2023 (8) TMI 720

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....t "the Act"), assessee filed this appeal. 2. Two questions were involved in this appeal. One is that whether the weighted deduction claimed under section 35(2AB) of the Act is available in respect of the expenditure incurred on bio equivalence and clinical study outside the approved facility and the other is in respect of the Foreign Tax Credit (FTC), which was denied on the ground that Form 67 shall be furnished on or before the due date specified for furnishing of the return of income under section 139(1) of the Act and on furnishing the documents specified in Form 67. 3. Insofar as the first issue is concerned, contention of the assessee is that the bio equivalence and clinical study cannot be performed within the approved facility and....

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....in the case of CIT vs. Cadila Healthcare Ltd. (supra), the Hon'ble Gujarat High Court held the issue in favour of the assessee and for the sake of completeness, we extract the relevant observations here under,- "15. In our opinion, the Tribunal committed no error. Sec. 35(2AB) of the Act provides for deduction to a company engaged in business of bio-technology or in the business of manufacture or production of any article or thing notified by the Board towards expenditure of scientific research development facility approved by the prescribed authority. Such deduction at the relevant time was one and a half times expenditure which has now been increased to twice the eligible expenditure. We may notice that Explanation to s. 35(2AB)(1) ....

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....nical trial can be carried out only in the laboratory of the pharmaceutical company. If we give such restricted meaning to the term "expenditure incurred on in-house research and development facility", we, would on one hand be completely diluting the deduction envisaged under sub-so (2AB) of s. 35 and on the other, making the Explanation noted above quite meaningless. We have noticed that for the purpose of the said clause in relation to drugs and pharmaceuticals, the expenditure on scientific research has to include the expenditure incurred on clinical trials, in obtaining approvals from any requlatory authority or in filing an application for grant of patent. The activities of obtaining approval of the authority and filing of an applicati....

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....t no scientific research was undertaken. What the legislature desired to encourage by granting deduction under S. 35(1) of the Act was a scientific research and not necessarily only the successful scientific research undertaken by an assessee." 7. This decision has been followed by the Co-ordinate Benches of the Tribunal in a number of cases. This decision is applicable to the facts of the case on all fours since the activities of bio equivalence and clinical study cannot be carried out only in the laboratory of the pharmaceutical company and they have to be necessarily carried out outside the research and development facility. However, the prescribed authority approved this expenditure by incorporating the same in form 3CL. 8. We, theref....