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2014 (12) TMI 261 - GUJARAT HIGH COURTEntitlement for deduction u/s 35(1) – Research activity carried on as per section 43(4) – Held that:- Assessee claimed huge amount as expenses for research and development u/s 35 of the Act – The Tribunal held that the activity carried on by the respondent did constitute research u/s 43(4) of the Act - The assessee had also claimed expenses as royalty as it was appointed as distributor in respect of software packages of two companies – Following the decision in Deputy Commissioner of Income-tax (Asstt.) Versus Mastek Ltd. [2012 (9) TMI 264 - GUJARAT HIGH COURT] wherein it has been held that Section 35(3) of the Act requires a reference to be made by the Board to the prescribed authority when a question arises as to whether and if so to what extent, any activity constitutes or constituted or any asset is or was being used for scientific research. If an assessee puts forth a claim of deduction u/s 35(1) for expenditure incurred on scientific research and if the AO is not inclined to accept such a claim, the question can be stated to have arisen - at no stage, right up to the Tribunal and even during the pendency of these appeals before the High Court, any such attempt was made by the revenue - Secondly, in the meantime, more than 20 years have passed since the assessee incurred the expenditure. Expecting the assessee to now produce minute details of the research activity undertaken would be unreasonable - the Commissioner held that a substantial portion of such expenditure was in any case of revenue nature and in respect of the provision of section 37(1), the assessee was entitled to claim full deduction - such conclusion of the Commissioner was not disturbed by the Tribunal though the revenue had specifically preferred an appeal in this respect – Decided against revenue.
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