The assessee, a pharmaceutical company, claimed deduction u/s...

The assessee, a pharmaceutical company, claimed deduction u/s 80-IE for its units located in Sikkim. The Assessing Officer (AO) allocated the Research and Development (R&D) expenditure incurred by the assessee among the 80-IE units and non-80-IE units based on the percentage of sales. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the AO's allocation was incorrect as the assessee had produced evidence that the R&D expenditure was unrelated to the products manufactured in the 80-IE units. The Tribunal observed that the R&D activities were focused on future products and innovations, not the current products manufactured. The products developed in R&D undergo a process of 6-10 years before manufacturing, involving testing and approvals. Thus, the R&D expenditure during the year was not directly related to the products manufactured in the eligible units that year. The Tribunal upheld the CIT(A)'s decision to delete the allocation of R&D expenditure to the 80-IE units, ruling in favor of the assessee.