2019 (3) TMI 794 - AT - Income Tax

Rectification of mistake u/s. 254(2) - Scope of tribunal in rectification - eligibility for deduction u/s 35(1) - maintenance of books of account in respect of R&D facility - HELD THAT - As carefully considered the Miscellaneous Application filed by the assessee seeking rectification of the order of the Tribunal. The assessee is seeking rectification of the ITAT order on the ground that the Tribunal has recorded incorrect findings in so far as maintenance of books of account in respect of R&D facility. The arguments advanced by the assessee have been considered in the light of the provisions of section 35(1) and Rule 5D of the I.T. Rules, 1962; before coming to the conclusion that in order to be eligible for deduction u/s. 35(1), the assessee is required to maintain separate books of account in respect of its R&D facilities. We, therefore are of the considered view that there is no error in the findings given by the Tribunal in its order dated 31.1.2018. The assessee is seeking review of the order passed by the Tribunal in the guise of rectification which is not permissible u/s. 254(2) of the Act. Hence, Miscellaneous Application filed by the assessee is dismissed.

Summary

Issues:
Rectification of order passed by Tribunal in ITA No. 3533/Mum/2014 for A.Y. 2009-10 regarding deduction under section 35(l)(iv) read with section 35(2)(ia) of the Act for capital expenditure on scientific research related to business.

Analysis:
The assessee filed a Miscellaneous Application seeking rectification in the Tribunal's order regarding the denial of deduction under section 35(l)(iv) read with section 35(2)(ia) of the Act for capital expenditure on scientific research. The CIT-1 had set aside the assessment order, stating that the appellant did not maintain separate independent books of account for the Research & Development Unit. The appellant contested this decision, arguing that there was no statutory requirement to maintain separate books of account for claiming the deduction. The Tribunal upheld the CIT's decision, stating that the assessing officer erred in allowing the deduction without proper discussion or evidence provided by the appellant. The appellant claimed that the Tribunal's order suffered from a mistake apparent from the record and requested rectification in the interest of justice.

During the hearing, the assessee contended that the Tribunal's order incorrectly required the maintenance of separate books of account for R&D facilities to be eligible for the deduction under section 35(1) of the Act. The assessee argued that the Act did not prescribe such a requirement and that as long as the accounts were maintained along with regular books of account, the deduction should be allowed if other conditions were met. The Tribunal, however, found no error in its previous findings and dismissed the Miscellaneous Application, stating that the assessee was seeking a review of the judgment under the guise of rectification without pointing out any mistake in the order.

In conclusion, the Tribunal held that the requirement to maintain separate books of account for R&D facilities was necessary for claiming the deduction under section 35(1) of the Act. The Tribunal found no error in its previous order and dismissed the assessee's application for rectification, stating that it was seeking a review of the judgment, which was not permissible under the law. The order was pronounced on 24.1.2019, upholding the denial of the deduction based on the maintenance of separate books of account for R&D facilities.