TMI Blog2008 (8) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the Tribunal was right in holding that the definition of scientific research given in section 43(4) is not relevant to claim of expenditure under section 35 ? (ii) Whether on the facts and in the circumstances of the case the Tribunal was correct in holding that the expenditure of a capital nature was admissible as deduction when the expenditure was not incurred for the existing business ?" 2. This appeal relates to the assessment year 1992-93. The undisputed facts of the case are that the assessee was carrying on the business of manufacture and sale of precision sheet metal components. In the assess-ment year under reference, the assessee decided to manufacture and market automatic coffee machine named Vendomate. The case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of the phrase "scientific research" under section 43(4) has no connection with the deduction claimed under section 35 and rejected the case of the Revenue. Hence, the present appeal by the Revenue. 5. To appreciate the rival contentions of the parties, it would be appro-priate to quote section 35(1)(i) and (iv) of the Income-tax Act (for short : the Act) which reads as under : "35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed- (i) any expenditure (not being in the nature of capital expendi-ture) laid out or expended on scientific research related to the busi-ness . . . . (iv) in respect of any expenditure of a capital nature on scientific research related to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ientific research should be allowed under sec-tion 35. It was further contended that this expenditure was not in relation to the business. It was lastly contended that the matter should have been referred to the prescribed authority under section 35(3) of the Act. 9. Section 43(4) defines scientific research. In sub-clause (i), scientific research has been defined to mean any activity for the extension of know-ledge in the fields of natural or applied science including agriculture, animal husbandry or fisheries. It is contended on behalf of the Revenue that this is the sole definition of scientific research and sub-clause (iii) cannot be read in isolation of sub-clause (i). This argument cannot be accepted. Section 43(4) in totality def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cientific" has been defined in the Oxford Dictionary as (i)relating to or based on science, (ii) systematic or methodical. The word "research" has been defined in the same dictionary as "the systematic investigation into and study of materials and sources in order to establish facts and reach new conclusions". 12. On a combined reading of the meanings of the aforesaid two words, it is obvious that any methodical or systematic investigation based on science into the study of any materials and sources, is a scientific research. The dis-mantling of the imported coffee machine with a view to decipher how the said machine functions and also with a view to develop a new model of the machine with the intention of making the said machine su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cide the question as to what activity constitutes scientific research. In support of his contention, he has relied upon a judgment of the Allahabad High Court in J. K. Synthetics Ltd. v. O.S. Bajpai, ITO [1976] 105 ITR 864 (All). 15. At the outset, we may note that this contention was neither raised before any of the income-tax authorities nor was raised in the grounds of appeal and for the first time it was raised at the time of hearing of the matter. We are, therefore, of the view that at this stage the Revenue cannot be permitted to raise this ground. 16. However, we have also considered that aspect of the matter in detail. After referring to section 35, the Allahabad High Court held as follows (page 884) : "It is apparent th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the Revenue has failed to bring to our notice any provision of the Act or the Rules which empowers the Assessing Officer or other income-tax autho-rities to refer the matter to the Board. Once the matter is before the Assess-ing Officer, he must decide the same. Since the Revenue has failed to show us any provision of law vesting the assessing authority with the power to refer the matter to the Board, the assessing authority must decide the matter himself and cannot refer it to the Board. 18. In our view, section 35(3) has no applicability to the facts of the case. This section applies only when the matter goes before the Board and then the Board is bound to refer the matter to the prescribed authority. No such limitation has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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