The Gujarat High Court has ruled that deductions under Section 35(2AB) cannot be denied on the grounds of later approval from the Department of Scientific and Industrial Research (DSIR). This ruling clarifies the conditions under which such deductions should be analyzed.
Gujarat HC Denies Section 35(2AB) Deduction Due to After-the-Fact Approval
In a pivotal ruling, the Gujarat High Court has stated that the denial of deductions under Section 35(2AB) on the basis of a subsequent approval from the Department of Scientific and Industrial Research (DSIR) lacks merit. The Court emphasized that such deductions should not be contingent on later developments but rather on the circumstances at the time the claims were made.
This ruling arose from a Revenue challenge concerning a taxpayer's entitlement to claim deductions for research and development (R&D) expenses for the assessment year 2013-14. The High Court's acknowledgment of the validity of the deductions at the time of filing is noteworthy.
“The assessment cannot hinge on subsequent approvals,” the High Court articulated, reinforcing the principle that tax claims should be evaluated on the facts available at the time of filing.
This decision is valuable for firms engaged in R&D who rely on Section 35(2AB) deductions. Practitioners should inform clients that the rulings made during assessments will consider the circumstances at the time of the claims without undue reliance on later approvals.
Citations
- Gujarat HC (2026) 231 ITR 460
