DEPUTY COMMISSIONER OF INCOME TAX Vs. MASTEK LTD

JUDGEMENT

(1.) These three tax appeals involve the same assessee and give rise to similar questions of law. We have heard them together and propose to dispose them off by this common judgment. While admitting these appeals by common order dated 22-11-2000, the court framed following two substantial questions of law:-

(2.) We may notice facts in brief. The respondent assessee M/s. Mastek Ltd. is a company registered under the Companies Act and is regularly assessed to tax. For the assessment years 1992-93, 1993-94 and 1994-95, the assessee claimed certain expenditure, revenue as well as capital, by way of deduction under section 35 of the Income Tax Act, 1961 ('the Act', for short) expended on scientific research. The case of the assessee was that the assessee incurred expenditure of Rs. 31,58,882/- in the previous year relevant to the assessment year 1992-93 in setting up a Product Development Centre at Pune. The new product developed at this centre was marketed in the name and style of a package called MAMIS during the financial year 1993-94. On such expenditure, the assessee claimed deduction under section 35 of the Act. In support of such a claim, the assessee produced advice of the Expert Advisory Committee of the Institute of Chartered Accountants.

(3.) The Assessing Officer, however, was of the opinion that such claim was not sustainable. He was of the opinion that such product MAMIS was already developed in the year 1989. The basic features of the package projected to be produced and one ultimately produced were substantially similar. He was, therefore, of the opinion that no new product was developed and there was only modification in the existing product to suit the requirements of the prospective buyers. On such basis, the Assessing Officer disallowed the claim of deduction under section 35 of the Act.