Weighted research deduction limited to direct R&D spend; bonus excluded, ESOP expense allowed, and certified chief scientist costs partly accepted.

Weighted deduction for approved in-house scientific research is confined to expenditure directly attributable to research activity within the facility; a one-time bonus paid after patent licensing was treated as compensatory and excluded from eligible research spend. ESOP expenditure was allowed on the basis of consistency with earlier years on similar facts. Remuneration and travel-related costs of the Chief Scientific Officer were eligible for weighted deduction only to the extent actually certified as qualifying research expenditure, while any broader claim was not accepted in full and the alternative ordinary deduction was left to verification and allowance on a payment basis.

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Issues: (i) whether the one-time bonus paid to the full-time Director and Chief Scientific Officer formed part of eligible scientific research expenditure for weighted deduction; (ii) whether ESOP expenditure was allowable as a revenue deduction; and (iii) whether remuneration and travel-related expenditure on the Chief Scientific Officer qualified for weighted deduction under the approved in-house research and development facility.

Issue (i): whether the one-time bonus paid to the full-time Director and Chief Scientific Officer formed part of eligible scientific research expenditure for weighted deduction.

Analysis: The eligible deduction under the weighted research incentive was confined to expenditure incurred on scientific research and development within the approved facility. The one-time bonus was paid after successful licensing of the patent as a reward for hard work and commitment, and was not shown to be directly incurred for scientific research activity. Such a payment was compensatory in nature and not part of the research expenditure eligible for the enhanced deduction.

Conclusion: The one-time bonus was held ineligible for weighted deduction and was directed to be excluded from the qualifying research expenditure.

Issue (ii): whether ESOP expenditure was allowable as a revenue deduction.

Analysis: The ESOP claim was treated as a legacy issue already decided in the assessee's favour in earlier years on similar facts. Applying the principle of consistency, the same treatment was followed for the year under consideration. For the later year, the same reasoning was applied and the ESOP claim was accepted.

Conclusion: ESOP expenditure was allowed in the assessee's favour.

Issue (iii): whether remuneration and travel-related expenditure on the Chief Scientific Officer qualified for weighted deduction under the approved in-house research and development facility.

Analysis: The Tribunal accepted that the approved in-house research facility existed and that expenditure verified in the prescribed certification could qualify. However, the claim to weighted deduction could extend only to the expenditure actually certified and eligible as research expenditure. The additional claim was therefore not accepted in full, while the alternative claim for ordinary deduction was directed to be verified and allowed on payment basis to the extent available.

Conclusion: The weighted deduction was not allowed in full, and the alternative ordinary deduction was allowed only to the extent directed for verification.

Final Conclusion: The common order granted partial relief to the assessee overall, sustaining part of the disallowance while allowing the ESOP claim and limiting the research-based weighted deduction to eligible expenditure only.

Ratio Decidendi: For weighted deduction on in-house scientific research, only expenditure that is directly attributable to scientific research and development within the approved facility qualifies, while compensatory payments made as a reward or bonus for commercial success do not.

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