1998 (8) TMI 56

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..... ing that the provisions of section 69D cannot be applied in respect of transactions where the identity is established and the loan is genuine ? (3) Whether, on the facts and circumstances of the case despite the absence of any specific provision for the grant of any proportionate deduction under section 35(1)(iv) read with section 35(2) of the Act, the Income-tax Appellate Tribunal was justified in law in allowing 50 per cent. of the cost of equipment as attributable for research? " The facts in brief are as follows : The assessee is a company. During the examination of accounts for the assessment years 1981-82 and 1982-83, some hundi transactions were noted by the Income-tax Officer. On going through the details it was found that whi .....

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..... e are always three parties to such a transaction. They are the drawer, the drawee and the payee. The drawer cannot himself also be the drawee. If the transaction is bilateral it is a very strong indication to show that it is not a hundi transaction. 2. A hundi is payable to satisfy a person or order but negotiable without endorsement by the payee. 3. The holder of a hundi is entitled to sue on its basis without any endorsement in his favour. 4. A hundi once accepted by the donee, could be negotiated without endorsement. 5. In the case of loss of a hundi, the owner can claim duplicate or triplicate from the drawer and present the same to the drawee for claiming payment. 6. A hundi is normally in the oriental language as per the mer .....

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..... nfirmed the view expressed by the Commissioner of Income-tax (Appeals). However, the Tribunal referred the third question for the opinion of this court at the instance of the Revenue. The main argument of learned counsel for the Revenue is that deduction cannot be allowed as the finding of the Tribunal as well as the Commissioner of Income-tax is that only plant and machinery are partly used for the purpose of research and development and as long as it is not wholly used for research and development the assessee is not entitled for deduction of the claim. It is difficult to accept the contention of the Revenue as the language used in section 35 of the Income-tax Act reads as follows : "35. (1) In respect of expenditure on scientific res .....

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