TMI Blog2007 (8) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate order." 2. We have heard the rival submissions and carefully perused the order of the authorities below and documents placed on record. 3. With regard to ground No. 1, it is noticed that the assessee has claimed deduction under s. 35(1)(iv) a sum of Rs. 96,99,624. The assessee has stated that it is engaged in 'research business' and investment, in joint ventures. The principal objective of the company is engaging in specialised research activities and to enter into joint ventures with Indian companies to undertake the manufacture of chemicals. The assessee was asked to justify the claim in this regard. In response thereto it was stated that the assessee was engaged in the business of carrying out specialised research activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, it was with the objectives to prepare a scientific and analytical report or to provide the consultancy service to the desired person. It has already stated before the AO that he was engaged in the business of carrying out specialised research activities for two persons namely CIBA Speciality Chemicals Ltd. of Switzerland and Chiron Diagnostic of USA and whatever datas or informations were collected on the basis of scientific research, it were furnished to these companies and the income earned in lieu of that was offered to tax. He has also invited our attention to the judgment of Allahabad High Court in the case of U.P. Electronic Corpn. Ltd. in which their Lordships have held that the term business is to be given a wide meaning a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specialised consultancy on datas collected in scientific research to other companies? It is also to be seen whether providing of consultancy services or providing datas, collected on scientific research, amounts to business activity of the assessee? These questions were examined by the Allahabad High Court in the case of U.P. Electronic Corpn. Ltd. The facts of this case are that the assessee is a Government undertaking and had been set up with the basic object of promoting and developing electronic industries in the State of U.P. In the beginning it set up a factory to manufacture black and white T.V. sets w.e.f. 1st April, 1987. The State Government created certain separate corporations. The factories owned by the assessee were trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdships have observed that the expenditure on scientific research under s. 35 of the Act is allowable only when such expenditure is laid out or expended or related to the business. The term 'business' is to be given a wide meaning and with the rapid advancement and growth in the field of science and technology even the consultancy services offered would be covered under the term business. Their Lordships further observed that providing consultancy is the major source of revenue and it is not at all required to confine the term 'business' to mean only the sale and purchase of merchandise or manufacturing activities. Having observed that the assessee had derived income from consultancy services, preparation of feasibility report and other con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby, the assessee can only be called to be an extended unit of these two concerns in India, who is engaged in the specialised scientific research activity. The assessee was not doing any other business independent to research activities whereas according to s. 35(1)(iv) the expenditure of capital nature on scientific research can only be allowed to be deducted if it is related to the business carried on by the assessee. Since assessee was not engaged in any sort of business except the scientific research activity, expenditure incurred thereon cannot be called to have incurred a scientific research in relation to any business of the assessee. The language of relevant provision is quite unambiguous and clear and according to it deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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