SEQUENT SCIENTIFIC LTD ( FORMERLY KNOWN AS O U DRUGS & PHARMACEUTICALS LTD), THANE V. ITO 3(2)(4), MUMBAI

ITA 8386/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9551 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV
• Assessee Lawyers: DEVADATTA MANIKAR
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT (MZ) AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A. NO. 8386/M/2011 ASSESSMENT YEAR: 2008-2009 SEQUENT SCIENTIFIC LIMITED ( FORMERLY KNOWN AS P I DRUGS & PHARMACEUTICALS LTD), 116, VARDHAMAN INDUSTRIAL ESTATE, LBS MARG, GOKUL NAGAR, THANE 400 601. VS. ACIT, RANGE-3(2), AAYAKAR BHAVAN, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEVADATTA MANIKAR, AR RESPONDENT BY : SHRI RAJIV PANT, JCIT-DR DATE OF HEARING: 22.11.2012 DATE OF OR DER: 30.11.2012 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 9.12.2011 IS A GAINST THE ORDER OF CIT (A)- 4, MUMBAI DATED 23.9.2011 FOR THE ASSESSMENT YEAR 2 008-2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GR OUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING DENIAL OF WEIGHTED DEDUCTION U/S 35(2AB) TO THE TUNE OF RS. 9,23,463/- IN RESPECT OF CAPITA L EXPENDITURE INCURRED BY THE APPROVED IN-HOUSE RESEARCH AND DEVE LOPMENT UNIT. 2. WITHOUT PREJUDICE TO GROUND NO.1 ABOVE, THE LD C IT (A) ERRED IN NOT ALLOWING DEDUCTION U/S 35(1)(IV) OF RS. 6,15,642/- BEING CAPITAL EXPENDITURE INCURRED RELATED TO THE BUSINESS CARRIE D ON BY THE APPELLANT. 3. BRIEFLY STATED THE RELEVANT FACTS OF THE CASE AR E THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF DRUGS AND PHARM ACEUTICALS. ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 44,8 5,980/-. ASSESSEE CLAIMED WEIGHTED DEDUCTION @150% AS PER THE PROVISIONS OF S ECTION 35(2AB) OF THE INCOME TAX ACT, 1961 (THE ACT) ON THE SUM OF RS. 6,15,642/ - BEING CAPITAL EXPENDITURE ON ACCOUNTS OF LAB EQUIPMENT, COMPUTER AND MOTOR CAR A ND THE DEDUCTION CLAIMED AT 2 THE RATE OF 150% AMOUNTS TO RS. 9,23,463/-. AO DID NOT ALLOW THE CLAIM OF THE ASSESSEE HOLDING THAT ASSESSEE IS NOT ELIGIBLE FOR WEIGHTED DEDUCTION ON CAPITAL EXPENDITURE AND RELIED ON THE LANGUAGE USED IN THE SECTION 35(2AB) READ WITH SECTION 35(2) OF THE ACT. IN ALTERNATIVE, AO DID NO T ALLOW THE CLAIM OF DEDUCTION OF RS. 6,15,642/- AT LEAST AT THE RATE OF 100% IN ACCO RDANCE WITH THE PROVISIONS OF SECTION 35(1)(IV) OF THE ACT. AGGRIEVED WITH THE S AME, ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 4. BEFORE THE CIT (A), IT WAS SUBMITTED THAT THE AS SESSEE