The Bombay High Court has clarified that submitting the audit report electronically on time is enough to meet procedural requirements for R&D tax deductions, even if the department disputes internal records of delay.
The Bombay High Court has held that Sedemac Mechatronics’ claim for tax relief on in-house research and development spending could not be thrown out as late simply because the Department of Scientific and Industrial Research had treated its paperwork as delayed. The bench of Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla said that uploading Form 3CLA to the Income Tax Department’s e-filing portal by the return deadline was enough to satisfy the rule governing the filing of the audit report.
The case turned on Section 35(2AB) of the Income Tax Act, which grants a weighted deduction for approved in-house R&D facilities, and on Rule 6(7A)(c), which requires the annual audit report to be furnished electronically by the due date for filing the income tax return. Sedemac said it had done so for Assessment Years 2018-19 and 2020-21, pointing to filings made on October 30, 2018 and December 24, 2020, both before the relevant deadlines. The company also noted that the DSIR had registered on the e-filing system as an external agency able to receive the form and had accepted that the documents filed by Sedemac could be accessed through the portal.
According to the court, those facts meant the company had met the procedural requirement. It rejected the DSIR’s reliance on internal records and on the argument that some further details were supplied later, saying the later exchange did not justify treating the original applications as barred by delay. The judges also took note of the department’s own opportunity letter of May 30, 2024, after which Sedemac sent the requested material in mid-June and followed up by email.
The court therefore set aside the DSIR’s October 25, 2024 order to the extent it had rejected the two applications on delay grounds. It directed the department to decide the claims on their merits and to compute the eligible expenditure in accordance with law. No fresh direction was needed for Assessment Year 2019-20, because that return had already been accepted.
The ruling sits within the wider compliance framework for India’s R&D deduction regime, where companies must first secure recognition for their facility and then file annual statements supporting the claim. For taxpayers, the decision is a reminder that where the law requires electronic furnishing by a deadline, proof of timely uploading may be enough even if the department later disputes how the form was logged internally.
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