Delhi High Court rules R&D deduction under Section 35(2AB) applies to pre-DSIR approval expenditure if part of approved project.
R&D Deduction Not Restricted to Post-DSIR Approval: Delhi HC
The Delhi High Court held that deductions under Section 35(2AB) for scientific research cannot be restricted only to expenses incurred after DSIR approval. Expenditure incurred prior to formal approval is eligible if it forms part of the approved research project.
The department had disallowed pre-approval R&D costs, but the Court emphasized that the statutory language does not impose temporal restrictions. Where such expenditure is integral to an approved project, it qualifies for weighted deduction. The AO was directed to issue revised Forms 3CM and 3CL accordingly.
This ruling expands the scope of eligible R&D outlays. Taxpayers in technology and manufacturing sectors should compile pre-approval expenditure logs and align them with DSIR-submitted project timelines to claim full deductions.