WAS ENGAGED IN THE BUSINESS OF BULK DRUGS AND PHARMACEUTICALS AND HAS SET UP IN-HOUSE RESEARCH AND DEVELOPMENT FACILITY (R & D UNIT) AT KUMTHA IN THE STATE OF KARNATAKA AND THE SAME IS APPROVED BY THE DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH. THE ASSESSEE INCURRED EXPENDITURE ON RESEARCH & DEVELOP MENT AMOUNTING TO RS. 93,39,126/- OUT OF WHICH REVENUE EXPENDITURE AMOUNTS TO RS. 87,23,484/- AND THE BALANCE OF RS. 6,15,642/- ACCOUNTS FOR CAPITAL EXPE NDITURE. CONSIDERING THE PROVISIONS OF SECTION 35(2AB) FOR ALLOWING WEIGHTED DEDUCTION AT THE RATE OF 150% THE ALLOWABLE DEDUCTION AMOUNTS TO RS. 1,40,08,689/ -. HOWEVER, AO ALLOWED WEIGHTED DEDUCTION FULLY IN RESPECT OF REVENUE EXPE NDITURE OF RS. 87,23,484/- AND AO DENIED THE CLAIM OF DEDUCTION IN RESPECT OF CAPITAL EXPENDITURE OF RS. 6,15,642/- IN THE ABSENCE OF SPECIFIC PROVISIONS FOR ALLOWING THE CAPITAL EXPENDITURE OF THIS KIND. OTHERWISE, CAPITAL EXPENDITURE CLAIMED BY THE ASSE SSEE RELATES TO (I) LABORATORY EQUIPMENTS - RS. 51,000/- (II) COMPUTER - RS. 7,628 /- AND (III) MOTOR CAR EXPENSES - RS.5,57,014/-. AS PER THE ASSESSEE, ANY EXPENDITUR E INCURRED ON RESEARCH & DEVELOPMENT SHOULD BE ALLOWED AND THE BAR, IF ANY, IS APPLICABLE ONLY TO LAND AND BUILDING. RELYING ON THE PROVISIONS OF EXPLANATION TO SECTION 35(2AB) IT WAS ARGUED BY THE ASSESSEE THAT IN RESPECT OF BUSINESS OF DRUGS AND PHARMACEUTICALS INDUSTRY SUCH AS THE ASSESSEE, ANY EXPENDITURE INCU RRED ON (A) CLINICAL DRUG TRIAL; (B) OBTAINING APPROVALS AND (C) FILING APPLICATION FOR PATENTS WAS ALSO ALLOWABLE. FURTHER, IT WAS SUBMITTED THAT THE PURCHASE OF LABO RATORY EQUIPMENTS AND PRINTERS ARE ALLOWABLE EXPENDITURE WHEN THE SAME ARE USED ON CLINICAL DRUG TRIAL. REGARDING MOTOR CAR, WHICH WAS ALLOTTED TO EMPLOYEES FOR TRAN SPORTATION OF EMPLOYEES ENGAGED IN THE CLINICAL DRUG TRIAL, THE CLAIM SHOULD NOT BE ALLOWED CONSIDERING THE 3 JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE O F SMITHKLINE & FRENCH (INDIA) LIMITED REPORTED IN 77 TAXMANN 153. THE FACTS OF THIS CASE ARE THAT THE ASSESSEE PURCHASED TWO BUSES AND USED FOR TRANSPORT ATION OF EMPLOYEES WORKING AT RESEARCH & DEVELOPMENT UNIT AND THE CLAIM WAS NOT A LLOWED U/S 35(1)(IV) OF THE ACT. ON CONSIDERING THE ABOVE SUBMISSIONS OF THE A SSESSEE, CIT (A) EXPLAINED THE PROVISIONS OF SECTION 35(2AB) OF THE ACT AND MENTIO NED THAT REGARDING EXPENDITURE ON SCIENTIFIC RESEARCH RELATING TO DRUGS AND PHARMA CEUTICALS, EXPENDITURE ALLOWABLE SHALL INCLUDE THOSE INCURRED