High Court Of Punjab & Haryana
CIT vs. Lakhani Rubber Udyog Ltd.
Sections 32AB, 154
Vijender Jain, C.J. & J.S. Narang, J.
IT Appeal Nos. 81 & 82 of 2006
11th December, 2006
Counsel Appeared
Yogesh Putney, for the Appellant
ORDER
J.S. Narang, J. :
This judgment would dispose of two IT Appeal Nos. 81 and 82 of 2006, as common questions of law and facts are involved in both these appeals. Facts are being taken from IT Appeal No. 81 of 2006.
2. The instant appeal has been filed by proposing the following questions of law for consideration :
(a) Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal erred in law in confirming the order of the CIT(A) in holding that the profit of the business eligible for deduction under s. 32AB of the Act would not get reduced on allowing deduction of expenditure on scientific research under s. 35 ?
(b) Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal erred in law in confirming the order of the CIT(A) in holding that the order was wrongly passed by the AO under s. 154 of the Act as there was no mistake apparent from record ?
The brief facts need to be noticed are that the assessee filed return of income on 29th July, 1988 declaring income of Rs. 17,34,554. The assessment had been finalised by the AO vide order dt. 11th March, 1992, for the asst. yr. 1988-89. The assessee had made a claim of Rs. 27,61,348 under s. 35 of the IT Act, 1961 (hereinafter referred to as “the Act”). The total cost of assets on account of scientific research has been given as Rs. 36,57,523. The total costs of land and depreciation thereon have been quantified as Rs. 1,50,350 and Rs. 7,45,825, respectively. The net claim of Rs. 27,61,348 has been made. A reference had been made to the prescribed authority. The report had not been received and that the assessment was getting barred by limitation as on 31st March, 1992. Thus, the report was not awaited and the assessment was finalised. The deduction under s. 32AB of the Act i.e. 1/5th of the amount so determined had been allowed.
By order dt. 10th March, 1998, the deduction under s. 32AB of the Act was held to be in excess and that the same was rectified vide the aforesaid order.
The assessee challenged the aforesaid order by way of an appeal before the CIT(A) which was allowed vide order dt. 10th Oct., 2001 and that the deduction under s. 32AB of the Act had been allowed.
The Revenue felt aggrieved of the aforesaid order and challenged the same by way of an appeal before the Tribunal, Delhi Bench, New Delhi. The appeal has been dismissed vide order dt. 27th June, 2005, which has been questioned in the instant appeal by way of proposing the aforesaid questions of law.The question considered by the Tribunal is : Whether as per the provisions of s. 32AB of the Act, the profits of the business eligible for deduction under the said provision would get reduced on allowing deduction of expenditure on scientific research under s. 35 of the Act ? It has been interpreted that as per s. 32AB(3), “profits of the business or profession” for the purpose of s. 32AB(1) of the Act would be an amount arrived at after deducting an amount equal to the depreciation computed according to the requirements of Part II and Part III of Sch. VI to the Companies Act, 1956. It is obvious that there is no mention of s. 35 of the Act in the provision contained under s. 32AB of the Act. Thus, it would not be correct to say that on allowing deduction of expenditure on scientific research under s. 35, the profits of the business eligible for deduction under s. 32AB would get reduced. Resultantly, the Tribunal has held that the order under s. 154 of the Act had been wrongly passed by the AO. The order of the CIT(A) has been upheld.Learned counsel for the appellant has not been able to address any meaningful argument to controvert the view taken by the CIT(A), which has been further affirmed by the Tribunal. The contention is that it is a case of simple accountancy; once the AO allowed deduction under s. 35, the profits of business or profession of the assessee got reduced, simultaneously reducing the eligible profits for the purpose of s. 32AB of the Act, would not be sustainable. Thus, deduction under s. 32AB of the Act entailed recomputation on the basis of allowing deduction under s. 35. Thus, the excess deduction would not be sustainable.
We find that the argument is totally fallacious and is not sustainable. We do not find any infirmity in the order dt. 10th Oct., 2001, passed by the learned CIT(A), which has been further affirmed by the Tribunal by making a categoric observation that the profits of the business or profession shall be an amount equal to the depreciation computed according to the requirements of Part II and Part III of Sch. VI to the Companies Act, 1956. No question of law arises for consideration of this Court. Dismissed.
[Citation : 290 ITR 111]
