TMI Blog2015 (10) TMI 2254X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Whether the notification approving IIT, Madras as an approved institution for the purpose of Sec.35(1)(ii) of the Act is no longer valid? - Held that:- Erstwhile Sec.35 of the Act got revived and remained in suspended animation for a short period. Since the erstwhile Sec.35 of the Act has always been part of the Act, the notification dated 10.12.1973 notifying IIT, Madras as an approved institution for the purpose of Sec.35(1)(ii) of the Act was valid at all point of time. Therefore the objection of the learned DR in this regard is not accepted. We also find force in the argument of the learned counsel for the Assessee that nowhere it is expressly provided that approval of IIT, Madras for the purpose of Sec.35(1)(ii) of the Act will no longer hold good. Sec.24 of the General Clause Act, 1897 refers to repeal of an Act and re-enactment with or without modification. Provisions of Sec.24 of the General Clauses Act, 1897 are applicable even when there is a statutory amendment without there being a repeal of an enactment and re-enactment in place of repealed law and the reliance placed by the learned counsel for the Assessee on the decision of the Hon'ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973), on payment of any salary as defined in Explanation 2 below sub-section (5) of section 40A to an employee engaged in such scientific research, or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which the business is commenced . (ii) an amount equal to one and one-fourth times of any sum paid to a scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research: Provided that such association, university, college or other institution for the purposes of this clause- (A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of the prescribed authority and that the Assessee had also not made any claim for deduction u/s.35(1)(ii) of the Act. The AO further observed as follows: In the above circumstances no additional allowance is allowed subject to the observation that assessment will be rectified accordingly in case the said approval for AY 2005-06 is received subsequently. In the computation of Income under the head Business Income , the AO allowed deduction of ₹ 1.43 Crores with the observation Amount paid to IIT Chennai in the nature of Scientific Research . The claim has apparently been allowed by the AO without making reference to any section of the Act under which the same is being allowed. The order of assessment by the AO is dated 19.12.2007. In the said order of assessment, certain other additions and disallowances were made by the AO. Against the same the Assessee filed appeal before the CIT(A). The issue with regard to deduction u/s.35(2AA) of the Act was not raised by the Assessee, as admittedly there was no approval by the prescribed authority and therefore the deduction was not admissible u/s.35(2AA) of the Act. The CIT(A) decided the appeal of the Assessee vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor did the Assessee file a revised return of income making such a claim, the AO ought not to have allowed the claim in view of the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. Vs. CIT 284 ITR 323(SC) wherein the Hon'ble Supreme Court held that the AO cannot entertain a claim by the Assessee without filing a revised return of income making such a claim. He was also of the view that the CIT(A) in pursuance of the directions of the Tribunal had not decided the issue and therefore the subject matter of revision u/s.263 of the Act is not an issue which has already been decided by the CIT(A). He therefore held that the proceedings u/s.263 of the Act are valid. He finally set aside the order of the AO and directed the AO to redo the assessment in accordance with law. By order dated 31.12.2010, the AO gave effect to the order of the CIT dated 4.3.2010 in the order u/s.263 of the Act and finally concluded that deduction of ₹ 1.43 Crores cannot be allowed to the Assessee and accordingly added the said sum to the total income of the Assessee. Against the said order of the AO dated 31.12.2010, the Assessee filed appeal before Tribunal in Appeal No.218/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No.287 dated 10-11-1973 with effect from 01.04.1973. In this factual background, I find that all the conditions as prescribed in section 35(1)(ii) for claiming weighted deduction were fulfilled by the appellant. Merely because the appellant did not make claim for weighted deduction in the return filed u/s 139(1) could not disentitle the appellant to claim it in the appellate proceedings. Moreover, appellant's such claim was admitted for adjudication by the Tribunal, and then, it was restored to the CIT(A) for his decision in accordance with law. In the circumstances, the only question to be adjudicated by the first appellate authority is whether on the facts and circumstances of the case, the appellant fulfilled the conditions of section 35(1)(vii) for claiming weighted deduction. As discussed in the foregoing paragraphs, the sum paid by the appellant to the IIT Madras fulfilled all the conditions as prescribed in section 35(1)(ii). I therefore hold that the appellant was entitled to claim deduction for expenditure on scientific research u/s 35(1)(ii). Accordingly, the AO is directed to allow weighted deduction @125% of ₹ 143 lakhs being the amount paid by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince such a claim was not made in the return of income nor did the Assessee file a revised return of income making such a claim, the AO ought not to have allowed the claim in view of the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. Vs. CIT 284 ITR 323(SC) wherein the Hon'ble Supreme Court held that the AO cannot entertain a claim by the Assessee without filing a revised return of income making such a claim. 5. The grievance projected in the grounds of appeal by the Revenue in ITA No. 304/Kol/13 which is the appeal by the revenue against the order dated 20.12.2012 in Appeal No.218/CC-VI/CIT(A)C-I/10-11 before CIT(A) is that the payment of ₹ 1.43 Crores by the Assessee to IIT, Madras was for carrying out specific research in the field of tyre and vehicle mechanics with the sole objective to use the result of the research for the development of its own business and such payments do not qualify for any incentive for promoting scientific research as a whole. 6. We have heard the submissions of the learned DR who reiterated the stand of the Revenue as reflected in the grounds of appeal filed before the Tribunal. The learned DR also submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e General Clause Act, 1897 refers to repeal of an Act and reenactment with or without modification. The question is as to whether it will apply where there is a statutory amendment to a provision in an enactment without the enactment being repealed. The learned counsel for the Assessee relied on the decision of the Hon'ble Supreme Court in the case of Parle Biscuits (P) Ltd. Vs. State of Bihar 2005 (192) E.L.T 23 (SC) wherein the Hon'ble Supreme Court held that provisions analogous to Sec.24 of the General Clauses Act, 1897 are applicable even when there is a statutory amendment without there being a repeal of an enactment and reenactment in place of repealed law. 6.2. We have given a very careful consideration to the rival submissions. The first question that arises for our consideration is as to whether in the absence of a claim made by the Assessee for deduction u/s.35(1)(ii) of the Act in the return of income filed or by filing a revised return of income a claim can be entertained by the AO, in view of the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. Vs. CIT 284 ITR 323(SC) wherein the Hon'ble Supreme Court held that the AO cannot en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntific research or to an approved university, college or other institution to be used for scientific research is deductible. Unlike cl. (i) to Sec.35(1) of the Act, this clause does not lay down that the scientific research , for which the amount is paid should be related to the assessee's business. Therefore deduction u/s.35(1)(ii) of the Act has to be allowed whether the enditure incurred towards scientific research is in connection with the Assessee's business or not. 6.4. The last question that needs to be answered is as to whether the notification approving IIT, Madras as an approved institution for the purpose of Sec.35(1)(ii) of the Act is no longer valid. It is no doubt true as pointed out by the learned DR that erstwhile Sec.35 of the Act was deleted by Sec. 10 of the Direct Tax Laws (Amendment) Act, 1987 (Act 4 of 1988). The notification dated 10.12.1973 (Notification:P S.O.287) approving of IIT, Madras for the purpose of Sec.35(1)(ii) of the Act was issued under the erstwhile Section 35(1)(ii). It is also true that there is no other notification after 1973 notifying IIT, Madras as an approved institution for the purpose of Sec.35(1)(ii) of the Act. However by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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