The Tax Publishers2020 TaxPub(DT) 4605 (Bang-Trib)

INCOME TAX ACT, 1961

Section 35(1)(iv)

Where assessee filed recognition received from R&D Unit, Ministry of Department of Science and Technology, Government of India before CIT (A), however, the CIT (A) did not carry out necessary steps to ascertain whether the assessee could be considered to be carrying out research and development activities during the relevant period, therefore, the issue regarding the assessee's claim of deduction under section 35(1)(iv) was remanded to CIT(A) to take such necessary actions/steps.

Business deduction under section 35 - Scientific and research expenditure - Assessee filed recognition received from R&D Unit, Department of Science and Technology, Government of India -

Assessee-company claimed deduction under section 35(1)(iv) in respect of research and development expenditure. AO rejected the said claim by observing that assessee was involved in manufacturing and testing of auxiliary groomed aluminum ammonia heat pipes used in spacecrafts by using the technology provided by ISRO, and not out of its own research and development. Subsequently, he levied penalty under section 271(1)(c). Before CIT (A), the assessee filed recognition received from R&D Unit, Ministry of Department of Science and Technology, Government of India. CIT (A) was of the view that the AO should have referred the matter to the board through proper channel, as to whether assessee's activities involved scientific research and development. He further deleted the penalty on the basis that mere disallowance of claim could not lead to furnishing of inaccurate particulars of income or concealment of income. Held: Before CIT (A), the assessee filed recognition received from R&D Unit, Ministry of Department of Science and Technology, Government of India. Thus, it was relevant that necessary steps ought to have been taken to ascertain if assessee could be considered to be carrying out research and development activities during the relevant period. However, CIT(A), despite having observed the same, had not taken necessary steps. Therefore, the issue was remanded to the CIT (A) to take necessary actions/steps to ascertain, whether the assessee could be considered to be carrying out research and development activities during the relevant period, based on the recognition issued by R&D Unit, Ministry of Department of Science and Technology, Government of India.

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2002-03



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