TaxTMI 
TaxTMI 
2026 (4) TMI 1388
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....A)-16, New Delhi order dated 09.03.2020 28.12.2018 143(3) of the Income Tax Act, 1961 2. 3887/Del/2023 [AY 2018-19] [Assessee's appeal] CIT(A), NFAC, Delhi order dated 04.12.2023 20.03.2021 143(3) r.w. sections 143(3A) & 143(3B) of the Act 3. 3886/Del/2023 [AY 2020-21] [Assessee's appeal] CIT(A), NFAC, Delhi order dated 06.12.2023 27.09.2022 143(3) r.w.s. 144B of the Act 2. All captioned appeals filed by the Revenue and the assessee are having identical issues, therefore, all these appeals are taken together for consideration and decided by a common order. 3. First we take the appeal of the Revenue in ITA No. 1260/Del/2022 for Assessment Year 2016-17. [ITA No. 1260/Del/2022 [Assessment Year 2016-17] [Revenue's appeal] 4. Brief facts of the case are that the assessee has filed its return of income u/s 139(1) on 29.11.2016, declaring total income at INR 2,15,96,610/-. The case was selected for complete scrutiny and notice u/s 143(2) was issued on 04.07.2017. The AO has made addition of INR 1,31,81,258/- of ESOP expenses debited in the Profit & Loss Account. Besides this, weighted deduction claimed u/s 35(2AB) of the Act of I....
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....s approved by DSIR, expenditure incurred is eligible for weighted deduction. Ld. AR further submits that only condition for claiming weighted deduction u/s 35(2AB) is that the scientific research facility should be approved by the DSIR and there is no rule prescribed which says that the expenditure on scientific research must be quantified and certified by DSIR for claiming deduction u/s 35(2AB) of the Act. For this, he placed reliance on the judgement of Co- ordinate Bench of Ahmedabad Tribunal in the case of ACIT us Torrent Pharmaceuticals Ltd. in ITA No. 3569/Ahd/2004 vide order dated 13.11.2009 and further the judgement of Hon'ble Gujarat High Court in the case of CIT us Claris Life Sciences Ltd. reported in 326 ITR 251 (Guj.). Ld. AR further submits that amendment in section 35(2AB) regarding approval from Ld. PCIT or DGIT for scientific research expenditure and weighted deduction u/s 35(2AB) of the Act are applicable from 01.07.2016 relevant to AY 2017-18 onwards and not applicable for AY 2016-17 i.e. the year under appeal. He thus, submits that remuneration paid to Dr. Arjun Surya who worked as Scientific Research Officer, cannot be disallowed for weighted deduction u/s ....
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....fic Officer. It is correct that weighted deduction u/s 35(2AB) is to be allowed in AY 2016-17 in which in-house facility is approved by DSIR which is an undisputed fact in the instant case. 11. The only dispute is whether remuneration of INR 40,84,02,592/- (including one-time performance bonus of INR 40 crores) paid to Dr. Arjun Surya who worked in the capacity of Chief Scientific Officer, is eligible for being part of scientific research expenses for the purpose of claiming weighted deduction u/s 35(2AB) of the Act or not. 12. As could be observed from the letter dated 15.04.2015, written by the Managing Director of the company, Dr. Arjun Surya was granted one-time bonus on successful license of the patent to Roche which was paid as a recognition of his hard work, dedication and commitment to the Core team of the company. Had there been no license granted, such payment could not be made therefore, this expense of bonus cannot be held as directly related to scientific research and development activity carried out by the assessee company rather it is paid as a gratitude/recognition of the hard work and dedication of Dr. Arjun Surya towards the work. Therefore, the payment of o....
