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2022 (10) TMI 214 - AT - Income TaxWeighted deduction u/s 35(2AB) - deduction at the rate of 200% for Clinical Trial Expenses and Quality Control/Testing Expenses - Disallowance of claim as expenditure not approved by the DSIR and incurred by the assessee on clinical trials and on quality control/testing conducted outside the R&D facility - CIT-A allowed deduction - HELD THAT:- CIT(A) concluded that for the relevant assessment year for allowing weighted deduction under Section 35(2AB) of the Act the requirement was that the in-house R&D facility should be approved by DSIR. As held by the Tribunal, prior to 01.07.2016 there was no requirement that the quantum of expenditure should also be approved by DSIR. We note that the decision of CIT(A) is in conformity with the order of the Tribunal in the case of Nirmal Industries Control Private Limited [2021 (8) TMI 655 - ITAT MUMBAI] Therefore, the contention raised by the Revenue that weighted deduction for R&D Expenses should not be allowed under Section 35(2AB) of the Act since the expenses are not approved by DSIR is rejected. We do not find any infirmity in the order passed by the CIT(A) in allowing weighted deduction at the rate of 200% in respect of Quality Control/Testing Expenses. As regards Clinical Trial Expenses CIT(A) had allowed the claim of the Assessee holding that since the R&D Facilities were approved there was no requirement of expenditure being approved following the decision of the Tribunal in the case of Crompton Greaves Ltd. [2019 (10) TMI 134 - ITAT MUMBAI] and therefore, in view of our findings in paragraph 11 above, we do not find any infirmity in the order passed by the CIT(A) on this count. On the issue of Clinical Trial Expenses having been incurred outside the R&D Facilities, the CIT(A) concluded that the weighted deduction for Clinical Trial Expenses is to be allowed under Section 35(2AB) of the Act even if the same have been incurred outside the R&D Facility by following the decision of the Tribunal in the case of the Assessee for the Assessment Year 2008-09 and 2009-10 [2015 (2) TMI 1348 - ITAT MUMBAI] wherein the Tribunal had allowed weighted deduction for Clinical Trial Expenses incurred outside R&D Facilities under Section 35(2AB) of the Act by following the judgment of Cadila Healthcare Ltd. [2013 (3) TMI 539 - GUJARAT HIGH COURT] - we refrain to interfere with the order passed by CIT(A) allowing weighted deduction at the rate of 200% in respect of Clinical Trial Expenses. AO restricted the deduction u/s 35(2AB) to 100% of expenses in respect of Consultancy Fee Expenses - HELD THAT:- As respectfully following the decision of the Tribunal in the case of the Assessee for the preceding assessment years, we refrain to interfere with the order passed by the CIT(A) allowing weighted deduction at the rate of 200% in respect of Consultancy Fee Expenses Deduction of R&D Expenses on ‘gross basis‘ without netting off the income from sale of R&D products and assets - HELD THAT:- As it is admitted position sale proceeds of INR 9,22,898/- arising from sale of R&D products and sale proceeds arising from sale of R&D assets have been realized during the relevant previous year. Accordingly, we hold that CIT(A) was justified in holding that sale proceeds pertaining to sale of R&D products would not be reduced from R&D expenses while computing weighted deduction under Section 35(2AB) of the Act. However, in view of the decision of the Tribunal in the case of Microlab [2015 (3) TMI 982 - ITAT BANGALORE] the sale proceeds arising from sale of assets would have to be reduced from research and development expenses while computing weighted deduction under Section 35(2AB) - Also see case of M/s. Centaur Pharmaceuticals Pvt. [2022 (8) TMI 1127 - ITAT MUMBAI] Deduction for Education Cess under Section 37(1) - HELD THAT:- We note that by way of Finance Act 2022 Explanation 3 has been inserted in Section 40(a)(ii) of the Act with retrospective effect from 01.04.2005 which clearly provides that the term ‘tax‘ includes and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Therefore, in view of the same no deduction is allowable in respect of Education Cess for the Assessment Year 2014-15 in terms of Section 40(a)(ii) of the Act read with Explanation 3 thereto. Accordingly, Ground No. 8 raised by the Revenue is allowed. Surcharge and cess for MAT credit computation - HELD THAT:- Surcharge and education cess are to be included for determination of the amount of MAT credit in terms of Section 115JAA of the Act. Accordingly, respectfully following the above decisions Tata Motors Limited [2021 (7) TMI 207 - ITAT MUMBAI] AND Richa Global Exports Pvt. Ltd [2012 (9) TMI 99 - ITAT DELHI] we refrain to interfere with the order passed by the CIT(A) on this issue. Ground No. 8 raised by the Revenue is, therefore, dismissed.
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