INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Assessee's claim of deduction under section 35(2AB) -

Assessee was engaged in manufacture and sale of pharmaceutical products. Assessment in case of assessee was completed and against the assessment order so passed, CIT issued notice under section 263 and while doing so, she found that assessee had claimed Rs. 5283.82 lac as weighted deduction under section 35(2AB), which was allowed by AO. She further noticed that revenue expenditure of Rs. 5302.03 lac incurred by assessee was for providing Research & Development services to its AE. She further found that for providing such contract Research and Development services to AE, assessee had received income of Rs. 6671.79 lacs. CIT was of the view that while computing net expenditure on Research & Development activities, instead of reducing the contract Research & Development expenditure, the Contract Research & Development income of Rs. 6671.79 lacs was required to be reduced for claiming deduction under section 35(2AB). Held: Assessee had specifically submitted that provision of section 35(2AB) speaks of Research & Development expenditure and not income. CIT had not countered specific submissions of assessee on this issue. Assessment order passed could not be held to be erroneous and prejudicial to the interest of Revenue when deduction claimed under section 35(2AB) was in conformity with statutory provisions. Accordingly, order of CIT passed under section 263 was liable to be quashed.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2012-13

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