Law: Income Tax Act, 1961

Section: 256(1),35(i)(iv),32

Income tax-- ---- Expenditure on scientific research ---Assessee engaged in manufacture of dye-stuffs and pesticides---Laying approach road to its research and development laboratories---Road was necessary adjunct to research laboratories---Expenditure was incurred solely for scientific research related to business of assessee---That same might also be used as approach road to other buildings of assessee immaterial---Expenditure is allowable deduction-- -Indian Income Tax Act, 1961, S.35(1)(iv). Where the whole and exclusive purpose of the expenditure is the purpose of the expender's trade, and the object which the expenditure serves is the same, the mere fact that, to some extent, the expenditure enures to a third party's benefit cannot in law defeat the effect of the finding as to the whole and exclusive purpose. For the assessment year 1975-76, the assessee-company, engaged in the manufacture of pharmaceutical dye-stuffs and medicines, claimed deduction of a sum of Rs.26,984 under section 35(1)(iv) of the Income-tax Act, 1961, which was expended by it on the construction of an approach road to the premises of its research and development laboratories. The Income-tax Officer disallowed the claim on the ground that the expenditure was not directly relate to research but was only incidental. The Appellate Assistant Commissions an affirmed the order of the Income-tax Officer. The Tribunal allowed the claim of the assessee. On a reference: Held (i) that the approach road to the research laboratories of the assessee was a necessary adjunct to such research laboratories and the expenditure incurred on the construction thereof had to be treated at par with the expenditure on the construction of the research laboratories themselves. (ii) That the main purpose of the expenditure being to provide an approach road to the research laboratory, the fact that it might be used for other purpose was immaterial (iii) That therefore the expenditure incurred by the assessee on the construction of the approach road to its research and development laboratories was an expenditure of capital nature on scientific research related to the business of the assessee within the meaning of…

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