Proof of genuine machinery purchase required for R&D deduction; unsupported claim failed and disallowance was restored.

Deduction under section 35(2)(ia) for research and development machinery was denied because the assessee failed to prove a genuine purchase by reliable evidence of delivery, ownership, transport and payment. The High Court held that, where the claim depends on acquisition of machinery, the burden rests on the assessee to substantiate the transaction with credible documentary proof and supplier confirmation. As the material on record did not displace the Assessing Officer's finding that the transaction was not established, the disallowance was restored and the Revenue's appeal succeeded.

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Issues: Whether the assessee was entitled to deduction under section 35(2)(ia) of the Income-tax Act, 1961 in respect of alleged purchase of research and development machinery without satisfactory proof of purchase, delivery, ownership and payment.

Analysis: The assessee claimed 100% deduction for machinery said to have been purchased for its R&D department. The Assessing Officer disallowed the claim on the basis that the assessee did not produce convincing documentary proof of purchase, transport, delivery, or confirmation from the alleged suppliers, and the correspondence sent to the suppliers remained unserved or inconclusive. The appellate authority and the Tribunal accepted the assessee's claim, but the Court found that the evidence relied upon by them did not adequately displace the Assessing Officer's finding that the transaction was not proved. The Court held that, for a claim of this magnitude, the burden lay on the assessee to establish genuine acquisition of the machinery by reliable evidence.

Conclusion: The deduction was not allowable, and the Revenue's challenge succeeded.

Final Conclusion: The assessment order disallowing the claim was restored and the appeal was allowed in favour of the Revenue.

Ratio Decidendi: A claim for deduction based on purchase of machinery must be supported by credible and sufficient evidence proving the genuineness of the transaction and the assessee's acquisition of the asset; where that burden is not discharged, the claim can be disallowed.

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