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| The Tax Publishers2020 TaxPub(DT) 1572 (Guj-HC) INCOME TAX ACT, 1961
Section 35
Merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those which were incurred outside, by itself would not be sufficient to deny the benefit to the assessee under section 35(2AB).
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Business deduction under section 35(2AB) - Scientific research expenditure - Prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those which were incurred outside -
Revenue challenged order of Tribunal as regards issue of allowance of Research and Development expenditure after excluding export turnover for the purpose of computing allocation of such expenses and also in not upholding disallowance of weighted deduction under section 35(2AB) on revenue expenditure made by AO. Revenue further challenged that Tribunal wrongly directed AO to allow assessee weighted deduction under section 35(2AB) of clinical trial expenses incurred outside the approved facility. Held: Expenditure was incurred by assessee for and on behalf of partnership firm and therefore it was not for purpose of assessee's business. Often times in field of research and invention, the efforts undertaken may or may not yield fruitful results. What is to be ascertained is whether any scientific research was undertaken and not whether such scientific research resulted into the ultimate aim for which such research was undertaken. It can be easily envisaged that the scientific research undertaken often times would completely fail to achieve desired results. That by itself does not mean that no scientific research was undertaken. What the Legislature desired to encourage by granting deduction under section 35(1) was a scientific research and not necessarily only the successful scientific research undertaken by an assessee. Tribunal committed no error. Merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those were incurred outside, by itself would not be sufficient to deny the benefit to the assessee under section 35(2AB).
Followed:CIT v. Cadila Healthcare Ltd. (2013) 214 Taxman 672 (Gujarat) : 2013 TaxPub(DT) 1313 (Guj-HC)
REFERRED : Pr. CIT v. Sun Pharmaceutical Industires Ltd. [Tax Appeal No. 983 of 2018, dt. 4-9-2018] : 2019 TaxPub(DT) 1613 (Guj-HC); Dy. CIT v. Mastek Ltd. [Tax Appeal Nos. 242, 243 & 263 of 2000, dt. 28-8-2012] : 2012 TaxPub(DT) 2931 (Guj-HC); Sun Pharmaceuticals Industries Ltd. v. ACIT [ITA No. 1689/Ahd/2015, dt. 20-6-2019] : 2019 TaxPub(DT) 7459 (Ahd-Trib)
FAVOUR : In assessee's favour
A.Y. :
IN THE GUJARAT HIGH COURT
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