DSIR quantification not mandatory for section 35(2AB) deduction on scientific research expenditure before April 2016

ITAT Ahmedabad ruled in favor of the assessee regarding disallowance under section 35(2AB) for scientific research expenditure on in-house R&D facility. The court held that prior to 01.04.2016, DSIR quantification of eligible expenditure was not mandatory for claiming deduction. Revenue authorities incorrectly restricted deduction based on DSIR-quantified amount rather than actual expenditure incurred. The assessee was entitled to 200% deduction on actual expenditure for scientific research on approved in-house R&D facility under section 35(2AB).

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Issues:
Disallowance u/s. 35(2AB) of the Income Tax Act for assessment years 2013-14 & 2017-18.

Analysis:
For the assessment year 2013-14, the assessee appealed against the disallowance u/s. 35(2AB) of the Act. The Assessing Officer disallowed the excess deduction claimed by the assessee, which was upheld by the CIT(A). The assessee contended that the entire expenditure on the research facility approved by DSIR should be eligible for deduction u/s. 35(2AB). The ITAT analyzed the provisions and previous decisions, concluding that the Revenue erred in restricting the deduction based on DSIR's quantification. The ITAT allowed the appeal, directing the full deduction claimed by the assessee.

In the case of the assessment year 2017-18, the assessee appealed against the CIT(A)'s decision regarding weighted deduction for R&D facility expenditure and clinical trial expenditure. However, during the hearing, the assessee decided to withdraw the appeal as the CIT(A) had deleted the total addition made by the Assessing Officer. The ITAT dismissed the appeal as withdrawn.

In summary, the ITAT allowed the appeal for the assessment year 2013-14, ruling in favor of the assessee regarding the disallowance u/s. 35(2AB). However, the appeal for the assessment year 2017-18 was dismissed as withdrawn by the assessee.

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