1989 (2) TMI 406 - HC - Income Tax

Summary

Issues involved: Interpretation of deduction under section 35(1)(iv) of the Income-tax Act, 1961 for expenditure on purchase of buses.

Summary:
The case involved the assessee, Smith Kline and French (India) Ltd., now ESKAYLE LIMITED, seeking a deduction under section 35(1)(iv) of the Income-tax Act, 1961 for the amount spent on purchasing buses. The question was whether the expenditure on buses for transporting research personnel qualified for the deduction under section 35(1)(iv).

The assessee claimed that the purchase of buses was a capital expenditure incurred to facilitate research, as the buses were used solely for transporting research personnel. The Income Tax Officer (ITO) disagreed, viewing it as a normal conveyance expense for employees. However, the Commissioner (Appeals) and the Tribunal sided with the assessee, considering the buses as facilities for the prosecution of scientific research.

The Tribunal relied on the definition of 'scientific research' in section 43(4)(i) and the Explanation under section 43(4)(ii) of the Act to support their decision. The Tribunal rejected the revenue's contention that only expenditures strictly intended for research prosecution could qualify for the deduction.

In the final judgment, the High Court upheld the decisions of the Commissioner (Appeals) and the Tribunal, concluding that the buses provided were indeed facilities for the prosecution of scientific research, thus entitling the assessee to the benefit of section 35(1)(iv). The question was answered in the affirmative, against the revenue.