Income Tax, Issue Update

Scientific research expenditure under Section 35(2AB) incurred during the period prior to the approval: Eligibility for weighted deduction

Case: Advanced Enzyme Technologies Ltd (Formerly, Advanced Biochemicals Ltd ) vs. Asst Cit Cir 1, Mumbai ITAT

Outcome: Assessee


  • For the year under consideration, the Assessee had filed return of income declaring total income at Rs. 2.56 Crs. The Assessee had claimed a weighted deduction for research and development expenditure under section 35(2AB) of the Act, in respect of amount incurred for research and development in its in house facility.
  • The Assessing Officer had denied deduction claimed under section 35(2AB) of the Act on the ground that although the research and development facilities were recognized by the DSIR, for the purpose of tax exemption it was required to be approved by the competent authority i.e The Secretary, Department of Scientific and Industrial Research, Ministry of Science and Technology, Govt. of India.
  • Since the research and development facility was not approved from the competent authority and necessary approval form 3CM was not available for the impugned assessment year, he opined that weighted deduction claimed under section 35(2AB) of the Act was not available to the Assessee.

Key Points

  • An identical issue had been considered by the Tribunal in Assessee’s own case for Assessment Year 2010-11, wherein it was held that once, research and development facility had been recognized by the competent authority, then deductions provided under section 35(2AB) cannot be denied, merely for the reason that approval of expenditure for the impugned year in prescribed form was not been received from the competent authority.
  • In this view of the matter and consistent with the view taken by the co-ordinate bench in Assessee’s own case for earlier years, the Assessing Officer was directed to allow weighted deductions claimed by the Assessee towards research and development expenditure under section 35(2AB).

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