ITAT Delhi Upholds Section 35(2AB) Deduction: Valid Form 3CM Sufficient Despite Procedural Objections by Revenue

Background and Overview

The Income Tax Appellate Tribunal (ITAT), Delhi, recently delivered a significant ruling in the case of DCIT Vs ITW India Private Limited, affirming that a weighted deduction claimed under Section 35(2AB) of the Income Tax Act, 1961 cannot be denied when the assessee holds a valid approval in Form 3CM issued by the Department of Scientific & Industrial Research (DSIR) and the same has been duly placed before the Assessing Officer.

The case arose from an order dated 28.08.2025 passed by the Commissioner of Income Tax (Appeals) [CIT(A)] under Section 250 of the Income Tax Act, 1961, through which relief had been granted to the assessee by deleting an addition of Rs. 1,91,97,051/-. The Revenue, aggrieved by this relief, preferred an appeal before the Tribunal, which ultimately dismissed the Revenue's challenge vide its order pronounced in open court on 08.04.2026.

The Core Dispute: Disallowance of Scientific Research Expenditure

Assessing Officer's Action

The assessee, ITW India Private Limited, had claimed a weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 in respect of expenditure incurred on specified scientific research activities amounting to Rs. 1,91,97,051/-.

The Assessing Officer (AO), during the course of assessment proceedings, recorded a finding that the assessee had failed to file the mandatory Form 3CM issued by the DSIR. On the basis of this finding, the AO concluded that the assessee was eligible for deduction under Section 35(2AB) only from 01.04.2018 to 31.03.2018 — a period that, notably, appears to have been referenced as a limited window — and consequently disallowed the entire claimed deduction, adding Rs. 1,91,97,051/- back to the assessee's taxable income.

First Appellate Proceedings Before CIT(A)

Relief Granted to the Assessee

The assessee challenged the AO's disallowance before the CIT(A), who examined the documentary record in detail. The CIT(A) noted that the assessee had electronically submitted copies of Form 3CLA and Form 3CM during the assessment proceedings and had further produced the same before the appellate authority as well.

Upon perusal of these documents, the CIT(A) found that Form 3CM was valid for the period from 01.04.2013 to 31.03.2017 for the purposes of Section 35(2AB) of the Act. In light of this finding, the CIT(A) declined to accept the AO's observation and proceeded to delete the disallowance entirely.

The relevant finding of the CIT(A) reads as under:

"These grounds agitate against the disallowance of deduction of Rs.1,91,97,051/- claimed u/s 35(2AB) of the Act. The fact related to this disallowance has already been discussed in earlier paragraphs. During the appellate proceedings, in para 6 of the written submissions, the appellant has submitted that it had furnished the copies of Form No.3CLA and Form No. 3CM electronically along with other documents before the AO. He had produced the same before the appellate authority also. From a perusal of the same it is noticed that the said Form 3CM was valid from 01.04.2013 to 31.03.2017 for the purpose of section 35(2AB) of the Act. Accordingly, the observation put forth by the AO cannot be accepted and therefore, the addition made by the AO is hereby deleted. These grounds of appeal are, thus, allowed."

Revenue's Appeal Before ITAT Delhi

Grounds Raised by the Department

Dissatisfied with the CIT(A)'s order, the Revenue filed an appeal before the ITAT raising the following grounds: