TaxTMI 
TaxTMI 
2018 (10) TMI 1713
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....s. Judicial decisions relied upon were carefully perused. 4. At the very outset, the ld. AR urged for the application of Rule 27 of the ITAT Rules stating that the assessee had challenged the reopening of the assessment before the first appellate authority and this issue has been decided against him, though on merits the first appellate authority has decided the appeal in favour of the assessee and against the Revenue. 5. Since the issue raised by the counsel goes to the root of the matter, we will first address on this issue. 6. Rule 27 of the ITAT Rules reads as under: "The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him." 7. We find that vide Ground No. 2 of the appeal, preferred before the CIT(A), the assessee has challenged the reopening of the assessment and the CIT(A) has dismissed this ground of appeal. In our considered opinion, Rule 27 clearly applies on the given facts of the case and the assessee is at liberty to challenge the reopening of the assessment while defending the order of the first appellate authority. 8. In this case, the original assessment was framed u/s 1....
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....vide order dated 29.08.2007 addressed the issues as under: "AS regards Ground No.(3), the Assessing Officerobserved that the appellant had claimed patent registration expenses and consultancy charges for in house research and development. He held the same to have been incurred in relation to an intangible capital asset being patent as provided u/s. 32(1 )(ii) of the Act. He allowed depreciation on the same. Before me, the appellant has argued that the expenditure represents fees paid to various consultancy firms for making for registration of patents. It has been argued that the patents may or may not be granted ultimately. It has argued that in case its claim of revenue expenditure is not acceptable, the expenditure so incurred in relation to the applications about which no patent has been granted may, at least, be granted as revenue expenditure. I have considered the rival submissions. It is observed that the similar issue had come up before me in the appellant's case for AY. 2002-03 in which I have directed the Assessing Officer in my order dated 14-11-2006 at Para 19 to verify the details to see if the patent's applications have been rejected ....
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....r, even the remaining amount of the claims were disallowed in the assessment order. The perusal of the records for A.Y.2003-04 reveals that the assessee had claimed deductions under sub-clause (I), (ii) & (iv) of sub section (1) of section 35 of the I.T. Act. The details of which are as under:- u/s.35(1)(i) Rs. 92,10,889/- u/s.35(1 )(ii) Rs. 65,64,853/- u/s.35(1 )(iv) Rs. 1,96,910/- The claims as above are made without supporting evidences proofs and therefore not allowable. In view of the above discussion, income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. I have therefore reason to believe that income to the extent of Rs. 1,59,72,652/- has escaped the assessment. Issue notice u/s. 148 of the Act. (Y.C. Surti) Dy. Commissioner of Income-tax, Circle-1 (1), Baroda" 13. As the date of notice is 26.06.2009, obviously the reopening is proposed to be done after four assessment years, which means that the first proviso to section 147 clearly applies, which reads as under: "Provided that where an as....
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.... 35AC, 35CCA, 35CCB, 35D & 35E as under: Name of the Institution Section Amount Deduction In house capital 35(2)(ia) 1,04,235 1,04,235 Mother Dairy Fruits and 35(i)(iv) 1,96,910 1,96,910 Delhi University 35(i)(ii) 9,12,544 11,40,680 Total 12,13,689 14,41,825 And Name of the Institution Section Amount Deduction In house capital 35(2)(ia) 1,04,235 1,04,235 Mother Dairy Fruits and 35(i)(iv) 1,96,910 1,96,910 Delhi University 35(i)(ii) 9,12,544 11,40,680 Total 12,13,689 14,41,825 18. In our understanding of facts, in the original assessment order as well as the order made by the first appellate authority, it was clear that the Assessing Officer was well aware of the primary facts, namely claim made by the assessee, circumstances under which the claim was made, and provisions of law, which could be applied while granting the benefits. A decision may be right or wrong, but that was none of the concern of the subsequent officer. If the primary facts were not available or there was concealment or there was no application of mind at all, then a case of ....
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....f the entire assessment beyond a period of four years from the end of the relevant A.Y. 24. Considering the facts of the case in totality, the assessee succeeds u/r 27 of the ITAT Rules. We hold that the reopening of the assessment is bad in law. 25. We do not want to rest our decision at this point but would like to address the issue on merits of the case. 26. The bone of contention is the claim of deduction u/s 35(1) (i),(ii) & (iv) of the Act. The first reason for disallowing the claim of deduction is that research work was carried out by Mother Diary Foods Processing Ltd, Delhi and not by assessee and later on, part of costs were recovered from the assessee company. The Revenue alleges that the assessee itself had not carried out R & D activities. Thus the correlation of expenses incurred with the business of the assessee could not be established which is primarily required for allowance of deduction u/s 35(1)(i) of the Act. 27. We find the answer to this quarrel is in the decision of the Hon'ble High Court of Bombay in the case of National Rayon Corporation Limited 140 ITR 143 wherein the Hon'ble High Court has held that for claiming the deduction u/s 35(1)....