SAHAJANAND MEDICAL TECHNOLOGIES LIMITED,MUMBAI vs. THE ACIT, CENTRAL CIRCLE-2, SURAT., SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT Before: Shri T. R. Senthil Kumar, Judicial Member & Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 258/SRT/2025 Assessment Year: 2020-21

Shajanand Medical Vs ACIT, Technologies Ltd., Circle – 2, 221-C Wing, Kanakia Surat Atrium, Andheri Kurla Road, JB Nagar, Andheri East – 400059, Mumbai PAN: AAFCS7649L (Appellant) (Respondent) Assessee Represented by : Shri Rajesh C. Shah, CA Revenue Represented by : Shri Mukesh Jain, CIT-DR Date of hearing : 30.04.2026 Date of pronouncement : 16.06.2026 आदेश/ORDER PER RATNESH NANDAN SAHAY, AM:

I.T.A No.258/SRT/2025/AY.2020-21 Page No 2 Shajanand Medical Technologies Ltd vs. ACIT “1. The Ld. AO has erred in making the addition of Rs.9,06,500/- being a deduction of donation claimed u/s 80G and the Ld. CIT(A) has confirmed it. 2. The Ld. AO has erred in making the addition of Rs.32,50,000/- being expenses of a capital nature on scientific research u/s 35(1)(iv) and the Ld. CIT(A) has confirmed it. 3. The appellant reserves the right to add, alter, amend or withdrawn any grounds of appeal.” 3. The facts of the case in brief are that the assessee, during the period under consideration, was engaged in the manufacturing of stent (a medical device used in angioplasty to remove blockage in arteries of heart) and balloon catheters (a medical product used in angioplasty and in stent). The Assessing Officer (in short, ‘AO’), however, disallowed the claim of deduction made u/s 80G of the Income-tax Act (in short, ‘the Act’) amounting to Rs.9,06,500/- while passing order u/s 143(3) of the Act on the ground that the Tadik Subbaiah Trust has not obtained approval u/s 80G of the Act for the year under consideration. 4. Aggrieved by the order of AO, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) vide impugned order confirmed the order of AO that the donation given to the said Trust was not eligible and therefore, the AO has rightly disallowed the same. 5. Regarding the second ground of appeal, during the course of assessment proceedings, the AO noticed that the assessee has claimed a deduction of Rs.32,50,000/- u/s 35(1)(iv) of the Act for

I.T.A No.258/SRT/2025/AY.2020-21 Page No 3 Shajanand Medical Technologies Ltd vs. ACIT the year under consideration. The AO in the assessment order passed u/s 143(3) of the Act has noted that the assessee had submitted an invoice bill of EDS Technologies Pvt. Ltd., Bangalore, however, on verification from EDS Technologies Pvt. Ltd., it was found that EDS Pvt. Ltd. is a company, which is a largest engineering and real time visual simulation solution provider in India. Therefore, the assessee-company was requested to furnish the justification that how it is an expense of capital nature on scientific research and eligible u/s 35(1)(iv) of the Act. When the matter went to the ld. CIT(A), he confirmed the addition made by the AO on the ground that the AO has rightly held as the assessee failed to furnish the justification with supporting documents regarding the allowability of deduction u/s 35(1)(iv) of the Act because the section provides that the expenses should be of capital nature and should have been made for scientific research. The assessee in its reply has failed to prove how the payments made to EDS Technologies Pvt. Ltd., Bangalore, is a subject of scientific research as required u/s 35(1)(iv) of the Act. 6. During the appellate proceedings before us, the appellant filed a written submission, which is reproduced as under: “1. Disallowance of donation for Rs.9,06,500/-:

I.T.A No.258/SRT/2025/AY.2020-21 Page No 4 Shajanand Medical Technologies Ltd vs. ACIT The Ld. AO, based on information provided by the Ld. JCIT (Exemption) OSD, disallowed the donation of Rs. 18,13,000/- given to the Tadikela Subbaiah Trust (R.). A copy letter issued by the office of the Ld. JCIT (Exemption) is affixed in the assessment order itself.

In the said letter, it is mentioned that "Assessee not obtained approval u/s 80G". On the contrary, the appellant has filed the letter dated 18.03.2011 issued by the Commissioner of Income-tax, Davangere, before the Ld. AO and the Ld. CIT(A). A copy of said letter is once again enclosed herewith. [Please refer to pages 5 & 6 of the paper Book]. In the said letter, it is also mentioned that the same certificate is valid from 01.04.2011 till it is rescinded.

We would like to draw your attention to the amendment made by the proviso to the Finance (No.2) Act, 2009 w.e.f. 01.10.2009.

This position has been explained by the CBDT Circular No. 5 explaining the provisions of Finance (No. 2) Act, 2009 in para 29.7 of the Circular, which reads as under:

“This amendment has been made applicable with effect from 1" October, 2009. Accordingly existing approvals expiring on or after 1 October, 2009 will be deemed to have been extended in perpetuity unless specifically withdrawn. However, in case of approvals expiring before 1st October, 2009, these will have to be renewed and once renewed these shall continue to be valid in perpetuity, unless specifically withdrawn".

It was clear that once the exemption is granted u/s 80G, it is perpetual unless specifically withdrawn. The Ld. JCIT (Exemption) has mentioned that the assessee did not obtain approval is

I.T.A No.258/SRT/2025/AY.2020-21 Page No 5 Shajanand Medical Technologies Ltd vs. ACIT incorrect, as the appellant has already filed the certificate. The Ld. JCIT (Exemption) has never mentioned that the exemption granted was withdrawn.

