“R&D expenditure”

Business ExpensesSection 35(2AB)Section 35(2AB)252 judgments

The decision most relied on for R&D expenditure is CIT v. Claris Lifesciences Ltd. (326 ITR 251), cited in 196 judgments on BharatTax.

Leading authorities on R&D expenditure

CIT v. Claris Lifesciences Ltd.

326 ITR 251 · 2010 · High Court

196

citing judgments

If approval from the Department of Scientific and Industrial Research (DSIR) for an in-house R&D centre is granted during the previous year, the assessee is entitled to claim weighted deduction under section 35(2AB) for the entire expenditure incurred during that year.

CIT v. Microlabs Ltd.

383 ITR 490 · 2016 · High Court

175

citing judgments

If an assessee possesses interest-free funds exceeding investments in tax-free securities, it is presumed that investments are made from these own funds, precluding disallowance of interest expenditure under Section 14A read with Rule 8D(2)(ii). Additionally, weighted deduction under Section 35(2AB) is computed on the gross expenditure incurred, not net expenditure after reducing income earned.

CIT v. Sadan Vikas (India) Ltd.

335 ITR 117 · 2011 · High Court

112

citing judgments

Weighted deduction under Section 35(2AB) is allowable for R&D expenditure incurred even if the approval from the DSIR is granted in a subsequent assessment year, provided the application for approval was made in time. The assessee is entitled to the deduction if the approval is based on verification of details submitted.

PCIT v. Maruti Suzuki India Ltd.

397 ITR 681 · 2017 · High Court

citing judgments

For claiming weighted deduction under section 35(2AB), the existence of recognition for a Research and Development (R&D) Centre is relevant, not necessarily the date of approval or recognition.

Zandu Pharmaceuticals Works Ltd. v. CIT

350 ITR 366 · 2013 · High Court

citing judgments

Expenses, including scientific research or head office expenses, cannot be allocated to units eligible for deductions under sections 80IB or 80IC unless there is a clear nexus between the expenditure and the specific eligible unit for computing the deduction.

Cummins India Ltd. v. DCIT

96 Taxmann.com 576 · 2018 · ITAT

citing judgments

The weighted deduction for scientific research expenditure under Section 35(2AB) is allowable, clarifying that the requirement for the prescribed authority to approve or quantify the expenditure from year to year became effective only from April 1, 2016, through amendments to Rule 6(7A)(b).

CIT v. Cadila Healthcare Ltd.

31 Taxmann.com 300 · 2013 · High Court

citing judgments

Section 35(2AB), an incentive provision, allows weighted deduction for expenditure 'on in-house research or development facility' even if related activities like clinical trials are conducted externally, provided they are for the in-house research. This requires a liberal interpretation of the provision.

Sun Pharmaceutical Industries Ltd. v. Pr.CIT

162 ITD 484 · 2017 · ITAT

citing judgments

The approval of an in-house R&D centre through Form 3CM is the primary document for claiming weighted deduction under Section 35(2AB) for scientific research expenditure. The case clarifies the significance of this form and the role of the prescribed authority (DSIR) in the approval process.

Judgments citing R&D expenditure

M/S Harman International (India) Pvt Ltd, Bangalore vs. Deputy Commissioner of Income Tax Circle-3(1)(2), Bangalore

In the result, the appeal by the assessee is partly allowed

ITA 49/BANG/2019[2014-15]Status: DisposedITAT Bangalore30 Jun 2022AY 2014-15

Bench: Shri N. V. Vasudevan & Ms. Padmavathy Sit(Tp)A No.49/Bang/2019 Assessment Year : 2014-15 M/S. Harman Connected Services Vs. Deputy Commissioner Of Corporation India Private Limited, Income Tax, 4A, Jupiter, Prestige Technology Park, Circle - 3(1)(2), Sarjapur, Marathahalli Road, Bengaluru. Kadubeesanahalli Village, Bengaluru – 560 103. Pan: Aacch 1585 J Appellant Respondent Assessee By : Shri. T. Suryanarayana, Senior Advocate Revenue By : Dr. Manjunath Karkihalli, Cit(Dr)(Itat), Bengaluru. Date Of Hearing : 27.06.2022 Date Of Pronouncement : 30.06.2022 O R D E R Per N V Vasudevan

