High Court Of Madras
Tube Investments Of India Ltd. vs. CIT
Section 35(1)(iv), 35(2B)
Asst. Year 1984-85
R. Jayasimha Babu & K. Raviraja Pandian, JJ.
TC Nos. 477 to 479 of 1994
5th September, 2002
Counsel Appeared :
P.P.S. Janarthana Raja, for the Applicant : T.C.A. Ramanujam, for the Respondent
JUDGMENT
R. JAYASIMHA BABU, J. :
The question referred to us for our consideration is, “whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the applicant would not be eligible for deduction under s. 35(1)(iv) of the IT Act in relation to the two sums of Rs. 5,87,044 and Rs. 5,16,853 in view of the same having been claimed under s. 35(2B) and in spite of the same having been disallowed under the said section.”
2. The assessment year is 1984-85. Out of the two sums referred to in the question, the sum of Rs. 5,16,853 is the value of a machine imported by the assessee on 22nd Aug., 1980, and which machine was used in carrying out scientific research in a program approved by the authority prescribed under s. 35(2B) of the Act. The assessee’s claim for deduction in respect of the value of that machine under s. 35(2B) was rejected by the AO. The assessee’s claim that that expenditure be considered under s. 35(1)(iv) as expenditure incurred on a capital asset used for scientific research was negatived by the appellate authority as also the Tribunal on the ground that the asset itself was not purchased in the previous year relevant to the accounting year. Though the Tribunal was in error in proceeding further to reject the claim also on the ground that when a claim is made under s. 35(2B), such a claim cannot at all be considered even if a portion of it falls squarely under s. 35(1)(iv), the ultimate decisions of the Tribunal that this sum cannot be allowed for this assessment year under s. 35(1)(iv) must be upheld. Sec. 35 of the Act deals with expenditure on scientific research. Section 35(1)(iv) refers to expenditure of a capital nature on scientific research related to the business carried on by the assessee. Sec. 35(2B) refers to expenditure, other than capital expenditure incurred on the acquisition of any land or building or construction of any building, on scientific research undertaken under a programme approved in that behalf by the prescribed authority, having regard to the social, economic and industrial need of India. It is only such expenditure as is incurred on a programme which has been approved by the authority prescribed under s. 35(2B), which can be claimed as deduction under that provision. The capital expenditure on the acquisition of land or building whether acquired or constructed cannot be claimed under s. 35(2B). The benefit of s. 35 (1)(iv) can be availed by the assessee in respect of expenditure of a capital nature on scientific research if that research is related to the business carried on by the assessee.
The approval of the authority prescribed under s. 35(2B) is not an essential prerequisite for claiming the allowance under s. 35(1)(iv) if it is found that a part of the claim falls within the ambit of s. 35(1)(iv). The mere fact of a claim not having been found admissible under s. 35(2B) will not constitute a bar to allowing an expenditure under s. 35(1)(iv) if that expenditure is capital expenditure and falls squarely within the ambit of s. 35(1)(iv). Capital expenditure incurred on the acquisition of land or construction of building which is excluded by the very terms of s. 35(2B) can be claimed under s. 35(1)(iv). So far as the other sum of Rs. 5,87,044 is concerned, it has been found ‘ by the Tribunal that the assessee had treated the assets of that value in its P&L a/c and balance-sheet as assets and had also claimed depreciation on those assets in the relevant year. The Tribunal, while upholding the disallowance of that sum under s. 35(2B), has held that the assessee cannot claim the benefit of s. 35(2B) after the assets had been fully depreciated under s. 32. The assessee having enjoyed hundred per cent depreciation cannot claim double deduction, allowable depreciation under s. 35 (1)(iv) also being hundred per cent in that year. The Supreme Court in the case of Escorts Ltd. vs. Union of India (1992) 108 CTR (SC) 275 : (1993) 199 ITR 43 (SC), observed that, “there is a fundamental, though unwritten, axiom that no legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary the statute should not be read so as to permit an assessee two deductions, both under s. 10(2)(vi) and s. 10(2)(xiv) of the 1922 Act or both under s.32(1)(ii) and s. 35(1)(iv) of the 1961 Act.” The Court went on to hold that s. 35(2)(iv) mandates that the assessee should be granted the special allowance for scientific research and not the routine annual one for depreciation, where a depreciable asset is used for scientific research and qualifies for deduction under s. 35 of the Act.
6. We, therefore, answer the question referred to us in favour of the Revenue and against the assessee.
[Citation : 260 ITR 94]