TMI Blog2016 (4) TMI 1294X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs (as against ₹ 3898.39 lakhs claimed by the assessee) for the Assessment Year 2012-13. 3. The assessee filed a representation to the said Department vide Annexure F on 4.3.2015 that the assessee found certain differences on the amount of expenditure as claimed by the assessee as the amount of expenditure entitled for approval and deduction under S.35(2AB) of the Act and the amount approved by the said authority, and that as inquired by them over telephone and as orally communicated to them, though no such reason for deduction was assigned in writing in the impugned order Annexure C dated 20.1.2015 and therefore, the assessee company was of the belief that the capital expenditure other than land and building (motor vehicles) and recurring expenses (salary and wages) paid to the trainees and apprentices was the amount of difference in the aforesaid two assessment years to the extent of ₹ 59.69 lakhs for the Assessment Year 2011-12 and ₹ 55.51 lakhs for the Assessment Year 2012-13. The assessee, therefore, requested the said respondent No.1 authority to reconsider the approval for the reduced amount under the order impugned and to revise the same upwardly on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the parties at some length and perused the record. 7. The provisions of S.35(2AB) which provides for a weighted deduction under Chapter IV of the Income Tax Act, 1961 in respect of 'Expenditure on Scientific Research' to promote such research by the industry is reproduced below for ready reference. S:35(2AB) (1) Where a company engaged in the business of biotechnology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building), on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to two times of the expenditure. 8. It is not in dispute before this Court that the petitioner company had undertaken the research work and had spent certain amount during the relevant assessment years on scientific research, not being the capital expenditure in the nature of land and building and the conditions for availing deduction under this provision were satisfied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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) of the Act 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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