Revenue loses on weighted deduction u/s 35(2AB) and unsecured loan addition u/s 68 challenges

ITAT Delhi dismissed Revenue's appeal in two matters. First, regarding weighted deduction u/s 35(2AB), assessee furnished Form 3CL from DSIR during appellate proceedings. CIT(A) allowed weighted deduction for approved expenditure and permitted remaining R&D expenses as revenue expenditure u/s 37. ITAT upheld this decision. Second, concerning addition u/s 68 for unsecured loan, CIT(A) deleted the addition after examining loan creditor's financial capacity through bank statements, income tax returns, and overdraft facility confirmation. ITAT found creditor's identity, creditworthiness, and transaction genuineness established through documentary evidence, sustaining CIT(A)'s order deleting the addition.

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Issues Involved:
1. Deletion of addition made under section 35(2AB) of the Income Tax Act, 1961.
2. Deletion of addition made under section 68 of the Income Tax Act, 1961.

Issue 1: Deletion of Addition Under Section 35(2AB)
The Revenue contested the deletion of an addition of Rs. 7,49,88,607/- made by the Assessing Officer (AO) under section 35(2AB) of the Income Tax Act, 1961. The AO had denied the claim for deduction as the prescribed authority had not issued approval in Form No. 3CL by the assessment completion date. The CIT (Appeals) allowed the claim based on the Form No. 3CL issued by DSIR on 24.01.2017, approving capital and revenue expenditure totaling Rs. 307.32 lakhs. The CIT (Appeals) allowed the weighted deduction to the extent of Rs. 6,14,64,000/- and also permitted Rs. 1,35,24,607/- as allowable Revenue expenditure under section 37(1) of the Act. The Tribunal upheld the CIT (Appeals)'s decision, noting that the delay in issuing Form No. 3CL was procedural and beyond the assessee's control. The Tribunal cited a similar decision in the assessee's own case for the assessment year 2013-14, where the weighted deduction was allowed under similar circumstances.

Issue 2: Deletion of Addition Under Section 68
The Revenue also contested the deletion of an addition of Rs. 2,20,00,000/- made under section 68 of the Act. The AO had added the amount as unexplained credit, questioning the identity, creditworthiness, and genuineness of a loan transaction with M/s. B. D. Vanijya Udyog Pvt. Ltd. The assessee provided various documents, including the loan creditor's Income Tax Return, confirmation, balance sheet, and bank statements. The AO disbelieved the documents due to the absence of the principal officer for deposition. The CIT (Appeals) deleted the addition, stating that the identity, creditworthiness, and genuineness of the transaction were established through the furnished documents and the Karnataka Bank certificate confirming the loan transaction. The Tribunal agreed with the CIT (Appeals), emphasizing that the creditor's financial statements and bank transactions substantiated the loan's legitimacy.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT (Appeals)'s decisions on both issues. The weighted deduction under section 35(2AB) and the loan transaction under section 68 were both deemed justified based on the evidence provided. The appeal was dismissed in its entirety.

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