2023 (1) TMI 712 - AT - Income Tax
Weighted deduction u/s.35(2AB) - research & development expenses incurred on laboratory & Clinical Trial - As per AO expenses towards clinical trial conducted outside the approved facility is not included in the amount of cost of in-house Research Facilities and that weighted deduction u/s.35(2AB) is available only for in-house R&D facility - CIT(A) upheld the disallowance of weighted deduction that the expenditure incurred on outsourced R&D activities is not eligible for weighted deduction - HELD THAT:- The entire amount is incurred towards outsourced clinical trial activities and considering the facts of the present case in our view the impugned issue in assessee’s is covered by the decision in the case of Cadila Healthcare Ltd[2012 (6) TMI 13 - ITAT AHMEDABAD]. Accordingly the expenses incurred towards clinical trial conducted outside the approved facilities would be eligible for weighted deduction u/s.35(2AB).
Amount as mentioned separately in Form 3CL is not eligible for weighted deduction - The various benches of the Tribunal have been taking a view that prior to amendment introduced w.e.f. 01/07/2016, the deduction u/s 35(2AB) of the Act would be available to an assessee having an approved in-house R&D facility by the prescribed Authority Act and that Form 3CL is only an intimation sent to the department that the facility is approved that is eligible for weighted deduction towards expenditure incurred on scientific research. Prior to 1.7.2016 there is no requirement by DSIR to certify the amount eligible for weighted deduction and the assessee cannot be denied the weighted deduction for the reason that the amount claimed is more than what is mentioned in Form 3CL.
There can be merit in revenue’s contention that the reason behind the requirement for the auditor to certify that the amount for the purpose of section 35(2AB) does not include expenses towards clinical trial conducted outside the approved facility mentioned in Form 3CL separately is that the said amount is not eligible for weighted deduction u/s.35(2AB). However based on the binding effect of the various judicial rulings discussed herein above we are inclined to take a view that prior to 1.7.2016 Form 3CL does not certify the amount of deduction and therefore the same cannot be the reason for restricting the amount eligible for weighted deduction.
We see merit in the alternate submissions of the ld AR and accordingly we are of the considered view that the amount as mentioned in Form 3CL as expenses incurred towards clinical research outside facility would also be eligible for weighted deduction u/s.35(2AB) on this count also. Accordingly the disallowance made in this regard is deleted.