Tribunal orders full deduction under section 35(2AB) for approved R&D facility.

The Tribunal allowed the appeal, directing the AO to grant the full deduction to the assessee as per the provisions of section 35(2AB) and relevant case laws. The decision was based on the principle that once the authority approves the R&D facility and expenditure, the deduction should cover the entire assessment year.

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Issues:
Quantum of deduction u/s 35(2AB) for revenue expenditure incurred on R&D activity from 01.04.2013 to 28.01.2014.

Analysis:

1. Background:
The appeal by the assessee for Assessment Year 2014-15 arose from the order of the Commissioner of Income Tax (Appeals) regarding the assessment framed by the Assessing Officer under section 143(3) of the Income Tax Act.

2. Claim and Disallowance:
The appellant, a pharmaceutical company, filed its return of income admitting an income under the conventional scheme and U/s 115JB. The Assessing Officer determined a taxable income under both schemes. The appeal was against the non-allowance of weighted deduction U/s 35(2AB) for R&D expenditure incurred. The dispute centered on the quantum of deduction.

3. Assessment and Appeal:
The appellant contended that the deduction should not be restricted based on the DSIR certificate and cited relevant case laws supporting their claim for the entire period's deduction. The AR relied on tribunal decisions to support the appellant's case.

4. CIT(A) Decision:
The CIT(A) upheld the AO's decision, emphasizing compliance with Rule 6 of the Income Tax Rules and the authority's approval conditions. The CIT(A) noted that the DSIR approved only a portion of the revenue expenditure, leading to disallowance by the AO.

5. Tribunal's Finding:
The Tribunal analyzed the case laws cited by the appellant and highlighted the importance of the prescribed authority's approval for claiming the deduction. Referring to decisions like CIT v. Claris Life Sciences Ltd., the Tribunal directed the AO to grant the full deduction to the assessee for the R&D expenditure incurred during the period in question.

6. Conclusion:
The Tribunal allowed the appeal, directing the AO to grant the full deduction to the assessee as per the provisions of section 35(2AB) and relevant case laws. The decision was based on the principle that once the authority approves the R&D facility and expenditure, the deduction should cover the entire assessment year.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, decisions by lower authorities, and the final ruling by the Tribunal, providing a detailed understanding of the case.

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