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2012 (2) TMI 405 - AT - Income TaxDeduction under 35(2AA) - Approval pending - Donation claimed in return at 100% and will increase to 125% after approval - Additional ground regarding deduction u/s 35(1)(ii) - Held That - 35(1)(i) and section 35(2AA) operate entirely in different fields and are mutually exclusive. For claiming deduction under 35(2AA) amount should be paid to National Laboratory, University, and under a programme approved in this behalf by the prescribed authority. In the instant case the amount simply was lying with the IIT but it could not be used for scientific research. However for deduction under 35(1)(i) its not necessary that research to be carried in house. For additional ground we remand case back to CIT if CIT(A) allows claim under 35(1)(ii), AO to give effect and if does not allow the assessee s claim entire deduction of 143 Laks to be withdrawn.
Issues Involved:
1. Allowability of deduction under section 35(2AA) for a donation to IIT, Chennai. 2. Allowability of deduction under section 35(1)(i) for scientific research expenditure. 3. Allowability of deduction under section 35(1)(ii) for scientific research expenditure. 4. Jurisdiction of CIT under section 263 after ITAT's direction to CIT(A) to reconsider the issue. Detailed Analysis: 1. Allowability of Deduction under Section 35(2AA): The CIT observed that the assessee claimed a deduction of Rs.1,43,00,000/- for a donation to IIT, Chennai under section 35(2AA) without obtaining the necessary approval from the specified authority. The CIT concluded that without this approval, the deduction was not allowable, making the assessment order erroneous and prejudicial to the interests of revenue. The assessee contended that they claimed only 100% deduction pending approval and would claim enhanced deduction upon receiving approval. The Tribunal noted that the assessee did not claim the weighted deduction under section 35(2AA) but only 100%, and the CIT was wrong in stating that the claim was under section 35(2AA). 2. Allowability of Deduction under Section 35(1)(i): The CIT rejected the claim under section 35(1)(i) stating it was not made in the return and was not applicable as the expenditure was not directly incurred by the assessee for scientific research related to its business. The Tribunal noted that the assessee claimed 100% deduction for the amount paid to IIT, Chennai for scientific research related to its business and not weighted deduction. The Tribunal held that the claim was made under section 35(1)(i) and allowed by the Assessing Officer, thus there was no error in the assessment order. 3. Allowability of Deduction under Section 35(1)(ii): The CIT noted that the alternative claim under section 35(1)(ii) was not made before the Assessing Officer or the CIT(A), and hence, in view of the decision in Goetze India Ltd., it was not allowable. The Tribunal observed that IIT, Chennai was a notified institution under section 35(1)(ii), and the assessee was entitled to weighted deduction. The Tribunal directed the CIT(A) to reconsider this issue on merits. 4. Jurisdiction of CIT under Section 263: The CIT's jurisdiction under section 263 was challenged on the ground that the ITAT had directed the CIT(A) to examine the claim under section 35(1)(ii). The Tribunal held that the CIT's jurisdiction under section 263 was not curtailed by the ITAT's direction to the CIT(A). However, the CIT was not justified in canceling the entire assessment order and directing a de novo assessment without issuing a show-cause notice for other items. The Tribunal modified the CIT's directions, stating that if the CIT(A) allows the claim under section 35(1)(ii), the Assessing Officer should give effect to it. If the CIT(A) does not allow the claim, the entire deduction of Rs.1,43,00,000/- should be withdrawn. Conclusion: The Tribunal partly allowed the assessee's appeal for statistical purposes, directing the CIT(A) to reconsider the claim under section 35(1)(ii) and modifying the CIT's directions under section 263 accordingly. The Tribunal emphasized that the CIT's jurisdiction was limited to revising the assessment order concerning the specific issues raised and not the entire order.
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