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TMI Blog2002 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and the deduction to be granted is regulated by the provisions of sub-section (2) of section 35 of the Act. Under section 35(2)(ia) of the Act, where the assessee has incurred capital expenditure after March 31, 1967, the whole of such capital expenditure incurred in any previous year shall be deducted for that previous year and the proviso regulates the grant of deduction for the expenditure on the acquisition of any land incurred after February 29, 1984, with which we are not concerned. We are also not concerned with the Explanation 2 to section 35(2)(ia) of the Act as the said Explanation was introduced only from April 1, 1984. The assessee claimed certain deductions by way of capital expenditure for the purchase of properties, one at Chennai and another at Gujarat. In so far as the Chennai property is concerned, the assessee claimed a sum of Rs. 59,88,893 to be allowed as deduction under section 35(1)(iv) of the Act. The Assessing Officer, during the course of assessment proceedings, found that the deed of sale for the Chennai property was registered only on June 26, 1982, which was four days prior to the closing of the accounting period, viz., June 30, 1982. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce any proof of scientific research that was alleged to have been carried on. Hence, he rejected the claim of deduction towards scientific research expenditure of a sum of Rs. 42,67,054. In so far as the assessment proceedings are concerned, the Commissioner of Income-tax (Appeals) upheld the order of the Assessing Officer in not granting deduction under section 35(1)(iv) of the Act. The Income-tax Appellate Tribunal, in the appeal preferred by the assessee against the order of assessment, also held that the assessee has not established that the assets were maintained for scientific research purposes. The Appellate Tribunal also found that the mere intention of the assessee to carry on scientific research would not be sufficient to treat the property as the provision to facilitate research. The Appellate Tribunal also observed that if there was already a laboratory in existence, the purchase of any asset for utilisation in that laboratory would fulfil the criterion, even if such purchase was at the end of the year as an asset intended for scientific research, but where no such laboratory was in existence and the land was just purchased, the intention to set up the laboratory was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88,893 along with interest on deferred payments. On the above facts, the Assessing Officer came to the conclusion that the assessee deliberately and fraudulently furnished false particulars and attempted to defraud the Department by making a false claim that there was scientific research as there was absolutely no proof for that. As far as the Gujarat property is concerned, the Assessing Officer found that the assessee did not become the owner of the land and did not even spend any money, but claimed a sum of Rs. 42,67,054 as capital expenditure for scientific research purposes. He held that there was no agreement with the owners of the land for the purchase of the property and no advance was paid and on the basis of the unregistered and undated agreement with the middleman agreeing to procure the land, the assessee claimed the deduction. He therefore held that the claim of the assessee was false. He also found that the agreement with the middleman showed that the land was to be used for industrial activities and manufacturing facilities and only a sum of Rs.6,75,000 was paid to the middleman for levelling purpose, but the assessee claimed that amount also as scientific research e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal was justified in cancelling the penalty levied under section 271(1)(c) of the Act? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in cancelling the penalty levied under section 273(2)(a) of the Act?" Mrs. Pushya Sitharaman, learned senior standing counsel for the Revenue, submitted that the Tribunal was not correct in holding that the assessee had not made a false case. According to her, the facts clearly establish that the assessee had claimed deduction under section 35(1)(iv) of the Act knowing fully well that it was a false claim and none of the conditions prescribed in section 35(1)(iv) of the Act was fulfilled. She referred to the order of the Tribunal for the assessment under appeal wherein the Tribunal found that no laboratory was in existence as the land was purchased just four days before the close of the relevant previous year and the intention of the assessee to set up the laboratory would not be sufficient to hold that the claim was eligible for deduction and further, the intention was not effectuated. She further submitted that there is absolutely no material to establish the intention on the part of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We find that the Income-tax Officer while levying the penalty under section 271(1)(c) as well as under section 273(2)(a) of the Act, has found that in so far as the claim for expenditure on the Chennai property is concerned, the assessee claimed the expenditure or purchase of the said property, but the said property was purchased four days prior to the close of the previous year and the assessee had claimed that it was put to use for scientific research, but actually it was not done so. The Income-tax Officer found that there was no proof at all that the building was put to use for any scientific research. He also found that the sale deed showed a part of the property was purchased for the administrative purpose, and the assessee claimed the entire purchase consideration as if the entire property was put to use for the purpose of scientific research. He found that no portion of the property was used for the purpose of scientific research. He also found that the expenditure incurred during the previous year was only Rs. 12,60,000, but the assessee claimed full amount of Rs. 59,88,893 and also interest for the deferred payments amounting to Rs. 2,63,308 and on the above basis, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al the Tribunal held that the assessee had material honestly, though erroneously, to believe that it could legitimately claim deduction in respect of the purchase of assets intended for scientific research even though such research units were to be set up only in the future. We are of the view that the above observation of the Appellate Tribunal is quite contrary to its own finding. It was found by the Assessing Officer as well as by the Commissioner of Income-tax (Appeals) that the assessee has not even produced any material to show that it had intention to purchase the property for scientific research. In so far as the property that was purchased at Chennai is concerned the purchase was just four days prior to the end of the previous year and it was found that the assessee has paid only Rs. 12,60,000, but claimed the entire amount of Rs. 59,88,893 and also claimed interest of a sum of Rs. 2,63,308. It was also found that the assessee had not used the building for any scientific research and even at the time of purchase the sale deed showed that part of it was used only for administrative purpose, but the assessee claimed the entire expenditure as scientific research expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd. [1991] 192 ITR 155 are concerned, it is axiomatic that the High Court should not interfere with the Tribunal's finding of fact even if another view is possible. The Supreme Court has also held that the High Court hearing a reference under the Income-tax Act does not exercise appellate or revisional or supervisory jurisdiction over the Appellate Tribunal and that it acts in a purely advisory capacity. We are of the view that if the Tribunal, after considering the evidence produced before it on a question of fact, records a finding, this court will not interfere with such a finding unless the said finding is not supported by any evidence or is perverse or patently unreasonable. In our view, the finding of the Tribunal in the penalty appeal is not based on any evidence and it is perverse and it is patently erroneous and unreasonable as it has overlooked the materials produced before the Assessing Officer and in the absence of any material, the Appellate Tribunal has come to an erroneous conclusion. Hence, both the decisions referred to above do not support the case of the assessee. As far as the decision reported in CIT v. Indian Metals and Ferro Alloys Ltd. [1995] 211 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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