ON CLINICAL TRIALS OF THE DRUGS MANUFACTURED AND NOT THE EXPENDITURE ON LAB EQUIPMENT, COMPUTER AND MOTOR CA R. THEREFORE, THE CIT (A) CONFIRMED THE DISALLOWANCES MADE BY THE AO. AGGRIEV ED WITH THE SAME, ASSESSEE FILED THE PRESENT APPEAL BEFORE US. 5. BEFORE US, SHRI DEVADATTA MANIKAR, LD COUNSEL FO R THE ASSESSEE EXPLAINED THE ABOVE FACTS OF THE CASE AND MENTIONED THAT THE LABO RATORY EQUIPMENTS, COMPUTER AND MOTOR CAR WERE MEANT FOR PURSUING THE SCIENTIFI C RESEARCH, THEREFORE, ASSESSEE IS ENTITLED TO WEIGHTED DEDUCTION @ 150% AS PER THE PR OVISIONS OF SECTION 35(2AB) OF THE ACT. ALTERNATIVELY, ASSESSEE MUST GET BENEFIT OF DEDUCTION U/S 35(1)(IV) OF THE ACT. HE READ OUT THE RELEVANT PROVISIONS BEFORE US . CLAUSE (IV) OF SECTION 35(1) PROVIDES FOR RELIEF IN RESPECT OF ANY EXPENDITURE O F CAPITAL NATURE ON SCIENTIFIC RESEARCH . LD COUNSEL FILED COPIES OF THE JUDGMENT OF HONB LE KERALA HIGH COURT IN THE CASE OF SMITHKLINE & FRENCH (INDIA) LIMITED (SU PRA) FOR THE PROPOSITION THAT THE PROVISIONS OF SECTION 35(1)(IV) ALLOWS THE DEDUCTIO N OF AMOUNTS SPENT ON PURCHASES OF BUSES MEANT FOR TRANSPORTATION OF THE SCIENTIFIC RESEARCH PERSONNEL. FURTHER, RELYING ON THE DECISION OF ITAT, AHMADABAD BENCH IN THE CASE OF ACIT VS. TORRENT PHARMACEUTICALS LTD. [2012] 137 ITD 301 , LD COUNSEL FAIRLY MENTIONED THAT THE EXPENDITURE ON MOTOR CAR IS NOT ALLOWABLE U/S 35(2A B) OF THE ACT. 6. ON THE OTHER HAND, LD DR MENTIONED THAT THE NATU RE OF USE OF THE CAPITAL ASSETS IE LABORATORY EQUIPMENTS, COMPUTER AND MOTOR CAR WAS NOT EXAMINED BY THE LOWER AUTHORITIES AS THERE WAS NO SPECIFIC CLAIMS. UNLESS THE USE OF THE ABOVE ASSETS FOR THE PURPOSE OF SCIENTIFIC RESEARCH IN GENERAL A ND DRUG TRIALS IN PARTICULAR IS ESTABLISHED, THE CLAIM OF THE ASSESSEE FOR APPLYING THE PROVISIONS OF SECTION 35(1)(IV) OF THE ACT CANNOT BE INVOKED. ASSESSEE HAS NOT TAK EN UP THIS CLAIM BEFORE THE LOWER 4 AUTHORITIES, IN SUCH CASE, THE MATTER HAS TO BE SEN T BACK TO THE FILES OF THE AO FOR EXAMINING THE ISSUES AFRESH IN THE LIGHT OF THE SAI D PROVISIONS AS WELL AS THE DECISIONS CITED BY THE ASSESSEE BEFORE THE TRIBUNAL . 