For Appellant: Shri. T. Suryanarayana, Senior AdvocateFor Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 92Section 92C

company as a comparable company. The DRP rejected the contention of the assessee seeking its inclusion on the basis that generally, companies with R&D expenditure of less than 3% alone were considered. In this regard, it is submitted that the action of the DRP is wholly erroneous

Hikal Ltd, Mumbai vs. DCIT Cir 3(1), Mumbai

In the result, appeal by the assessee is partly allowed for statistical purpose

ITA 5386/MUM/2012[2007-08]Status: DisposedITAT Mumbai20 Jun 2022AY 2007-08

Bench: Shri Om Prakash Kant & Shri Sandeep Singh Karhail

For Appellant: Shri Sanjay ParikhFor Respondent: Shri Tejinder Pal Singh Anand

Section 10BSection 14ASection 250Section 35Section 35(1)(vi)

pharmaceuticals and R&D is an integral part of its production process, held that it is difficult to accept that only 5% of R&D expenditure can be allocated to EOUs and accordingly, allocated the R&D expenditure to Pharma EOU and Bangalore R&D proportionate to their turnover

M/S. Citrix R & D India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle- 2(1)(1), Bangalore

In the result the appeal filed by the assessee is allowed for statistical purposes

ITA 2428/BANG/2019[2015-16]Status: DisposedITAT Bangalore15 Jun 2022AY 2015-16

Bench: Shri Chandra Poojari & Shri George George K.

For Appellant: Shri Sumeet Khurana, A.RFor Respondent: Ms. Neera Malhotra, D.R

Appellant on the ground of functional similarity whereas this comparable should have been excluded for the reason being functionally dissimilar, huge amount of R&D expenditure, huge onsite expenses, etc. 8. The Learned AO in pursuance of the directions of the learned Panel erred in law and on facts ... been excluded for the reason being functionally dissimilar, lack of segmental data, significant onsite activities, owns huge amount of intangibles and having significant R&D expenditure. 10. The Learned AO in pursuance of the directions of the learned Panel erred in law and on facts in including Larsen & Tourbo Infotech

M/S Applied Materials India Private Limited, Bangalore vs. Income Tax Officer Ward-1(1)(1), Bangalore

In the result, the appeal of the assessee is partly allowed

ITA 3403/BANG/2018[2014-15]Status: DisposedITAT Bangalore08 Jun 2022AY 2014-15

Bench: Shri George George K. & Ms. Padmavathy S

For Appellant: Smt. Tanmayee Rajkumar, AdvocateFor Respondent: Dr. Manjunath Karkihalli, CIT(DR)(ITAT), Bangalore

Section 143(3)Section 92(1)Section 92ASection 92B(1)Section 92C

rejected by the TPO without any basis. The DRP upheld the exclusion of the company on the basis that generally, companies with R&D expenditure of less than 3% alone were considered, and therefore Maverick which had incurred expenses of 6% ought to remain excluded. 33. In this regard

