Section 35(1)(i) of the Income Tax Act
Income-tax Act, 2025: s.45
Section 35(1)(i) falls under section 35 of the Income-tax Act, 1961, which corresponds to section 45 (Expenditure on scientific research) of the Income-tax Act, 2025.
Read section 45 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 35(1)(i) is Techno Shares and Stocks Ltd. v. CIT (327 ITR 323), cited in 130 of the 80 judgments on BharatTax that turn on this section.
Leading authorities on Section 35(1)(i)
Membership rights and business contracts, as 'business or commercial rights of similar nature' to a license or franchise, qualify as intangible assets eligible for depreciation under Section 32(1)(ii) of the Income-tax Act.
Business contracts and commercial rights of similar nature qualify as intangible assets under Section 32(1)(ii) and are eligible for depreciation. The decision also affirms that goodwill is an intangible asset eligible for depreciation.
Expenditure on application software, which enhances business efficiency and requires a computer system to function, constitutes revenue expenditure rather than acquisition of a capital asset, even if it provides an enduring benefit.
The approval of an in-house R&D centre through Form 3CM is the primary document for claiming weighted deduction under Section 35(2AB) for scientific research expenditure. The case clarifies the significance of this form and the role of the prescribed authority (DSIR) in the approval process.
Disallowance under Section 14A cannot be made if the assessee has not received any exempt income during the relevant assessment year. The mere possibility of earning exempt income does not trigger disallowance.
The first appellate authority cannot dismiss an appeal for default without disposing of the grounds on merits. Dismissal without going into the merits is not justified.
AMP expenditure is not an international transaction. The Bright Line Test is not a valid basis for determining the existence of an international transaction or computing the arm's length price.
Form 3CL is a mere report for intimation of the approval of an R&D facility and is not intended for the approval or quantification of expenditure. This is supported by Rule 6(7A) of the Income Tax Rules and amendments to Section 35(3) of the Income Tax Act.
Disallowance under Section 14A cannot be added back when computing book profit under Section 115JB, as Section 115JB is a complete code in itself.
The Assessing Officer has reason to believe that income has escaped assessment when there is material on record, such as from a survey or a statement, indicating that the assessee has wrongly claimed a deduction.
