Topic
ITAT Delhi upholds deduction for warranty provisions as accrued liability under Section 37(1) and full R&D expenditure under Section 35(2AB), citing Rotork Controls precedent. Ruling benefits corporates claiming contingent liabilities and innovation expenses.
The ITAT Ahmedabad has ruled that companies claiming weighted deduction under Section 35(2AB) may compute the deduction on gross scientific research expenditure, without reducing it by income earned from contract research. This clarifies a long-standing ambiguity and benefits pharmaceutical and tech firms that outsource R&D, ensuring they receive full incentive for domestic innovation spending.
ITAT Mumbai rules that Form 3CL issued by DSIR and already part of the Assessing Officer’s record cannot be dismissed as additional evidence in rectification proceedings under Section 154. The ruling mandates consideration of pre-existing documents for income tax deductions, impacting taxpayers relying on DSIR approvals.
ITAT Delhi rules that R&D expenditure rejected under Section 35(2AB) for lack of certification can still be claimed as a business expense under Section 37(1) if its genuineness is established. This holding preserves tax relief for businesses incurring legitimate R&D costs even when formal compliance fails.