ACIT (Ltu)-1, Mumbai vs. M/S Glenmark Pharmaceuticals Ltd., Mumbai

ITA 884/MUM/2020[2009-10]Status: DisposedITAT Mumbai29 Apr 2022AY 2009-10

Bench: Shri M. Balaganesh & Shri Kuldip Singhassessment Year: 2009-10 Asst. Commissioner Of M/S. Glenmark Income Tax (Ltu)-1, Pharmaceuticals Ltd., 29Th Floor, Center-1, Glenmark House, World Trade Center, Hdo Corporate Building, Cuffe Parade, Wing A, Mumbai – 400 005 Vs. B.D. Sawant Marg, Chakla, Opp. Western Express Highway, Andheri (East), Mumbai – 400 099 Pan: Aaacg2207L (Appellant) (Respondent) Present For: Assessee By : Shri Anuj Kisnadwala, A.R. Revenue By : Shri Hoshang B. Irani, D.R. Date Of Hearing : 16 . 02 . 2022 Date Of Pronouncement : 29 . 04 . 2022 O R D E R Per : Kuldip Singh: The Appellant, Asst. Commissioner Of Income Tax (Ltu), Mumbai (Hereinafter Referred To As ‘The Revenue’) By Filing The Present Appeal, Sought To Set Aside The Impugned Order Dated 22.11.2019 Passed By Commissioner Of Income Tax (Appeals)-3, Mumbai [Hereinafter Referred To As The Cit(A)] Qua The Assessment Year 2009-10 On The Grounds Inter Alia That :-

For Appellant: Shri Anuj Kisnadwala, A.RFor Respondent: Shri Hoshang B. Irani, D.R

Section 115JSection 143Section 80CSection 80I

vide order dated 27.02.2015 passed in ITA No.101/M/2013 for A.Y. 2009-10 to decide the issue as to the Research & Development (R&D) expenditure by giving directions as under: “Decide the issue of allocation of R&D expenditure after giving specific finding whether any part of such expenditure ... however, remitted the case back to the AO to return the definite findings of the fact “as to whether any part of such R&D expenditure has direct nexus to the Baddi units and then decide the issue in the light of the judgment of Hon’ble Bombay

M/S. Biocon Research Limited, Bangalore vs. The Deputy Commissioner of Income Tax, Circle- 1(1)(2), Bangalore

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes

ITA 2612/BANG/2019[2015-16]Status: DisposedITAT Bangalore11 Apr 2022AY 2015-16

Bench: Shri B. R. Baskaran & Smt. Beena Pillai

For Appellant: Shri Padamchand Khincha, A.RFor Respondent: Sri Manjunath Karkihalli, DR

Section 10ASection 143(3)

took the view IT(TP)A No.2612/Bang/2019 Biocon Biologics Limited, Bangalore Page 7 of 9 that the assessee should receive 50% of the R&D expenditure as share from Mylan. Accordingly, the AO disallowed a sum of Rs.48,05,80,000/- from out of R&D expenditure claimed

Addl. CIT, Special Range- 7, New Delhi vs. Rrb Energy Ltd., New Delhi

In the result appeal filed by the RevenueDepartment stands dismissed

ITA 7323/DEL/2018[2011-12]Status: DisposedITAT Delhi21 Mar 2022AY 2011-12

Bench: Shrianil Chaturvedi & Shri N. K. Choudhry(Through Video Conferencing) Addl. Cit, Vs. Rrb Energy Ltd, Special Range-7, Ga, 1/B-1, Extension, New Delhi Mohan Coop. Ind Estate, Mathura Road, New Delhi Pan: Aaacv0109N (Appellant) (Respondent)

For Appellant: ShriVipulKashyap, Ld. Sr. DRFor Respondent: Shri. S. Krishanan, Ld. Adv

Section 250(6)Section 271(1)(c)Section 274Section 35Section 40

which is 100% of tax sought to be evaded on disallowance of Rs. 4,02,32,000/- of R&D expenditure u/s 35(2AB). I have gone through the submissions of the appellant, the facts on records, perused the penalty order and considered the decisions relied upon both ... date of approval accorded by the Prescribed Authority. In the case on hand Form No. 3CL has clearly quantified and certified the R&D expenditure eligible for weighted deduction u/s 35(2AB). The AO is directed to allow weighted deduction with reference to Rs.633.53 lacs only as against expenditure

Deputy Commissioner of Income Tax, Circle-3(1)(1), Bangalore vs. M/S. Hindustan Aeronautics Limited, Bangalore

In the result, the appeal of the Revenue is dismissed

ITA 719/BANG/2020[2015-16]Status: DisposedITAT Bangalore14 Mar 2022AY 2015-16

Bench: Shri George George K & Ms. Padmavathy Sassessment Year : 2015-16

For Appellant: Shri Siddhesh Chaugule, C.AFor Respondent: Shri Gopinath C.H , CIT(DRP-2)

