9911796707
TMI Blog1986 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee derived an interest income of Rs. 4,41,743. The assessee filed profit and loss account in which this receipt was shown. The expenses were only administrative expenses as observed in the assessment order. The assessee had given an amount of Rs. 4,50,000 to Shri Mohan Dai Oswal Cancer Treatment Research Foundation, which was a registered society at Delhi. The said institution was recognised for the purpose of section 35(1)(ii) of the Income-tax Act, 1961 ('the Act'). The assessee had deducted this amount from the interest income while computing the net income. For that reason, there was a net loss. This ITO examined the claim for deduction of Rs. 4,50,000. This deduction was claimed under section 35(1)(ii). The ITO examined the receipts and found that the amount had been paid the assessee to said institution with specific direction that the said amount would form part of the corpus of the said institution. In the receipt issued by the said institution, it was specifically mentioned that the amount had been received towards its corpus. The ITO held that since the amount had been donated towards the corpus of the said institution, deduction under section 35(1)(ii) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount donated to the said institution was Rs. 8,09,000. In the original assessment order, the ITO allowed deduction of Rs. 4,04,500 under section 80G being 50 per cent of that amount rejecting the claim of deduction of entire amount under section 35(1)(ii). The Commissioner (Appeals) dismissed the appeal against the said assessment order and the assessee has come now in appeal before us and that appeal is IT Appeal No. 4619 (Bom.) of 1985. The ITO subsequently passed an order under section 154 restricting the allowance under section 80G to 10 per cent of the gross total income. The deduction was reduced to Rs. 38,090. Against that order which was passed on 16-12-1985 by the ITO in exercise of powers under section 154, the assessee filed appeal, which was dismissed by the Commissioner (Appeals). Against that order of the Commissioner (Appeals), the assessee has come in appeal before us and that appeal is IT Appeal is No. 542 (Bom.) of 1986. 6. Section 35(1)(ii) is in the following words : "(1) In respect of expenditure on scientific research, the following deductions shall be allowed (i) ** ** ** (ii) any sum paid to scientific research association which has as its objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... university or college would have diverse activity. Some activities would be towards scientific research. Other activities would be for other research. There would be other activities which would not be connected with any research at all. If donation to such university or college is to be claimed as deduction, it would not be enough if the assessee merely makes payment to such university or college. The assessee has to make payment to such university or college for being used for scientific research in order to claim deduction. If the payment is not made for being used for scientific research, the amount received from the university or college could be used for any other purpose and the very object of section 35(1) would be frustrated if scientific research. In the present case, the assessee has not given direction that the amount paid should be used for scientific research. On the other hand, he has given a specific direction that the amount paid should from part of the corpus of the trust. The assessee by said direction has prohibited the concerned institution from using the said amount directly for scientific research. The amount paid towards corpus would not be the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35(1) (ii) would be attracted when the income of the assessee is from investment only. Shri S. E. Dastur, the learned counsel for the assessee submitted that the investment itself was the business of the assessee-company. The submission of the learned departmental representative, on the other hand, was that even if investment is treated as business of the assessee, the head under which the interest income would be computed would not be 'Profits and gains of business or profession.' Unless t he income falls under the head 'Profits and gains of business or profession', the computation provisions of section 30 to 43A of the Act would not be applicable. This aspect has not been considered either by the ITO or by the Commissioner (Appeals). We do not it necessary to record our finding on the question whether the provisions of section 35(1) (ii) would be inapplicable because of the fact that the income derived by the assessee was only by way of interest. 11. The learned counsel for the assessee drew our attention to section 80GGA of the Act. Under this section deduction is available in respect of the sum paid by the assessee to any scientific research association or to a university, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search. However, when the payment is specifically towards corpus, it would not figure in the account of amount received for scientific research. We do not say that the fact that the concerned institution is under legal obligation to maintain separate account for sum received for scientific research would itself ipso facto lead to conclusion that amount paid towards corpus was not to be for scientific research. However, the above fact is relevant for construing the nature of payment. At the time of making payment, the assessee has to make up its mind. If the assessee wants to make payment as general donation to the institution, he would be entitled to deduction admissible under section 80G. However, if the assessee intended that deduction of entire amount should be allowed either under section 35(1) (ii) (if the income is under the head 'Profits and gains of business or Profession'), or under section 80GGA (if the income is under any other head) the assessee has to make payment to the concerned institution for being used for scientific research. Normally, one would expect that there would be specific direction that the amount was being paid for use for scientific research. Even if s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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