PRINCIPAL COMMISSIONER OF INCOME TAX - 6 vs. INVESTMENT AND PRECISION CASTING LTD.

TAXAP/169/2018HC GujaratGJHC24008513201823 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA5 pages
AI SummaryDismissed

What were the facts?

The Revenue is in appeal against the Income Tax Appellate Tribunal's order dated January 19, 2017, concerning the assessee's claim for deduction under Section 35(1) of the Income Tax Act, 1961, for capital expenditure on scientific research. In the first round, the Tribunal remanded the matter for the opinion of the prescribed authority. In the second round, this opinion was not produced, and the assessee questioned if a reference was even made. The Assessing Officer, facing a prolonged delay in obtaining the prescribed authority's opinion, decided the issue without it, but stipulated that the demand would not be enforced until the opinion was available. The Tribunal ultimately deleted the demand, citing the indefinite uncertainty arising from the non-availability of the report. The appeals cover assessment years 2004-05 and 2005-06.

What did the High Court hold?

The High Court dismissed the Revenue's appeals. The Court noted that for over 10 years since the completion of the assessment years, the report of the prescribed authority under Section 35(1)(iv) of the Income Tax Act, 1961, remained unavailable. It was also unclear whether the Revenue had even sought such a report. While mere delay in the prescribed authority giving its opinion might not always be fatal to the Revenue's interests, in the given facts, the Court found no difficulty in accepting the Tribunal's approach. The Tribunal had deleted the demand primarily because the uncertainty arising from the non-availability of the report could not continue indefinitely. The Court relied on its previous observations in a Division Bench judgment, which stated that when a question arises regarding scientific research expenditure, the Assessing Officer cannot decide the issue but must refer it to the prescribed authority, whose decision would be final. The prolonged non-compliance with this procedural requirement by the Revenue led to the deletion of the demand.

What were the issues?

1. Whether the Tribunal was justified in deleting the demand for deduction under Section 35(1)(iv) of the Income Tax Act, 1961, for capital expenditure on scientific research, given the non-availability of the prescribed authority's opinion? Assessee's Contention: The assessee's claim for deduction under Section 35(1)(iv) of the Act pertaining to the assessment years 2004-05 and 2005-06 should remain under suspension if the Assessing Officer's orders were to prevail. No report from the prescribed authority has been produced to date, and it is unclear if any such reference was ever made. The Tribunal's deletion of the demand was justified due to the indefinite uncertainty arising from the non-availability of the report. Revenue's Contention: The Revenue is in appeal against the Tribunal's order deleting the demand. The judgment does not explicitly record the Revenue's specific arguments or the authorities/precedents they relied upon, other than their general challenge to the Tribunal's decision.

Which sections of the Income-tax Act were involved?

Section 35(1),Section 35(1)(iv),Section 35(3)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/168/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 168 of 2018 With R/TAX APPEAL NO. 169 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX - 6 Versus INVESTMENT AND PRECISION CASTING LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 DARSHAN R PATEL(8486) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 23/04/2018

COMMON ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 19.01.2017. The issue pertains to the assessee's claim of deduction under section 35(1) of the Income Tax Act, 1961 ('the Act'   for   short).     Assessee's   claim   relates   to expenditure of capital nature on scientific research related to the business carried on by the assessee. In   the   first   round   of   litigation,   the

The order continues below.

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