SYNBIOTICS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal has referred the following three questions under S. 256(1) of the IT Act, 1961, to this Court for its opinion :

(2.) DURING the accounting year relevant to the asst. yr. 1974 75, the assessee company had debited Rs. 1,57,170 to the profit and loss account for provision of gratuity payable to the employees of the company. During the assessment proceedings, the assessee claimed deduction of Rs. 2,39,814 on the basis of actuarial certificates. Thus, deduction of Rs. 1,57,170 was claimed on account of the provision made and a claim for deduction of Rs. 90,249 (Rs. 2,39,814 minus Rs. 1,49,565) was made as no provision was made in that behalf. The ITO disallowed the claim on the ground that conditions of S. 40A(7) were not satisfied. This view was confirmed by the AAC in appeal. In further appeal to the Tribunal, it was held that the claim of Rs. 1,49,565 should fail where as the claim for Rs. 90,249 deserved to be allowed. As the claim of the assessee for deduction of Rs. 1,49,565 was not allowed, it moved the Tribunal for referring an appropriate question of law to this Court in that behalf. The Revenue was also aggrieved as the Tribunal had allowed deduction of Rs. 90,249 and, therefore, it also moved the Tribunal for referring an appropriate question with respect to that sum also. The assessee's claim for depreciation of Rs. 1,38,773 was rejected by the ITO and also by the AAC in appeal. The Tribunal also held that the claim of the assessee was not justified. The assessee thereupon moved the Tribunal to refer question No. 2 to this Court.

(3.) SO far as question No. 2 is concerned, it will have to be answered in the affirmative in view of the decision of the Supreme Court in Escorts Ltd. vs. Union of India (1992) 108 CTR (SC) 275 : (1993) 199 ITR 43, wherein it was held that, where a capital asset used for scientific research related to the business of the assessee is also ipso facto an asset used for the purpose of the business, it is impossible to conceive of the Legislature having envisaged a double deduction in respect of the same expenditure, one by way of depreciation under S. 32 of the IT Act, 1961, and the other by way of allowance under S. 35(1)(iv) of a part of the capital expenditure on scientific research, even though the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions.