9911796707
|
Home
Issues involved: Interpretation of deduction under u/s 35(1)(iv) of the Income-tax Act, 1961 for research and development expenses related to a building under construction.
Summary: The High Court of Madras addressed the issue of deduction under u/s 35(1)(iv) of the Income-tax Act, 1961 for research and development expenses incurred by a company during the assessment year 1985-86. The Assessing Officer initially disallowed the deduction on the grounds that the expenditure was related to a building still under construction. However, the Tribunal later allowed the claim of the assessee, leading to the reference of the question of law to the court. The court examined the relevant provisions of the Income-tax Act, particularly u/s 35(1)(iv) and u/s 35(2)(ia), which allow deduction for capital expenditure on scientific research related to the business. It was noted that the section does not require the asset created by such expenditure to be fully completed for the deduction to be applicable. The deduction is based on the expenditure incurred, and in this case, the ongoing construction of a building for research purposes qualifies as capital expenditure eligible for deduction. In conclusion, the court ruled in favor of the assessee, stating that the expenditure on the construction of the building for the research wing falls within the scope of u/s 35(1)(iv) and is deductible. The Revenue's appeal was dismissed, and the assessee was awarded costs amounting to Rs.1,500.
|
