1979 (10) TMI 100 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to depreciation under section 32(1) on scientific research assets.
2. Interpretation of "used for the purpose of business" in section 32(1) and "scientific research related to the business" in section 35.
3. Legislative intent and statutory interpretation regarding depreciation and scientific research expenditure.
4. Interaction between sections 32 and 35, and their respective scopes.
5. The concept of double allowance or excessive allowance.

Detailed Analysis:

1. Entitlement to Depreciation Under Section 32(1) on Scientific Research Assets:
The primary issue was whether the assessee could claim depreciation under section 32(1) on scientific research assets, which had already been fully deducted under section 35(1)(iv)/35(2)(ia) in a previous year. The Tribunal held that the assets in question, used for scientific research related to the business, could be considered as "used for the purpose of business" under section 32(1). This interpretation was based on the broader understanding of business use, which includes activities for the rationalization, modernization, and protection of business assets.

2. Interpretation of "Used for the Purpose of Business" and "Scientific Research Related to the Business":
The Tribunal examined the expressions "used for the purpose of business" in section 32(1) and "scientific research related to the business" in section 35. Referring to Supreme Court cases, it was determined that "used for the purpose of business" has a wider scope than merely earning profits and includes activities integral to the business, such as scientific research. The Tribunal concluded that scientific research related to the business could be considered as use for business purposes.

3. Legislative Intent and Statutory Interpretation:
The Tribunal explored the legislative intent behind sections 32 and 35. It was noted that the provisions were intended to encourage scientific research by providing tax incentives. The Tribunal emphasized that sections 32 and 35 operate in distinct fields and that the allowance of scientific research expenditure under section 35 does not preclude depreciation under section 32. The Tribunal rejected the argument that section 35 is a self-contained code, noting that various provisions related to scientific research are found throughout the Act.

4. Interaction Between Sections 32 and 35:
The Tribunal analyzed the interaction between sections 32 and 35, noting that section 35(2)(iv) explicitly bars depreciation for the same year in which scientific research expenditure is allowed. However, this bar does not extend to subsequent years. The Tribunal reasoned that the absence of an express prohibition in the Act means that depreciation can be claimed in the years following the deduction under section 35.

5. Double Allowance or Excessive Allowance:
The Tribunal addressed the concern of double allowance or excessive allowance, clarifying that different types of deductions allowed in different years do not constitute double allowance. The Tribunal highlighted that the legislative intent was to provide comprehensive relief for scientific research expenditure, which includes both immediate deductions and subsequent depreciation.

Conclusion:
The Tribunal concluded that the assessee is entitled to claim depreciation under section 32(1) on scientific research assets in the years following the deduction under section 35. The appeals were dismissed, affirming the allowance of depreciation on the assets in question.