Section 35Section 35(1)(iv)Section 37

Income Tax Act (the Act). The assessing Officer (AO) in the final assessment order dated 18/12/2017, inter alia held that since the R&D expenditure had been incurred out of the grants received from the Government which has been treated as capital receipt, the corresponding expenditure incurred towards R&D ... activities would also have to be treated as being capital in nature. The Page 4 of 8 AO therefore disallowed the R&D expenditure of INR 613,40,06,000 which the company has claimed as deduction u/s.37 of the Act. 4. Aggrieved by the order

DCIT - 11(3)(1), Mumbai vs. Toto India Industries Pvt. Ltd., Mumbai

In the result, the appeal by the Revenue is dismissed in terms of our aforesaid findings

ITA 6226/MUM/2019[2012-13]Status: DisposedITAT Mumbai11 Mar 2022AY 2012-13

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Dhanesh BafnaFor Respondent: Ms. Vatsalaa Jha (CIT)

Section 250Section 251(1)(a)

issue in dispute, instead of directing separate benchmarking of Technical Administrative Fees of Rs.1,83,84,448/- which is in the nature of R&D expenditure incurred by the assessee on behalf of the AE? 1.6 Whether on the facts and circumstances of the case

Reliance Industries Ltd, Mumbai vs. Deputy Commissioner of Income Tax Large Taxpayer Unit-2, Mumbai

In the result, the ITA No

ITA 2876/MUM/2019[2015-16]Status: DisposedITAT Mumbai08 Mar 2022AY 2015-16

Section 143(3)Section 28

ITA Nos.1645 & 2876/Mum/2019 ITA Nos.2344 & 3945/Mum/2019 Assessment Years: 2014-15 & 2015-16 Page 1 of 105 INCOME TAX APPELLATE TRIBUNAL

DCIT (Ltu)-2, Mumbai vs. M/S Reliance Industries Ltd., Mumbai

In the result, the ITA No

ITA 2344/MUM/2019[2014-15]Status: DisposedITAT Mumbai08 Mar 2022AY 2014-15

Section 143(3)Section 28

ITA Nos.1645 & 2876/Mum/2019 ITA Nos.2344 & 3945/Mum/2019 Assessment Years: 2014-15 & 2015-16 Page 1 of 105 INCOME TAX APPELLATE TRIBUNAL

Reliance Industries Limited, Mumbai vs. ACIT, Mumbai

In the result, the ITA No

ITA 1645/MUM/2019[2014-15]Status: DisposedITAT Mumbai08 Mar 2022AY 2014-15

Section 143(3)Section 28

ITA Nos.1645 & 2876/Mum/2019 ITA Nos.2344 & 3945/Mum/2019 Assessment Years: 2014-15 & 2015-16 Page 1 of 105 INCOME TAX APPELLATE TRIBUNAL

Altran Technologies India Pvt Ltd, Bengaluru vs. Deputy Commissioner of Income Tax, Circle-1(1)(1), Bengaluru

