Law: Income Tax Act, 1961

Section: 35

(a) Income-tax----Expenditure on scientific research or business expenditure ---Assessee making payment to research laboratory for carrying out research for manufacture of soda ash ---I.T.O. rejecting claim for deduction of amount paid as research laboratory not institution approved under section 35 of Indian Income Tax Act, 1961---Assessee making alternative claim before A.A.C. for deduction of amount paid as business expenditure under section 37 of Indian Income Tax Act, 1961---A.A.C. rejecting claim for deduction under section 37 but remanding matter to I.T.O. for verifying whether research laboratory is an institution approved under section 35---Tribunal, without giving any finding whether expenditure was of the nature specified under section 35, holding that claim cannot be considered under section 37(1)---No clear-cut finding by Tribunal whether expenditure was of the nature specified in Ss.30 to 36--¬Conclusion of Tribunal that claim cannot be considered under section 37(1) not valid. The assessee paid a sum of Rs.1,12,715 to the National Chemical Laboratory (NCL) for carrying out research in manufacture of soda ash and claimed deduction of the amount under section 35(1)(ii) of the Indian Income Tax Act, 1961. The Income Tax Officer rejected the claim for deduction on the ground that NCL was not an institution within the meaning of section 35(1)(ii). On appeal to the Appellate Assistant Commissioner, without prejudice to its claim under section 35(1)(ii), the assessee also contended that such contribution was an allowable deduction under section 37(1) of the Act. The Appellate Assistant Commissioner remanded the matter to the Income-tax Officer for the purpose of verification as to whether NCL was an approved institution for the purpose of section 35. However, the Appellate Assistant Commissioner rejected the alternative claim of the assessee for deduction under section 37 on the ground that the expenditure could not be considered to have been incurred in the course of running the business of manufacturing soda ash. On further appeal, the Tribunal held that the contribution made for scientific research exclusively fell under section 35 and hence it was…

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