“approval of R&D facility”
The decision most relied on for approval of R&D facility is CIT v. Sun Pharmaceutical Industries Ltd. (250 Taxmann 270), cited in 34 judgments on BharatTax.
Leading authorities on approval of R&D facility
Form 3CL is a mere report for intimation of the approval of an R&D facility and is not intended for the approval or quantification of expenditure. This is supported by Rule 6(7A) of the Income Tax Rules and amendments to Section 35(3) of the Income Tax Act.
The Department of Scientific and Industrial Research's (DSIR) role, prior to July 1, 2016, was limited to approving R&D facilities, not the expenditure incurred, even if specific forms were not issued.
Deduction under section 35(2AB) cannot be denied for in-house R&D facilities when the assessee has complied with the requirements, even if there is a delay or non-issuance of Form 3CL by DSIR. The expenditure eligible for deduction under section 35(2AB) is not restricted to the amount certified by DSIR in Form 3CL.
Expenditure incurred for scientific research outside an approved R&D facility is not eligible for weighted deduction under section 35(2AB) of the Income Tax Act.
Recognition of a Scientific Research and Development facility by the prescribed authority is sufficient for claiming deduction under Section 35(2AB), even if the formal approval for the facility was not granted by the prescribed authority for the entire period of expenditure. The entitlement to deduction is not negated by the absence of subsequent formal approval.
Delay or non-issuance of Form 3CL by DSIR does not result in denial of deduction under Section 35(2AB) if the assessee's in-house R&D facilities were recognized by DSIR and the genuineness of expenditure is not doubted.
