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2016 (4) TMI 1294 - HC - Income TaxEntitlement to claim the weighted deduction at the specified rate u/s S.35 (2AB) - approval of the in-house research and development facility - quantum of such expenditure - no show cause notice and an opportunity of hearing to the petitioner assessee before cost of purchase of motor vehicles and salary and wages of the trainees and apprentices as disallowed from the category of 'approved expenditure on scientific research' - Held that:- Undisputably before reducing the amount of R & D expenditure for these two Assessment Years in question i.e., 2011-12 and 2012-13 to the extent of ₹ 59.69 lakhs and 55.51 lakhs respectively, the said respondent Secretary did not give any prior show cause notice and an opportunity of hearing to the petitioner assessee as to why these two amounts under two different heads namely, cost of purchase of motor vehicles and salary and wages of the trainees and apprentices, be not disallowed from the category of 'approved expenditure on scientific research'. Thus, the assessee was deprived of its valuable right of hearing and rebut and controvert the case against him on the basis of which, the said respondent Secretary passed the impugned order approving the expenditure for scientific research as required under the provisions of S.35 (2AB) at a reduced level. Had such a notice been given by the said authority to the assessee company, perhaps the assessee company could have satisfied the said authority about the genuineness of the claim and rational nexus of these expenses relatable to the scientific research undertaken by it entitling it for claiming the weighted deduction in respect of these expenses also under the category of approved expenditure for scientific research under S.35(2AB) of the Act. The impugned order is thus clearly hit by the vice of non-compliance of the principles of natural justice or audi alterm partem, the applicability of which even to the taxing statute cannot be ruled out. The competent authority passed this order under these provisions certainly exercising a quasi-judicial function when he passed this order approving the expenditure incurred by the assessee on scientific research. No such unilateral action or determination could have been taken by the respondent Secretary particularly when he chose to reduce the amount of expenditure incurred on scientific research as against the amount claimed by the assessee, to the detriment of the assessee company resulting in an adverse double tax effect as per the provisions of the Act. This Court would not like to pronounce upon the includibility of these expenses in the head of 'approved expenditure for scientific research' at this stage and it is considered appropriate that the 1st respondent Secretary himself is allowed to reconsider the case on these issues after allowing a reasonable opportunity of hearing to the assessee in this regard
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