Principal Commissioner Of Income Tax - 6 v. Common Oral Order

C/TAXAP/168/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 168 of 2018With R/TAX APPEAL NO. 169 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX - 6VersusINVESTMENT AND PRECISION CASTING LTD.==========================================================Appearance:MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1DARSHAN R PATEL(8486) for the RESPONDENT(s) No. 1========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHIandHONOURABLE MR.JUSTICE B.N. KARIA Date : 23/04/2018 COMMON ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1.Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 19.01.2017. The issue pertains to the assessee's claim of deduction under section 35(1) of the Income Tax Act, 1961 ('the Act' for short). Assessee's claim relates to expenditure of capital nature on scientific research related to the business carried on by the assessee. In the first round of litigation, the Assessing Officer objected the said claim. The matter reached the Tribunal which remanded the proceedings for fresh disposal in view of the fact that the opinion of the prescribed authority under the said section was not still available. 2.In the second round, such opinion was not brought on record by the Revenue. In fact, the assessee doubted the very reference having been made to such authority and called upon the Revenue to produce any such reference on record. 3.The Assessing Officer was handicapped since many years after the return was filed and assessment undertaken, the opinion of the prescribed authority was not available. He therefore decided the issue without the aid of such opinion but provided that till the prescribed authority's opinion is available, the actual demand will not be enforced. 4.In such background, the issue eventually once again reached the Tribunal. The Tribunal by the impugned judgment, deleted the demand mainly on the groundthatuncertaintyarisingoutof nonavailability of the report cannot be continue forever. Upon which, the Revenue has filed these appeals for two assessment years. C/TAXAP/168/2018 ORDER 5.Undisputed facts are that the assessee's claim for deduction under section 35(1)(iv) of the Act pertaining to the assessment years 2004-05 and2005-06 would remain under suspension if the Assessing Officer's orders were to prevail. Admittedly till date, no such report is brought on record. In fact, it is not even clear whether any such reference was ever made. 6.Sub-section (1) of section 35 of the Act grants certain deductions in respect to expenditure to scientific research. Clause (iv) thereof provides for such deduction in respect of expenditure of a capital nature on scientific research related to the business of the assessee. Sub-section (B) of section 35 provides that if any question arises under said section as to whether and if so, to what extent any activity constitutes or any asset is used for scientific research, the Board shall refer the question, depending on the question of nature to the Central Government or to the prescribed authority. 7.In this context, Division Bench of this Court had observed as under: C/TAXAP/168/2018 ORDER 7.In this context, Division Bench of this Court had observed as under: C/TAXAP/168/2018 ORDER “28. We are, however, of the opinion that insofar as the second aspect of the matter is concerned, the Tribunal was perfectly justified in holding in favour of the assessee. Section 35(3) of the Act as noticed requires a reference to be made by the Board to the prescribed authority when a question arises as to whether and if so to what extent, any activity constitutes or constituted or any asset is or was being used for scientific research. The decision of the prescribed authority on such a question would be final. In our opinion, therefore, whenever any such question arises, the Assessing Officer cannot decide the issue but must place the issue before the Board who, in terms of section 35(3) of the Act, would refer the question to the prescribed authority. The decision of the prescribed authority would govern the parties. Therefore, if an assessee puts forth a claim of deduction under section 35(1) for expenditure incurred on scientific research and if the Assessing Officer is not inclined to accept such a claim, the question can be stated to have arisen. In such a situation, the Assessing Officer cannot take a decision but must seek the opinion of the prescribed authority, We may hasten to add that only when such a question arises that the reference would be competent. For example, if in a given case, the assessee lodges a claim without any supporting material, it cannot be stated that the question has arisen which would require a reference by the Board. Similarly, if the Assessing Officer accepts the claim of the assessee, no such question can be stated to have arisen. We are, however, unable to accept Shri Bhatt's contention that such a question would arise only when the assessment is finally framed and that thereafter the onus would be on the assessee to seek a reference. No such intention is emerging from section 35(3) of the Act. Whenever an Assessing Officer is not inclined to accept the assessee's case for C/TAXAP/168/2018 ORDER deduction, we fail to see how at that very stage, the question cannot be stated to have arisen.” 8.It can be seen from the record that over 10 years since the completion of the assessment year and the filing of the return, the report of the prescribed authority is not yet available. As noted, it is not even clear that whether the Revenue has sought such report. In a given case, mere delay and the prescribed authority giving its opinion, may not be fatal to the interest of the Revenue. However, in facts of the case, we have no difficulty in accepting the Tribunal's approach. 9.Tax Appeals are dismissed. (AKIL KURESHI, J) ANKIT SHAH (B.N. KARIA, J)