On October 11, 2022, the Income Tax Appellate Tribunal’s Delhi Bench ‘H’ delivered a crucial ruling in the case of VE Commercial Vehicles Ltd. versus DCIT Circle-26(2), New Delhi. This case centered around the reassessment of tax deductions claimed under Section 35(2AB) of the Income Tax Act for R&D expenditures during the assessment year 2012-13.
The appellant, VE Commercial Vehicles Ltd., challenged the legality of the reassessment initiated by the Income Tax Department, arguing that it was barred by the limitation period and based on a mere change of opinion rather than on new tangible material. The primary contention was that the reassessment proceedings were initiated after the expiry of four years from the end of the relevant assessment year without any failure on the part of the company to disclose fully and truly all material facts necessary for the assessment.
Central to the dispute was the claim of Rs. 14.98 crores as additional deduction for R&D, which was disallowed based on the Department of Scientific and Industrial Research (DSIR) approval amounts. The tribunal examined whether the assessing officer was justified in rejecting the claim solely on the basis of DSIR’s lesser approved amount without considering the appellant’s submissions and documentary evidence supporting the eligibility of the full claim.
The tribunal’s decision to allow the appeal highlighted the critical role of proper procedural adherence by tax authorities and underscored the necessity for assessors to base reassessment on clear, tangible material evidencing the escapement of income. This case serves as a significant precedent for the interpretation of laws relating to the reassessment of R&D deductions and the importance of adhering to statutory limitations.
The decision in ITA 1610/DEL/2020 reaffirms the principles of lawful reassessment practices and the need for transparency and fairness in the treatment of R&D tax deductions within the corporate sector.
ITA 1610/DEL/2020: VE Commercial Vehicles Ltd. Challenges Reassessment Over R&D Deductions
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