1982 (2) TMI 109 - AT - Income Tax

Summary

Issues:
1. Rejection of allowance under section 35 of the Income-tax Act for laboratory equipment and building expenditure.

Analysis:
The appeal was filed against the Commissioner (Appeals) order upholding the rejection of allowance under section 35 of the Income-tax Act for laboratory equipment and building expenditure. The Income Tax Officer (ITO) allowed the deduction for laboratory equipment worth Rs. 3,08,175 but rejected the claim for laboratory equipment in transit and building under construction. The assessee contended that all three ingredients necessary for allowance under section 35 were present, despite the assets not being put to actual use during the year. The revenue argued that since the building was not yet completed and the laboratory equipment was in transit, the claim should be rejected.

The Tribunal considered the facts and submissions, noting that the assessee had engaged in scientific research on a small scale before the relevant accounting period. Machinery worth Rs. 3,08,175 was utilized for research, and the deduction was allowed by the ITO. The remaining expenditure on laboratory equipment and building was also intended for scientific research and of a capital nature. The Tribunal agreed that all requirements for deduction under section 35 were satisfied, and the assessee was eligible for the deduction. The Commissioner (Appeals) was found to have erred in upholding the ITO's rejection of the claim, and the deduction was allowed for the additional expenditure.

The appeal was partly allowed, and the assessee succeeded in obtaining the deduction for the laboratory equipment and building expenditure meant for scientific research, which had been previously rejected by the lower authorities.