Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2009 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (3) TMI 643 - AT - Income TaxDisallowance of expenditure on scientific research - claim deduction u/s 35(1)(iv) - Whether the assessee is entitled to depreciation claim u/s 32 in the later previous years in respect of the expenditure already allowed u/s 35 in a previous year - business of scientific research and investment in joint venture - assessee submitted copies of their foreign collaboration approvals and the MOA as well as the research agreement between and the sister concerns, i.e., CIBA Basle to substantiate that the doing specialized research is the principal business of the assessee - As per the assessee, the provisions of section 35(1)(iv) allow the capital expenditure on scientific research related to the business of the assessee as deduction - AO denied the deduction u/s 35(1)(iv) holding that it is allowable only in respect of the capital expenditure on scientific research related to the business of the assessee - he thrust the depreciation u/s 32 @ 25 per cent and 60 per cent on plant and machinery and on computers respectively instead. HELD THAT:- The assessee, in our considered opinion, cannot be said to have two distinct activities, i.e., business activity on one side and related scientific research activity on the other. In other words, the assessee does not have the business activity to absorb the developed scientific research. Further, it is also not the case of the assessee that he is covered by section 43(4)(iii)( a), i.e., the cases of scientific research, which may ‘lead to or to facilitate an extension of that business’. Thus, by conducting the said research, the assessee generates a marketable product or stock-in-trade in the form of the scientific research. In these circumstances, we are of the opinion that the provisions of section 35(1)(iv) have no applicable to assessee’s case and, accordingly, this part of the arguments of the assessee’s counsel is dismissed. The assessee incurred capital expenditure on the scientific research and undisputedly it is related to the subsidiary company such as CIBA Basle. Assessee does not have any active business activity carried on by him to which the said research relate to. Further, we find that this is not a case of cacus omicus after the amendment to section 35(2)(iv) to suppress the effects of the Tribunal decision in the case of Vickers Sperry of India [1979 (10) TMI 100 - ITAT BOMBAY]. Consequently, the recent Co-ordinate Bench decision in assessee’s own case for AY 2001-02 is applicable and binding. Regarding the AO’s decision in thrusting of the depreciation u/s 32, in the facts and circumstances of the issue where the expenditure on plant and machinery and on computers is undisputedly capital in nature and the same assets were undisputedly owned and used for the business, we find AO’s decision is fair and found valid. Accordingly, the ground of assessee’s appeal is dismissed. In the result of the appeal of the assessee is dismissed.
|