In the result the appeal filed by assessee stands partly allowed

ITA 2904/BANG/2017[2013-14]Status: DisposedITAT Bangalore07 Mar 2022AY 2013-14

Bench: Shri. B.R. Baskaran & Smt. Beena Pillaiit(Tp)A No. 2904/Bang/2017 Assessment Year : 2013-14 M/S. Altran Technologies India Pvt. Ltd., C/O Ernst & Young Llp, The Deputy Ground & 1St Floor, Commissioner Of Income ‘A’ Wing, Divyasree Chambers, Tax, Vs. #11, O’ Shaughnessy Road, Circle – 1 (1)(1), Langford Gardens, Bangalore. Bangalore – 560 025. Pan: Aaaca7125R Appellant Respondent Assessee By : Shri Nageswar Rao, Advocate Revenue By : Shri Pradeep Kumar, Cit-Dr Date Of Hearing : 27-12-2021 Date Of Pronouncement : 07-03-2022 Order Per Beena Pillaipresent Appeal Is Filed By Assessee Against The Final Assessment Order Dated 31/10/2017 Passed By The Ld.Dcit, Circle – 1(1)(1), Bangalore For Assessment Year 2013-14 On Following Grounds Of Appeal: “Based On The Facts & Circumstances Of The Case & In Law, Altran Technologies India Private Limited (The 'Appellant') Respectfully Craves Leave To Prefer An Appeal Against The Order Passed By The Learned Assessing Officer (Hereinafter Referred To As The 'Id. Ao') Under Section 143(3) Read With Section 144C Of The Income-Tax Act, 1961 (The 'Act') Pursuant To The Directions Issued By The Hon'Ble Dispute Resolution Panel (`Drp') On The Following Grounds:

For Appellant: Shri Nageswar Rao, AdvocateFor Respondent: Shri Pradeep Kumar, CIT-DR

Section 133(6)Section 143(3)Section 144C

software development services and therefore cannot be compared to a software development service provider. The learned counsel submitted that the company incurs significant R&D expenditure which resulted in global patents and the company owns significant intangibles which have either been developed or have been acquired from 3rd parties

M/S Cypress Semiconductor Technology India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-2(1)(1), Bangalore

In the result, appeal of the assessee stands partly allowed

ITA 3133/BANG/2018[2014-15]Status: DisposedITAT Bangalore28 Feb 2022AY 2014-15

Bench: Shri. Chandra Poojari & Smt. Beena Pillaiit(Tp)A No. 3133/Bang/2018 Assessment Year : 2014-15 M/S. Cypress Semiconductor Technology India Pvt. Ltd., The Deputy No. 65/2, Bagmane Laurel, Commissioner Of Block C, Bagmane Tech Park, Income Tax, C.V Raman Nagar, Circle – 2 (1)(1), Bangalore – 560 093. Bangalore. Vs. Pan: Aabcc2470Q Appellant Respondent

For Respondent: Smt. Tanmayee Rajkumar

Section 133(6)Section 92CSection 92D

activity and incurred expenditure of 6% of turnover. The DRP upheld the exclusion of the company on the basis that generally, companies with R&D expenditure of less than 3% alone were considered. 30. In this regard it was submitted that the actions of the lower authorities are erroneous

Deputy Commissioner of Income Tax, Circle- 6(1)(1), Bangalore vs. M/S. Sharp Software Development India Private Limited, Bangalore

In the result, the appeal filed by the Revenue and the cross objection filed by the assessee are dismissed

ITA 2358/BANG/2019[2011-12]Status: DisposedITAT Bangalore23 Feb 2022AY 2011-12

For Appellant: Sri. Sri.Chavali Narayan, CAFor Respondent: Sri. Pradeep Kumar, CIT-DR

Section 115JSection 143(2)Section 143(3)Section 92C

technology, engineering and outsourcing services etc. and also offers various software products. (d) The company owns significant intangibles (patents) and has incurred huge R&D expenditure. The fixed assets schedule of the company suggests that it owns intangibles in the form of intellectual property rights. (e) The annual report indicates

Sami-Sabinsa Group Limited (Formerly Sami Labs Limited), Bangalore vs. Deputy Commissioner of Income Tax Circle-6(1)(1), Bangalore

In the result, appeals filed by assessee for both the years stands partly allowed for statistical purposes

