TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2254
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....al income, the Assessee explained the aforesaid claim for deduction as follows: "9. Company has paid Rs. 143 lacs to IIT Chennai for scientific research project. The Company is entitled to deduction of 125% of the amount contributed u/s.35(2AA) of the I.Tax Act, 1961. Pending receipt of approval as eligible project u/s.35(2AA), deduction is being claimed at 100% of the amount contributed. Enhanced deduction will be claimed after receipt of approval from specified authority." 3. Sec.35 of the Act provides for certain deductions, while computing income from business or profession, viz., expenditure incurred on scientific research. The following provisions are relevant for the purpose of deciding these appeals. "Section 35: Expenditure on scientific research. (1) In respect of expenditure on scientific research, the following deductions shall be allowed- (i) any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the business. Explanation : Where any such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, ....
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....e the Assessee made a claim for deduction of the expenditure incurred on scientific research. This claim is apparently u/s.35(1)(ii) of the Act, though there is no such reference in note-9 to the return of income. For a claim u/s.35(1)(ii) of the Act at 125%, the condition is that amount should have been paid to a scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research and such association, university, college or other institution should have been approved for the purpose of Sec.35(1)(ii) of the Act by the prescribed authority by notification in the official gazette. By notification S.O.287 dated 10.12.1973, IIT, Madras has been approved by the prescribed authority for the purpose of Sec.35(1)(ii) of the Act. 3.2. The Assessing Officer (AO) after making a reference to the claim of the Assessee for deduction of the sum of Rs. 1.43 Crores u/s.35(2AA) of the Act observed that the Assessee has not submitted approval of the prescribed authority and that the Assessee had also not made any claim for deduction u/s.35(1)(ii) of the Act. The AO further observed as follo....
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....r the Tribunal directed the CIT(A) to adjudicate the said issue of allowing deduction u/s.35(1)(ii) of the Act at 125%. 3.6. In the meantime, in the proceedings u/s.263 of the Act, the Assessee pointed out that the deduction at 125% was allowable u/s.35(2AA) of the Act. Deduction at 125% of the expenditure was also admissible to the Assessee u/s.35(1)(i) or 35(1)(ii) of the Act and therefore the deduction allowed by the AO was not erroneous. The Assessee also pointed out the order of the Tribunal dated 29.10.2009 remanding the issue of allowance of deduction at 125% of expenditure incurred on scientific research u/s.35(1)(ii) of the Act to the CIT(A) for fresh consideration. The Assessee pleaded that the issue which is under consideration before CIT(A) cannot be subject matter of revision u/s.263 of the Act. 3.7. The CIT passed order u/s.263 of the Act on 4.3.2010. He was of the view that the deduction u/s.35(1)(ii) of the Act was admissible but since such a claim was not made in the return of income nor did the Assessee file a revised return of income making such a claim, the AO ought not to have allowed the claim in view of the decision of the Hon'ble Supreme Court in the c....
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....id order u/s.263 of the Act. 3.11. In the order passed in Appeal No.95/CC-VI/CIT(A), C-I/07-08, the CIT(A) upheld the claim of the Assessee for weighted deduction @ 125% of the expenditure of Rs. 1.43 Crores incurred on scientific research. After referring to the conditions for allowing deduction u/s.35(1)(ii) of the Act, the CIT(A) observed as follows: "8. If the criteria's set out in the foregoing are applied to the present case, then I find that Rs. 143 lakhs was paid by the appellant pursuant to an agreement with the IIT, Madras for jointly undertaking scientific research projects in the field of tyre & vehicle mechanics. The IIT, Madras in the Certificate dated 09-09-2008 has confirmed that during the FY 2004-05, it had undertaken scientific research projects jointly with the appellant, and on its completion, results were communicated to the appellant. The IIT, Madras was notified by the Central Government as an approved Institution under section 35(1)(ii) vide Notification No.287 dated 10-11-1973 with effect from 01.04.1973. In this factual background, I find that all the conditions as prescribed in section 35(1)(ii) for claiming weighted deduction were fulfilled by th....
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....duction u/s 35(1)(ii) if allowed by the CIT(A), or in the alternate, the appellant is not entitled for any deduction u/s 35(1)(i). In view of my said order, I hold that the appellant is entitled for weighted deduction u/s 35(1)(ii) in respect of the sum paid to the IIT, Madras. Ground no.5 is allowed. 11. In view of my finding with regard to ground no.5, the other grounds raised in this appeal have become infructuous; and accordingly, they are dismissed. 12. In result, the appeal is partly allowed." Aggrieved by the aforesaid two orders of the CIT(A), the Revenue has preferred the present appeals before the Tribunal. 4. The grievance projected in the grounds of appeal by the revenue in ITA No.303/Kol/2013 which is the appeal by the revenue against the order dated 20.12.2012 in Appeal No.95/CC-VI/CIT(A), C-I/07-08 before CIT(A) is that the Assessee did not make a claim for deduction u/s.35(1)(ii) of the Act in the return of income filed by it. Since such a claim was not made in the return of income nor did the Assessee file a revised return of income making such a claim, the AO ought not to have allowed the claim in view of the decision of the Hon'ble Supreme Court in the....
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.... (as amended by the Direct Tax Laws (Amendment) Act, 1989, explaining the restoration of erstwhile Sec.35 of the Act. It was further submitted by him that u/s.24 of the General Clauses Act, 1897 (Act No.X of 1987), where any Act of Parliament is repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided, any appointment, notification, order, scheme, rule, form or bye-law made or issued under the repealed Act or Regulation shall, so far as it is not inconsistent with the provisions re-enacted, continue in force, and be deemed to have been made or issued under the provisions so re-enacted, unless and until it is superseded by any appointment, notification, order, scheme, rule, form or bye-law made or issued under the provisions so re-enacted. According to him nowhere it is expressly provided that approval of IIT, Madras for the purpose of Sec.35(1)(ii) of the Act will no longer hold good. Sec.24 of the General Clause Act, 1897 refers to repeal of an Act and reenactment with or without modification. The question is as to whether it will apply where there is a statutory amendment to a provision in an enactment without the enactment being repea....
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....eration in accordance with law, after affording opportunity of being heard to the assessee. The grievance projected by the revenue in this regard is therefore without any basis and therefore the same is rejected. 6.3. The next question that needs to be answered is as to whether in a case expenditure is incurred for scientific research relating to the business of the Assessee, deduction u/s.35(1)(ii) of the Act can be allowed. It is not the case of the AO that deduction cannot be allowed to the Assessee as the scientific research for which the Assessee incurred expenditure in question related to its business and therefore the deduction claimed cannot be allowed. It is not open for the revenue to set up a totally new case in its grounds of appeal which was never the case of the AO/CIT(A). Under clause (ii) to Sec.35(1) of the Act, any sum paid to approved scientific research association which has as its object the undertaking of scientific research or to an approved university, college or other institution to be used for scientific research is deductible. Unlike cl. (i) to Sec.35(1) of the Act, this clause does not lay down that the "scientific research", for which the amount is pai....