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Issues:
1. Disallowance of expenditure claimed for scientific research under section 35 of the IT Act for the assessment year 1985-86. Analysis: The appeal was filed against the order of the CIT(A) upholding the disallowance of Rs. 4,65,579 claimed for scientific research under section 35 of the IT Act. The Tribunal found merit in the contention that the Board was duty-bound to refer the question of whether the expenditure constituted scientific research to the prescribed authority, not the assessee. The Tribunal set aside the order of the CIT(A) and directed the AO to refer the matter to the prescribed authority to determine the eligibility of the claim under section 35(2)(ia). The AO, however, proceeded to make the disallowance without waiting for the opinion of the prescribed authority. On appeal, the CIT(A) upheld the disallowance, stating that the expenditure was not incurred in the relevant accounting year. The assessee challenged this decision, arguing that the authorities were not competent to disallow the expenditure without following the Tribunal's specific directions. The learned counsel for the assessee relied on a judgment of the Madhya Pradesh High Court, emphasizing that when a matter is sent back to the authorities with specific directions, they cannot exceed the limits set by those directions. The Tribunal's specific directions were not followed by the AO, who made the disallowance without referring the matter to the prescribed authority as instructed. The Tribunal's directions were clear, and the AO was obligated to comply with them. As the disallowance was sustained without adhering to the Tribunal's directions, the order of the CIT(A) was set aside, and the disallowance was deleted. The Tribunal held that the AO could not have exceeded the Tribunal's directions and that the impugned disallowance was unjustified. Consequently, the appeal of the assessee was allowed.
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