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES. THE PROVISIONS OF SECTION 35(1)(IV) AN D 35(2AB) (1) ARE RELEVANT AND THEY READ AS UNDER: S.35. (1) IN RESPECT OF EXPENDITURE ON SCIENTIFIC RESEARCH, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED,- .. . . (IV) IN RESPECT OF ANY EXPENDITURE OF A CAPITAL NATURE ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS CARRIED ON BY THE ASSESSEE , SUCH DEDUCTION AS MAY BE ADMISSIBLE UNDER THE PROVISIONS OF SUB-SECTION(2): . . [2AB](1) WHERE A COMPANY ENGAGED IN THE BUSINESS OF BIO-TECHNOLOGY OR IN ANY BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY AR TICLE OR THING, NOT BEING AN ARTICLE OR THING SPECIFIED IN THE LIST OF ELEVEN TH SCHEDULE INCURS ANY EXPENDITURE ON SCIENTIFIC RESEARCH (NOT BEING EXPEN DITURE IN NATURE OF COST OF ANY LAND OR BUILDING) ON IN-HOUSE RESEARCH AND D EVELOPMENT FACILITY AS APPROVED BY THE PRESCRIBED AUTHORITY, THEN, THERE S HALL BE ALLOWED A DEDUCTION OF A SUM EQUAL TO TWO TIME OF EXPENDITURE SO INCURRED. EXPLANATION - FOR THE PURPOSES OF THIS CLAUSE, EXPENDITURE ON SCIENTIFIC RESEARCH, IN RELATION TO DRUGS AND PHARMACEUTICALS , SHALL INCLUDE EXPENDITURE INCURRED ON CLINICAL DRUG TRIAL , OBTAINING APPROVAL FROM ANY REGULATORY AUTHORITY OVER ANY CENTRAL, STATE OR PRO VINCIAL ACT AND FILING AN APPLICATION FOR PATENT UNDER PATENTS ACT, 1970. 8. FURTHER, WE HAVE PERUSED THE JUDGMENT IN THE CAS E OF SMITHKLINE & FRENCH (INDIA) LIMITED (SUPRA) WHEREIN, HONBLE KERALA HIGH COURT UPHELD THE ALLOWABILITY OF CAPITAL EXPENDITURE ON TWO BUSES USED FOR THE PURPO SE OF TRANSPORTATION OF RESEARCH PERSONNEL U/S 35(1)(IV) OF THE ACT AND NOT U/S 35(2 AB)(1) OF THE ACT. PARA 3 OF THE SAID JUDGMENT IS RELEVANT IN THIS REGARD, AND THE S AME IS REPRODUCED AS UNDER: AS STATED EARLIER, THE TWO AUTHORITIES, NAMELY, TH E COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE TAKEN THE VIEW THAT THE BUSES IN QUESTION WERE FACILITIES FOR THE PROSECUTION OF SCIENTIFIC RESEARCH AND, THEREFORE, THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF SECTION 35(1)(IV). WE FIND NO REASONS TO TAKE DIFFERENT VIEW. 5 9. WE HAVE ALSO PERUSED THE AHMADABAD BENCH DECISIO N IN THE CASE OF ACIT VS. TORRENT PHARMACEUTICALS LTD (SUPRA) WHEREIN, THE EX PENDITURE ON MOTOR CARS FOR IN- HOUSE RESEARCH & DEVELOPMENT WAS NOT ALLOWED AS AN ELIGIBLE WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT. RELEVANT PORTIONS OF THE S AID ORDER ARE READ AS FOLLOWS. IN THE LIGHT OF THESE FACTS AS HAS BEEN NOTED BY LD . CIT (A) IN THE ABOVE PARA, WE EXAMINE THE APPLICABILITY OF VARIOUS CONTE NTIONS RAISED BY LD AR OF THE ASSESSEE. FIRST CONTENTION OF LD AR OF THE ASS ESSEE IS THAT SINCE THE SALARY TO EMPLOYEE IS ELIGIBLE FOR DEDUCTION U/S 35 (2AB) OF THE ACT, ACQUISITION OF MOTOR CAR FOR THOSE EMPLOYEES SHOULD ALSO BE CON SIDERED AS ELIGIBLE FOR THIS BENEFIT. WE