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....Ground of appeal Nos. 3 & 4 raised by the assessee are with respect to the disallowance of ESOP expenditure of INR 45,48,000/- made u/s 37(1) of the Act. 20. Before us, Ld.AR for the assessee manually submits that which issue has been decided in assessee's own case for AYs 2013-14 to 2016-17 therefore, as a principal of consistency, the same be allowed. The necessary copy of the order for respective years was placed in the Paper Book pages 1 to 35. 21. On the other hand, Ld.CIT DR supported the orders of the lower authorities and requested for the confirmation of the additions made. 22. Heard the contentions of both the parties at length and perused the material available on record. It is observed that this issue is a legacy issue and in preceding AYs 2013-14 to 2016-17, the Co- ordinate Bench of the Tribunal had deleted the disallowance made. It is observed that in AYs 2014-15 to 2016-17 by a common order dated 15.12.2022, the Co-ordinate Bench has followed the order of the Tribunal in ITA No. 7187/Del/2017 for AY 2013-14 dated 01.11.2021 and deleted the disallowance by making following observations :- 7. The brief facts leading to the above common issue are ....
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.... Rs. 1,71,47,000/- Rs. 31,00,81,442/- (2) Claimed Rs. 31,86,54,942/- Rs. 85,73,500/- (Addition of Rs. 86,73,500/-)" Aggrieved, the assessee preferred appeal before CIT(A), who confirmed the exclusion of Rs. 48 lakhs on account of professional fee paid to Dr. C Dutt as well as garden expenses of Rs. 6.93 lakhs and allowed the balance deduction by holding in para-5.3 of his appellate order as under :- "5.3 I have considered the above submissions and the assessment order. On perusal of the nature of expenditure is on market research, sales promotion quality control testing commercial production style change or routine data collection. Therefore the disallowance of the above expenditure made by the assessing officer only on the basis of the report of the prescribed authority was not justified. What is to be seen by the AO is the nature of expenditure. Therefore I consider this ground for disposal on merits. On perusal of the nature of expenditure it is seen that except for professional fees of Rs. 48 lacs - and garden expense of Rs. 6.93 lacs the other expense are not of the nature referred t....
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.... provisions of section 35(2AB) the assessee is entitled to weighted deduction for the following expenditure :- Rs. In lac i) Capital expenditure (other than land & building) 178.61 ii) Revenue expenditure relating to building 37.55 iii) Recurring expenditure i.e. revenue expenditure (other than building) 1856.94 iv) Expenses related to clinical trials outside the approved facility not included in the above expenditure. 51.26 2124.36 v) Actual weighted deduction at 1.1/2 times of the eligible expenditure above referred to of Rs. 2124.36 lacs. 3186.54 In view of the above facts and figure, the Ld. counsel for the assessee stated that the weighted deduction should be allowed to the assessee as per the provisions of Section 35(2AB) of the Act. 23. Since facts are identical therefore, by respectfully following the order of Co-ordinate Bench of Tribunal in assessee's own case for preceding AYs, the disallowance made is hereby, deleted. Accordingly, Ground of appeal Nos. 3 & 4 raised by the assessee are allowed. 24. Ground of appeal Nos.5 & 6 raised by the assessee are with respec....
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....l of the assessee is partly allowed. 30. Now we take appeal of the assessee in ITA No. 3886/Del/2023 for Assessment Year 2020-21. ITA No. 3886/Del/2023 [Assessment Year 2020-21] [Assessee's appeal] 31. Ground of appeal Nos.1 & 2 are general in nature, need no separate adjudication. 32. Ground of appeal Nos. 3 & 4 raised by the assessee are with respect to the ESOP expenses. 33. Heard the contentions of both the parties at length and perused the material available on record. It is observed that this issue has already been decided in favour of assessee by the coordinate bench of Tribunal in assessee's own case for AY 2018-19 in ITA No. 3887/Del/2023 which observations are Mutatis Mutandis applicable to the facts of this year also. Therefore, by respectfully following the same, Grounds of appeal Nos. 3 & 4 raised by the assessee are allowed. 34. Ground of appeal Nos. 5 to 7 raised by the assessee are with respect to the disallowance of weighted deduction of INR 23,76,000/- claimed u/s 35(2AB) of the Act. This issue has already been dealt with in the assessee's appeal for AY 2018-19 in ITA No. 3887/Del/2023 and same observations are Mutatis Mutandis applic....