9911796707
TMI Blog1979 (1) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... the Research Institute for being used for scientific research would be allowed as a deduction under s. 35 of the Act. The petitioner maintains that under s. 10(21) of the Act, any income of the Research Institute which is applied solely for the purpose of that institute is not to be included in the computation of total income. The Research Institute received two donations from M/s. Orissa Cement Ltd. being Rs. 45,00,000 during the assessment year 1973-74 (accounting period ending with December, 1972) and Rs. 75,00,000 during the assessment year 1974-75 (accounting period ending with December, 1973). According to the petitioner, the total contribution of Rs. 1,20,00,000 could not be readily utilised as an appropriate building for housing the research institute had yet to be raised, requisite apparatus had not yet been obtained, personnel were still to be appointed and research themes had yet to be picked up. As the money had to be safely held, a part was utilised for acquiring dividend-earning stock in dependable companies. In respect of dividend, tax was deducted at source and the petitioner applied to the ITO in the assessment year 1974-75 for refund of Rs. 13,511 which had been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 1973-74, 1974-75, 1975-76 and 1976-77, on the allegation that income had escaped assessment, and those notices are assailed in these applications. In support of the challenge against the notices, it is contended on behalf of the petitioner that the donations received from M/s. Orissa Cement Ltd. did not constitute income ; when the petitioner invested out of such amount either in the shape of fixed deposits or for acquiring and holding stocks, there was no expenditure ; the entire money was held to be spent for purposes of research and in the absence of any allegation of diversion of funds for other purposes and in view of the fact that the funds acquired were not required to be spent during the year of accrual of income, there was no occasion to entertain the view that there was escapement. It is also claimed that the income was not to be taken into account for computing the total income and since the petitioner had no other income excepting those which were not includible in total income, it had no liability to make a return under s. 139(1) of the Act which, so far as relevant, provides : " Every person, if his total income..... during the previous year exceede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 148 of the Act, the revenue is likely to be prejudiced and in many cases the purpose of reopening the assessment may be frustrated. Here, however, we find that there are essentially two reasons and, as a fact, both the reasons are more or less disclosed in the counter-affidavit. In the circumstances, we do not find any justification for the reiterated submission of the learned standing counsel that it would be improper to disclose the reasons at this stage. For the considerations indicated above, we propose to extract the reasons as recorded by the ITO in the file relating to assessment year 1974-75. Learned standing counsel has told us that similar reasons have been recorded for the other three years : " Seen opinion of the department of Science and Technology communicated under C.I.T.'s letter dated 17-11-1977, placed in miscellaneous correspondence folder (letter No. 27725 dated 17-11-1977). According to the prescribed authority, i.e., C.S.I.R., investment made by the assessee in purchase of shares and making loans is not expenditure incurred for the purpose of scientific research. Utilisation of income in such investments would not, therefore, qualify for exemption from in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. For housing the research institute, the land was proposed to be acquired and until 1976, the building had not been made ready. On that account, the contribution which had been received earlier could not be contemporaneously spent and had been allowed to accumulate and were carried forward to be utilised when research proper would be undertaken. There is thus no dispute that the income earned during these years had not been fully utilised. Dr. Pal for the petitioner has emphatically urged that it is not a requirement of the law that the contribution or any earning out of the accumulation of it should be spent during the year. Reliance is placed by Dr. Pal on two letters of the Board of Direct Taxes addressed to two separate institutions. The first letter dated January 8,1976, is addressed to the Secretary, Institute of Chartered Accountants of India, while the second dated May 17, 1976, is addressed to the Secretary-General of Federation of Indian Chambers of Commerce and Industry. Both these letters have been appended as annex. 10 to a subsequent affidavit filed on behalf of the petitioner. It has been clearly stated therein that there is nothing in s. 10(21) of the Act whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as no return had been filed for the other two years it would not be appropriate for this court to interfere at this stage by making the rule nisi for a writ of prohibition absolute and thereby preventing the ITO from making an appropriate investigation into the matter. If there was really any matter to be looked into and if we were satisfied that quashing the notices at this stage would prejudice the revenue, we would certainly have accepted learned standing counsel's submission. For, all the years, one common stand has been taken by the revenue and even for the two years where no return has been filed the factual position is not different. Once we accept the basis that the income was not necessary to be spent during the year and could be allowed to accumulate and be carried forward and we further hold that in making investments by way of fixed deposits and holding of stocks there was no diversion of the income of the research institute, we do not think a distinction should be made for the two years where no return had been filed. It is pertinent to indicate here that there is no force in the contention of the learned standing counsel that the donation received by the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