DO NOT FIND ANY MERIT IN THIS CON TENTION OF LD AR OF THE ASSESSEE. SIMPLY BECAUSE OF THIS REASON THAT MOTOR CARS ARE PURCHASED FOR PROVIDING TO THE EMPLOYEES OF RESEARCH & DEVELOPMEN T WING OF THE ASSESSEE, IT CANNOT BE ACCEPTED THAT THE EXPENDITURE IS INCUR RED ON IN-HOUSE SCIENTIFIC RESEARCH & DEVELOPMENT. IN OUR CONSIDERED OPINION, THE PRIMARY CONDITION TO THE SATISFIED BY THE ASSESSEE FOR BEING ELIGIBLE FO R THIS WEIGHTED DEDUCTION IS THIS THAT THE EXPENDITURE WAS INCURRED ON IN-HOUSE RESEARCH & DEVELOPMENT AND THEN ONLY IT CAN BE ACCEPTED THAT, EXPENDITURE ON MOTOR CAR IS ALSO ELIGIBLE FOR SUCH DEDUCTION. WE WOULD LIKE TO OBSE RVE THAT THE PERQUISITE VALUE OF THE CAR BEING EXPENDITURE INCURRED BY THE ASSESSEE COMPANY ON RUNNING AND MAINTENANCE OF CAR ETC. CAN BE EQUATED WITH SALARY PAYMENT TO THE EMPLOYEES BUT NOT THE COST OF CAR PROVIDED TO THE EMPLOYEES FOR TRAVELLING. EXPENDITURE ON PURPOSE OF CAR CANNOT BE ACCEPTED AS EXPENDITURE WHETHER CAPITAL OR REVENUE INCURRED ON IN-HOUSE RESEARCH & DEVELOPMENT. IN OUR CONSIDERED OPINION, CAPITAL EX PENDITURE FOR EQUIPMENTS TO BE USED FOR IN-HOUSE RESEARCH IS ELIGIBLE FOR TH IS BENEFIT BUT NOT THE MOTOR CAR BECAUSE WHETHER THE EMPLOYEES CAME INTO CAR PRO VIDED BY THE EMPLOYER OR BY PUBLIC TRANSPORT OR HIRED CAR HAS NO BEARING ON IN-HOUSE RESEARCH & DEVELOPMENT. NOW, WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HONBLE APEX COURT CITED BY THE LD AR OF THE ASSESSEE REPORTED I N 209 ITR (STATUTE) 89 CASE, THE ISSUE INVOLVED WAS REGARDING DEDUCTION U/ S 35(1)(IV) OF THE ACT. WHEN WE EXAMINE THE PROVISIONS OF SECTION 35(1)(IV) OF THE ACT, WE FIND THAT THESE ARE MATERIALLY DIFFERENT FROM THE PROVISIONS OF U/S 35(2AB) OF THE ACT BECAUSE IN SECTION 35(1), THERE IS NO CONDITION THA T THE EXPENDITURE ON SCIENTIFIC RESEARCH HAS TO BE INCURRED ON IN-HOUSE RESEARCH & DEVELOPMENT FACILITIES AND THERE, ALL EXPENDITURES INCURRED ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS IS ELIGIBLE FOR DEDUCTION U/S 35(1) AN D IN CLAUSE (IV) OF SECTION 35(1) IS COVERED THE EXPENDITURE OF CAPITAL NATURE ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS CARRIED ON BY THE ASSESSEE AND HENCE, IN THIS CLAUSE ALSO, THERE IS NO CONDITION THAT SUCH COST HAS BEEN INCURRED ON IN-HOUSE SCIENTIFIC RESEARCH FACILITIES AS IN SECTION 35(2AB ) OF THE ACT AND BECAUSE OF THE ACT AND BECAUSE OF THE REASON, THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE. IN VIEW OF ABOVE DISCUSSION, WE FIND THAT THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE ON PURCHASE OF MOTOR CARS CANNOT BE CONSIDERED AS EXPENDITURE BY THE ASSESSEE ON IN-HOU SE RESEARCH & DEVELOPMENT AND THEREFORE, THE SAME IS NOT ELIGIBLE FOR WEIGHTED 6 DEDUCTION U/S 35(2AB) OF THE ACT. SIMILARLY, CAPITALIZED INTEREST ON PURCHASE OF CAR IS ALSO NOT ELIGIBLE FOR THIS BENEF IT FOR SAME REASONS. 