ITA 3353/BANG/2018[2014-15]Status: DisposedITAT Bangalore18 Feb 2022AY 2014-15

Bench: Shri. Chandra Poojari & Smt. Beena Pillaiit(Tp)A Nos. 2764/Bang/2017 & 3353/Bang/2018 Assessment Years : 2013-14 & 2014-15 M/S. Sami –Sabinsa Group Ltd. (Formerly The Deputy Sami Labs Ltd.), Commissioner Of No. 19/1 & 19/2, I Main, Income Tax, Ii Phase, Circle 6 (1)(1), Peenya Industrial Area, Vs. Bangalore. Bangalore – 560 058. Pan: Aadcs2549E Appellant Respondent Assessee By : Ms. Bhavya Bansal, Ca : Shri Manjunath Karkihalli, Revenue By Cit-Dr Date Of Hearing : 15-02-2022 Date Of Pronouncement : 18-02-2022 Order Per Beena Pillaipresent Appeals Filed By Assessee Against The Final Assessment Order Undated For A.Y. 2013-14 & 23.10.2018 For A.Y. 2014-15 Passed By Ld.Dcit, Circle – 6 (1)(1), Bangalore. The Above Appeals Are Disposed Of By Way Of A Common Order As Common Issues Arises On Identical Facts. For The Sake Of Convenience, We Are Reproducing The Grounds Raised By Assessee For Assessment Year 2013-14. Page 2 Of 7 It(Tp)A Nos. 2764/Bang/2017 & 3353/Bang/2018

For Appellant: Ms. Bhavya Bansal, CA

Section 92BSection 92C

erred on facts in considering expenditure incurred on research & development activity by your appellant for PL1 calculation, though the 7. R&D expenditure was not linked with the manufacturing activity and same principles have not been applied in computing PLI of comparables. The Learned

M/S Sami-Sabinsa Group Limited (Formerly Sami Labs Limited), Bangalore vs. Deputy Commissioner of Income Tax Circle-6(1)(1), Bangalore

In the result, appeals filed by assessee for both the years stands partly allowed for statistical purposes

ITA 2764/BANG/2017[2013-14]Status: DisposedITAT Bangalore18 Feb 2022AY 2013-14

For Appellant: Ms. Bhavya Bansal, CA

Section 92BSection 92C

M/S. Tejas Networks Limited, Bengaluru vs. Deputy Commissioner of Income Tax, Ltu, Circle-1, Bengaluru

In the result, the appeals filed by the revenue in IT(TP)A No

ITA 582/BANG/2021[2010-11]Status: DisposedITAT Bangalore09 Feb 2022AY 2010-11

Bench: Shri Chandra Poojari & Shri George George K.It(Tp)A Nos.296/Bang/2015 Assessment Year: 2010-11 M/S. Tejas Networks Ltd. Plot No.25, 5Th Floor Jp Software Park Acit, Circle-1, Ltu Vs. Electronic City, Phase I Bangalore Bangalore 560 100

For Appellant: Shri Jairam Raipura, D.RFor Respondent: Shri Annamalli & Shri Narendra Sharma, A.Rs

Section 154

that without prejudice the assessee is entitled for claim weighted deduction u/s 35(2AB) of the Act in respect of the amount of R&D expenditure quantified as per form 3CL issued by the DSIR. In this regard it is observed that the assessee has raised this ground ... expenditure of Rs.51,94,27,366/- incurred on Research and development. The A.O. noticed that the R & D expenditure is related to “product development expenditure”. He further noticed that the Form No.3CL issued by DSIR mentioned a sum of Rs.102,15,31,716/-. Accordingly, the excess amount of Rs.1

M/S Tejats Networks Limited, Bangalore vs. Principal Commissioner of Income Tax Central, Bangalore

In the result, the appeals filed by the revenue in IT(TP)A No

ITA 1674/BANG/2018[2011-12]Status: DisposedITAT Bangalore09 Feb 2022AY 2011-12

For Appellant: Shri Jairam Raipura, D.RFor Respondent: Shri Annamalli & Shri Narendra Sharma, A.Rs

Section 154

Tejas Networks Limited, Bangalore vs. DCIT, Bangalore

In the result, the appeals filed by the revenue in IT(TP)A No

ITA 694/BANG/2016[2011-12]Status: DisposedITAT Bangalore09 Feb 2022AY 2011-12

For Appellant: Shri Jairam Raipura, D.RFor Respondent: Shri Annamalli & Shri Narendra Sharma, A.Rs

Section 154