TMI Blog2018 (10) TMI 1713X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagpur University - HELD THAT:- AO was of the opinion that u/s 35(1)(ii) of the Act, the deduction of any sum paid to scientific research association is allowable if such association s object is undertaking of scientific research or to a university, college or other institution to be used for scientific research subject to fulfilment of certain conditions. AO was of the opinion that though the assessee has furnished proof of approval under the I.T. Act, 1922, but has failed to produce any evidence under the provisions of ITAT Rules, 1962. We find that a similar dispute was considered by DHARA VEGETABLE OIL FOODS CO LTD VERSUS DEPUTY COMMISSIONER OF INCOME TAX [ 2012 (7) TMI 593 - GUJARAT HIGH COURT] and at para 17 of its order the Hon'ble High Court has decided the issue in favour of the assessee and against the Revenue. - ITA No. 2875/DEL/2013 [A.Y 2003-04] - - - Dated:- 11-10-2018 - Shri N.K. Billaiya, Accountant Member, And Smt Beena A. Pillai, judicial Member Assessee by: Shri S.D. Kapila, Adv Shri R.R. Maurya, Adv Revenue by: Ms. Ashima Neb, Sr. DR ORDER N.K. Billaiya, This appeal filed by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On perusal of the return of income, it has been observed that the assessee has claimed expense of ₹ 19,90,750/- for the patent registration as revenue expenditure. During the course of assessment proceedings, the assessee was requested to explain as to why patent registration expense of in-house research and development should not be capitalized, as the same has been incurred in respect of an intangible assets. In response to the above, the assessee company vide Its submission dated 8-2-2.006 and 14-3-2006 giving the details of R D expenses and R D patent expenses of ₹ 1990750/-. The expenses are in respect of patent fees and consultancy charges for filing various patent applications. The bills in support are furnished. 10. The Assessing Officer observed in the assessment order as under: I have gone through the submissions as noted above but the claim that these are revenue expenses is not found to be tenable. These expenses have been incurred in relation to an intangible asset in the form of registration of patents. Any expenditure incurred to bring an asset into existence has to be capitalized with value of that asset. In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self. If it is found that there are applications of this category, the expenditure on their registration shall be treated as revenue expenditure. The Assessing Officer is directed to withdraw the depreciation already allowed by him on such amount. The appellant gets relief to that extent. It is further held that expenditure in respect of the applications where the registration has been granted shall be treated as capital expenditure and the view of the Assessing Officer in this regard is upheld 12. Vide notice dated 26.06.2009, issued u/s 148 of the Act, the Assessing Officer proposed for reopening of the assessment. The reasons for reopening of the assessment u/s 147 of the Act read as under: In this case, the assessment orders U/s. 143(3) for A.Y.2005-06 2006-07 were completed on 17.12.2007 and 11.12.2008 respectively. It was noticed that the assessee had claimed expenditure on scientific research under sub-clause (i), (ii) (iv) of sub section (1) of section 35 of the I T. Act. In the assessment order the AO has disallowed the claims as assessee could not substantiate its claims with supporting evidence. It was unearthed that though the expenditure on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: 14. A perusal of the aforementioned first proviso to section 147 of the Act shows that a completed assessment can be reopened only if there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. 15. We find that in the statement showing computation of total income for the year under consideration, the assessee has clearly mentioned the R D expenses as reduced by the patent expenses at ₹ 19,90,450/- and further R D expenses were shown separately as per Annexure III(a) and III(b) of Form 3CD. These details can be found from Exhibits 2 3 of the paper book. Exhibit 4 is the notes attached to and forming part of returned income and at point No. 5, the assessee states as under: The company has been ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 12,13,689 14,41,825 18. In our understanding of facts, in the original assessment order as well as the order made by the first appellate authority, it was clear that the Assessing Officer was well aware of the primary facts, namely claim made by the assessee, circumstances under which the claim was made, and provisions of law, which could be applied while granting the benefits. A decision may be right or wrong, but that was none of the concern of the subsequent officer. If the primary facts were not available or there was concealment or there was no application of mind at all, then a case of reopening the assessment could be made out. But when all the facts were placed before the Assessing Officer and the Assessing Officer consciously considered the facts and arrived at a decision, then, it could not be reopened merely because subsequently he changes his opinion or some other officer takes a different view. 19. Surprisingly, in the immediately preceding year, completed assessment was reopened on identical set of facts and for identical reasons for reopening assessment u/s 147 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) of the Act. The first reason for disallowing the claim of deduction is that research work was carried out by Mother Diary Foods Processing Ltd, Delhi and not by assessee and later on, part of costs were recovered from the assessee company. The Revenue alleges that the assessee itself had not carried out R D activities. Thus the correlation of expenses incurred with the business of the assessee could not be established which is primarily required for allowance of deduction u/s 35(1)(i) of the Act. 27. We find the answer to this quarrel is in the decision of the Hon'ble High Court of Bombay in the case of National Rayon Corporation Limited 140 ITR 143 wherein the Hon'ble High Court has held that for claiming the deduction u/s 35(1)(i) of the Act, research must have been carried on by the assessee itself is not borne out by phraseology of the statutory provision. The assessee can claim the deduction even if the research is carried on by some other person on behalf of the assessee. 28. Second quarrel is in respect of contribution made by the assessee to Delhi University and Nagpur University. 29. The Assessing Officer was of the opinion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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