Commissioner Of Income Tax v. M/S Consolidated Energy Consultants Limited

Commissioner of Income Tax Vs. M/s Consolidated Energy Consultants Limited 23.06.2014. Shri Sanjay Lal for the appellant. This is revenue’s appeal under section 260-A of the Income Tax Act, calling in question the concurrent orders passed by the Commissioner (Appeal) and the Income Tax Appellate Tribunal in the matter of allowing deduction to the respondent assessee on the ground that the activities of the respondent assessee falls within the definition of ‘scientific research’ as contemplated under section 43(4) of the Income Tax Act, 1961. Respondent was assessed for payment of income tax, for the assessment year 2009-10. Notice was issued under section 143(2) and based on the material that came on record an order of assessment was passed by the Assessing Officer. Respondent assessee claimed certain deduction on the ground that they are carrying out ‘scientific research’ and sought exemption from the expenditure incurred in the research and development activities under section 35. This was disallowed by the Assessing Officer, but the appellate authorities having allowed the same after applying the provisions of section 43(4) and the definition of ‘scientific research’, this appeal under section 260-A by the Revenue. Even though Shri Sanjay Lal, learned counsel for the appellant, invited our attention to the provisions of section 35(2)[(ia)] and proviso (1) thereof, to say that because of the aforesaid provision and the date of acquisition of land by the assessee, the exemption granted is unsustainable, but on going through the records, particularly the assessment order available at Annexure A/1, we find that the Assessing Officer has disallowed the expenditure for research and development not on the ground of section 35(2)[(ia)] or the proviso thereof, but after holding that the activities of the respondent for the project and the ‘scientific research’ do not come within the purview of ‘scientific research’, warranting grant of exemption. However, when the matter was taken up by the Commissioner (Appeal) and the Income Tax Appellate Tribunal, both the authorities considered the provisions of section 43(4) of the Act, the definition of ‘scientific research’ and after following certain judgments rendered by the High Court of Bombay, Karnataka and Andhra Pradesh, found that the definition of ‘scientific research’, as contemplated under section 43(4) is broad enough and the Legislature in its wisdom has granted benefit to research and development relating to business also and after interpreting the provision of section 43(4), the exemption under section 35 has been allowed, finding the respondent establishment to be carrying out activities which fall in the category of ‘scientific research’. The concurrent findings passed by the appellate authorities cannot be termed as perverse or unsustainable raising substantial question of law, which warrants consideration in this appeal. Accordingly, finding no ground, this appeal is dismissed. (RAJENDRA MENON) (SUSHIL KUMAR GUPTA) J U D G E J U D G E Aks/-