COMMISSIONER OF INCOME TAX Vs. CLARIS LIFESCIENCES LTD.

JUDGEMENT

(1.) THE Revenue has filed this tax appeal under Section 260A of the IT Act, 1961 ('the Act for short') for asst. yr. 2001 -02 proposing to formulate the following substantial question of law for the determination and consideration of this Court: Whether the Tribunal is right in law and on facts in deleting the disallowance of claim of deduction made under Section 35(2AB) amounting to Rs. 40,80,942 ?

(2.) THE brief facts giving rise to present appeal are that the assessee had set up in -house R&D; facility and incurred capital and revenue expenditure. The assessee applied to Ministry of Science and Technology, Department of Scientific and Industrial Research (DSIR) on 7th Aug., 2000 for approval. However, the approval was given only on 27th Feb., 2001. In the approval letter by a note, it was mentioned that the facility approved for the purpose of Section 35(2AB) was from 27th Feb., 2001 till 31st March, 2003. In the return filed by the assessee, it had claimed the weighted deduction under Section 35(2AB), i.e. l 1/2 times of the expenses incurred on the entire expenditure incurred on establishment of the income of the facility. However, during the course of assessment proceedings, the AO held that as approval under Section 35(2AB) has been granted w.e.f. 27th Feb., 2001, the deduction for expenditure incurred only from this date will be eligible for weighted deduction and accordingly, disallowed the weighted deduction on the expenditure incurred before 27th Feb., 2001.

(3.) MRS . Mauna M. Bhatt, learned standing counsel appearing for the Revenue has submitted that Section 35(2AB) is very clear and it says that expenditure incurred on in -house research and development facility, as approved by the prescribed authorities, has to be allowed as deduction. She has further submitted that while granting approval, it was made clear that with effect form that date onwards, the approval had come into force and, hence, expenditures incurred prior to that date are not to be allowed. She has submitted that in any case, there is a question regarding interpretation of Section 35(2AB) of the Act, which certainly gives rise to the question of law and it has to be determined by this Court after formulating the said question.