AI Drafter 
TaxTMI 
TaxTMI 
2014 (12) TMI 261
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....s framed the following substantial question of law: "(A) Whether the Appellate Tribunal is right in law and on facts in holding that the activities carried out by the assessee constituted research activity in terms of section 43(4) and therefore the assessee was entitled to deduction of expenditure incurred, capital as well as revenue, Pune centre under section 35(1) (B) Whether before permitting deduction under section 35(1) of the Act to the assessee, the Tribunal ought to have obtained the opinion of the Central Board of Direct Taxes on the question whether the expenditure incurred by the assessee on its project at Pune was for research activities?" 3. The....
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....he case on hand, the Tribunal allowed the assessee's appeal primarily on two grounds. Firstly, the Tribunal was of the opinion that the assessee had placed sufficient material to establish that a new product was developed through scientific research. The expenditure incurred for such purpose was, therefore, allowable deduction under section 35(1) of the Act. The second ground on which the Tribunal accepted the assessee's case was that under section 35(1) of the Act, the Assessing Officer could not have rejected such a claim without making a reference to the Board. 27. Insofar as the first aspect of the matter is concerned, we are of the opinion that the Tribunal without discussing full materials on record....
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....such question arises, the Assessing Officer cannot decide the issue but must place the issue before the Board who, in terms of section 35(3) of the Act, would refer the question to the prescribed authority. The decision of the prescribed authority would govern the parties. Therefore, if an assessee puts forth a claim of deduction under section 35(1) for expenditure incurred on scientific research and if the Assessing Officer is not inclined to accept such a claim, the question can be stated to have arisen. In such a situation, the Assessing Officer cannot take a decision but must seek the opinion of the prescribed authority, We may hasten to add that only when such a question arises that the reference would be competent. For example, if in ....
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....rt. The High Court was of the opinion that neither section 35(3) of the Act nor any other provision under the Act or the rules empowers the revenue authorities to refer the matter to the Board. We are of the opinion that the very scheme of section 35(3) of the Act would require a revenue authority whenever a question arises as to whether the expenditure was incurred for scientific research or not before the Board who, as provided under section 35(3) of the Act, would have to refer the issue for the decision of the prescribed authority. In such a case, the revenue authority is not making a reference to the Board but is only placing the issue at the disposal of the Board to act in terms of section 35(3) of the Act to make a reference to the p....
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....provision of section 37(1) of the Act, the assessee was entitled to claim full deduction thereof. We have noticed that such conclusion of the Commissioner was not disturbed by the Tribunal though the revenue had specifically preferred an appeal in this respect. Against non entertaining of such appeal, further appeals by the revenue also came to be dismissed by this court. No useful purpose would, therefore, be served in permitting reopening of the entire issue at this distant point of time. 32. In the result, we answer the question No.A by holding that the Tribunal itself ought not to have decided this question without the opinion of the prescribed authority, particularly without full discussion on the materials on rec....