The Tax Publishers2021 TaxPub(DT) 0676 (Karn-HC) : (2021) 431 ITR 0326 : (2021) 278 TAXMAN 0121

INCOME TAX ACT, 1961

Section 35(2AB)

Section 10B is in nature of deduction provision, and not in the nature of exemption provision as alleged by Tribunal. Further, section 10B is a provision, which deals with deduction of income, whereas section 35(2AB) deals with deduction on expenditure and both are independent provisions. Therefore, the Tribunal was not justified in holding that assessee was not entitled to claim deduction under section 35(2AB) to the extent of expenses eligible for deduction under the said provision in relation to units entitled to deduction under section 10B.

Business deduction under section 35(2AB) - Expenditure on scientific research - Denial of deduction on ground that assessee claimed deduction under section 10B -

Assessee-company was engaged in manufacture and sale of bio-technological products. It claimed deductions under section 10B and section 35(2AB). AO took the view that since assessee claimed deduction under section 10B, therefore, it was not entitled to claim deduction under section 35(2AB). CIT(A) as well as Tribunal upheld the order passed by the AO. Held: Section 10B is in nature of deduction provision and not in the nature of exemption provision as alleged by Tribunal. Further, section 10B is qua the undertaking and is given in respect of profits of business of the undertaking whereas deduction under section 35(2AB) is given effect to a later stage while computing the total income of the assessee at the entity level. Therefore, the deduction granted under section 10B and deduction granted under section 35(2AB) are independent provisions and deduction under section 35(2AB) is an expenditure based deduction, whereas deduction under section 10B is an income based deduction. Further, the restrictions contained in section 10B(6) were applicable only up to 1-4-2001. Therefore, the said restrictions had no application to the instant case as the assessment year was subsequent to 1-4-2001. It was also noteworthy that the bar contained in section 35(2AB)(2) would not apply to the fact situation of the case as the same provides that no deduction shall be allowed in respect of expenditure mentioned in clause (1) under any provisions of the Act, however, the deduction under section 10B is on income and not on expenditure. Hence, the Tribunal was not justified in holding that the assessee was not entitled to claim deduction under section 35(2AB) to the extent of expenses eligible for deduction under the said provision in relation to units entitled to deduction under section 10B.

Distinguished:CIT v. Yokogawa India Ltd. (2012) 21 taxmann.com 154 (KAR) : 2011 TaxPub(DT) 1778 (Karn-HC) .

REFERRED : CIT & Another v. M/s Yokogawa India Ltd. (2017) 77 taxmann.com 41 (SC) : 2016 TaxPub(DT) 5139 (SC).

FAVOUR : In assessee's favour

A.Y. : 2004-05


INCOME TAX ACT, 1961

Section 14A

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT

TaxPublishers.in

'Kedarnath', 7, Avadh Vihar, Near Nirali Dhani,

Chopasni Road

Jodhpur - 342 008 (Rajasthan) INDIA

Phones : 9785602619 (11 am - 5 pm)

E-Mail : mail@taxpublishers.in / mail.taxpublishers@gmail.com