Now, the appellant had contacted the authorities of the trust and found that the exemption was never withdrawn from the said trust, and the appellant has got a certificate for this and enclosed it herewith. [Please refer to page No. 7 of the paper Book].

Hence, the contention raised by JCIT(Exemption) is not legally correct and is followed by the Ld. AO and the Ld. CIT(A) is also not correct. Hence, the appellant prays to grant the relief to the appellant.

"At Sahajanand Medical Technologies, Simulia Abaqus software is used for design and development of medical devices. This is a virtual platform used for product development and optimization and is

I.T.A No.258/SRT/2025/AY.2020-21 Page No 6 Shajanand Medical Technologies Ltd vs. ACIT globally accepted in R&D activities. This software has ability to handle materials that are highly non-linearly and possess super elastic properties as well. Such materials have wide application in medical devices. The cost of developing a product without first testing its design in a virtual environment isn't' apparent until budgets are more closely examined. Without simulation, product development will suffer from a more expensive design process, lower build quality, longer production times and perhaps worst of all less innovation and creativity in the design.”

Thought this software has huge initial investment cost, but it returns, humongous benefits to the organization, in terms of lowest cost of product development along with reducing the lifecycle cost, at the other hand."  In the assessment order, the Ld. AO has mentioned

"During the course of assessment proceeding, on verification of computation of income, it is also noticed that the assessee has claimed deduction of Rs.32,50,000/- u/s 35(1)(iv) of the 1.T. Act for the year under consideration. In this regard, the assessee has submitted an invoice bill of EDS Technologies Pvt. Limited, Bangalore. However, on verification from website of EDS Technologies Pvt. Limited, Bangalore, it is found that EDS Technologies Pvt. Limited is a company which is largest engineering and real time visual simulation solutions provider in India."

The Ld. AO has verified from the website of the said company, namely EDS Technologies Pvt. Limited, Bangalore, and found that the company is the largest engineering and real-time visual simulation provider in India. We have also purchased the software for real-time visual simulation in the R&D department. One can understand that

I.T.A No.258/SRT/2025/AY.2020-21 Page No 7 Shajanand Medical Technologies Ltd vs. ACIT real-time visual simulation is to be used for the development of a new product, and the development of a product in the medical field is of the R&D department. The contention of the Ld. AO and the Ld. CIT(A) is baseless that the assessee company has not provide documentary evidence. The appellant say that the product is used for the R&D activity is to be accepted by the department unless contrary evidence the department has to produce. It is further to mention that the tax auditor has certified in his tax audit report for this expenditure [Please refer to pages 8 & 9 of the paper Book]. The appellant company has purchased a similar product from the same company in an earlier year, i.e., FY 2018-19 (AY 2019- 20) for Rs. 41,50,000/- and claimed u/s 35(1)(iv) of the Act, and the same was allowed in scrutiny assessment. The copy of the invoice is enclosed [Please refer to pages 10 to 15 of the paper Book]. In the light of the above discussion, it is clear that the assessee company has purchased the software for the R&D activity only.

Without prejudice to the above fact that the present software in question is an application software. The expenses incurred on application software a revenue expenditure and allowable as business expenditure. We rely on the judgment in the case of G.E. Capital Services India Vs Addl. CIT (ITAT Delhi) [Ι.Τ.Α. Νο. 2897/Del/2007] and date of judgment 10.06.2015, and in the case of DCIT Vs. M/s. Integrated Technology Solutions P. Ltd. [ITA No.3325/Mum/2012] and the date of judgment is 12.02.2016.”

I.T.A No.258/SRT/2025/AY.2020-21 Page No 8 Shajanand Medical Technologies Ltd vs. ACIT donation made u/s 80G of the Act, we find that on the basis of letter issued by the ld. CIT(A) dated 18.03.2011 which specifies that this amendment has been made applicable with effect from 1" October, 2009. Accordingly existing approvals expiring on or after 1st October, 2009 will be deemed to have been extended in perpetuity unless specifically withdrawn. However, in case of approvals expiring before 1st October, 2009, these will have to be renewed and once renewed these shall continue to be valid in perpetuity, unless specifically withdrawn. Thus, it is clear that once the exemption is granted u/s 80G, it is perpetual unless specifically withdrawn. The ld. JCIT(E) has mentioned that the assessee did not obtain approval is incorrect, as the appellant has already filed the certificate. The ld. JCIT(E) has never mentioned that the exemption granted was withdrawn. In view of the above letter, the appellant is entitled to claim of deduction u/s 80G of the Act and accordingly this ground of appeal is allowed. 8. Regarding the expenditure made on account of scientific research u/s 35(1)(iv) of the Act is concerned, the learned Authorized Representative (ld. AR) has placed reliance on the two decisions of Tribunal in cases of (i) G. E. Capital Services India vs. Addl. CIT, ITA No.2897/Del/2007, dated 10.06.2015 (ITAT – Del) and (ii)

I.T.A No.258/SRT/2025/AY.2020-21 Page No 9 Shajanand Medical Technologies Ltd vs. ACIT DCIT vs. M/s Integrated Technology Solutions Pvt. Ltd., ITA No. 3325/Mum/2012, dated 12.02.2016 (ITAT – Mum). Hon'ble Tribunal in the above orders have treated this expenditure as revenue expenditure and therefore an allowable expenditure. Further, the appellant has submitted in its written submission stated above that the same expenditure was allowed in preceeding A.Y. 2019-20. In view of the above, we also hold that this expenditure is an allowable expenditure. 9. In the result, the appeal of the assessee is allowed.

Order is pronounced under the provisions of Rule 34 of IT(AT) Rules, 1963 on 16/06/2026.

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