Scientific research expenditure – Weighted deduction – Section 35(2AB) – A. Y. 2003-04 – Denial of deduction by AO on ground that machinery is required to be installed and commissioned before expiry of relevant previous year – Not proper

The assessee was engaged in the business of manufacture of enzymes and pharmaceutical ingredients. The Assessing Officer rejected the assessee’s claim for weighted deduction u/s. 35(2AB) of the Income-tax Act, 1961 on three machineries acquired during the year on the ground that the machineries had not been installed and commissioned during the year. The Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

“i) The provision nowhere suggests or implies that the machinery is required to be installed and commissioned before expiry of the relevant previous year. The provision postulates approval of a research and development facility, which implies that a development facility shall be in existence, which in turn, presupposes that the assessee must have incurred expenditure in this behalf.

ii) The Tribunal had rightly concluded that if the interpretation of the Assessing Officer were accepted, it would create absurdity in the provision inasmuch as words not provided in the statute were to be read into it, which is against the settled proposition of law with regard to the plain and simple meaning of the provision. The plain and homogeneous reading of the provisions would suggest that the entire expenditure incurred in respect of research and development has to be considered for weighted deduction u/s. 35(2AB) of the Act.”