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Is R&D expenditure eligible for deduction under section 28 to 44DB of the Income Tax Act?


Court :
ITAT Bangalore

Brief :
These seven appeals at the instance of the assessee and five cross objections preferred by the Revenue are directed against various orders of the CIT(A). The relevant assessment years are 2007-2008, 1010-2011 to 2015-2016.

Citation :
ITA No.2942/Bang/2018 : Asst.Year 2015-2016

Before Shri George George K, JM & Shri B.R.Baskaran, AM
ITA No.1090/Bang/2017 : Asst.Year 2007-2008
ITA No.2627/Bang/2018 : Asst.Year 2010-2011
ITA No.1091/Bang/2017 : Asst.Year 2011-2012
ITA No.1092/Bang/2017 : Asst.Year 2012-2013
ITA No.1093/Bang/2017 : Asst.Year 2013-2014
ITA No.84/Bang/2018 : Asst.Year 2014-2015
ITA No.2942/Bang/2018 : Asst.Year 2015-2016

M/s.Hindustan Aeronautics
Limited, No.15/1, Cubbon Road
Bangalore – 560 001.



The Asst.Commissioner of
Income-tax, Circle 3(1)(2)


CO No.26/Bang/2019 : Asst.Year 2011-2012
CO No.27/Bang/2019 : Asst.Year 2012-2013
CO No.28/Bang/2019 : Asst.Year 2013-2014
CO No.29/Bang/2019 : Asst.Year 2014-2015
CO No.30/Bang/2019 : Asst.Year 2015-2016

The Asst.Commissioner of Incometax,
Circle 3(1)(2)

(Cross Objector)


M/s.Hindustan Aeronautics
Limited, No.15/1, Cubbon
Bangalore – 560 001.


Assessee by : Sri.Sunil Khurana, CA
Revenue by : Sri.Pradeep Kumar, CIT-DR
Date of Hearing : 18.08.2021
Date of
Pronouncement : 24.08.2021


The assessee is a Public Sector Undertaking of Government of India. It is engaged in the business of design, development, manufacture and maintenance of advanced fighters. It mainly caters to Indian Defence needs. For the purpose of manufacturing Aircrafts and Aviation System, it undertakes various research and development activities in its research and development centres.

2. The above grounds have become redundant in view of disposal of grounds No.2(a), 2(b). (We have directed the A.O. to examine the expenditure incurred whether it can be allowed as a deduction u/s 37 or 35(1)(iv) of the I.T.Act).

3. The Assessing Officer made a disallowance of Rs.1,57,05,523 u/s 14A of the I.T.Act r.w. Rule 8D(2)(ii) of the I.T.Rules being 0.5% of average value of investment held by the assessee and proportionate interest expenditure not directly attributable.

4. It is the claim of the assessee that in the return of income the assessee had disallowed the entire provision created towards doubtful debts. Therefore, the A.O. is not justified in again disallowing 50% of the doubtful debts.

5. The issue of disallowance u/s 14A had come up for adjudication on identical facts in the preceding assessment year, namely Asst.Year 2011-2012. In this year, the assessee has received dividend income of Rs.188.61 lakh from two  companies.

6. In the result, the appeals filed by the assessee are partly allowed for statistical purposes and the cross objections filed by the Revenue are dismissed.
Order pronounced on this 24th day of August, 2021.

Please find attached the enclosed file for the full judgement


Poojitha Raam
on 28 August 2021
Published in Income Tax
Views : 32
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