10. FROM THE ABOVE MENTIONED PROVISIONS OF LAW AS W ELL AS THE JUDICIAL PRONOUNCEMENTS, IT IS EVIDENT THAT WEIGHTED DEDUCTI ON IS NOT AT ALL ALLOWABLE IN RESPECT THE EXPENDITURE WHICH IS IN THE NATURE OF C OST OF ANY LAND AND BUILDING IN GENERAL AND BUSES IN PARTICULAR. FURTHER, IN VIEW OF THE SPECIFIC INDUSTRY SPECIFIC REFERENCE VIDE EXPLANATION TO SUB-SECTION (2AB) OF THE ACT, THE WEIGHTED DEDUCTION ON EXPENDITURE INCURRED ON (I) CLINICAL DRUG TRIAL; (II) OBTAINING APPROVALS FROM ANY REGULATORY AUTHORITY AND (III) FILING AN APPLICATIO N FOR PATENTS ALONE ARE ALLOWABLE. OF COURSE, DEDUCTION IN RESPECT OF LAND AND BUILDINGS IS ANY WAY BARRED. AS PER THE PROVISIONS OF SECTION 35(1)(IV) OF THE ACT, THE ASS ESSEE IS ENTITLED TO DEDUCTION ON ANY EXPENDITURE OF A CAPITAL NATURE ON SCIENTIFIC R ESEARCH RELATED TO THE BUSINESS CARRIED ON BY THE ASSESSEE. FURTHER, I T IS A DECIDED ISSUE THAT THE REVENUE EXPENDITURE I NCURRED ON MAINTENANCE OF MOTOR CARS SINCE COMPARABLE WITH THE SALARIES PAID TO THE EMPLOYEES WORKING IN THE SCIENTIFIC RESEARCH IS ALL OWABLE FOR WEIGHTED DEDUCTION VIDE THE AHMADABAD BENCH DECISION IN THE CASE OF ACIT VS . TORRENT PHARMACEUTICALS LTD (SUPRA). HOWEVER, THE PURCHASE VALUE OF THE MOTOR CAR, BEING CAPITAL EXPENDITURE, PROVIDED TO THE EMPLOYEES FOR THE PURPOSE OF TRAVEL LING CANNOT BE EQUATED TO THE SALARIES PAID TO SUCH SCIENTIFIC PERSONNEL. CAPITA L EXPENDITURE ON PURCHASE OF BUSES USED FOR TRANSPORTING THE RESEARCH PERSONNEL IS AN ALLOWABLE EXPENDITURE U/S 35(1)(IV) OF THE ACT VIDE JUDGMENT IN THE CASE OF S MITHKLINE & FRENCH (INDIA) LIMITED (SUPRA). IN THIS CASE, THE ASSESSEE CLEARED THE FUN CTIONAL TEST RELATING TO THE USE OF THE BUSES OF R AND D OF THE ASSESSEES BUSINESS. 11. IN THE LIGHT OF THE ABOVE LEGAL SUMMARY, WE NEED TO DECIDE IF THE CAPITAL EXPENDITURE ON LABORATORY EQUIPMENT, COMPUTER AND M OTOR CAR ARE ELIGIBLE FOR WEIGHTED DEDUCTION AS PER THE PROVISIONS OF SECTION 35(2AB) OF THE ACT. ASSET-WISE ALLOWABILITY OF DEDUCTION IS GIVEN IN THE SUCCEEDIN G PARAGRAPHS OF THIS ORDER. 12. TO START WITH, WE SHALL EXAMINE THE FIRST TWO C APITAL ASSETS NAMELY LABORATORY EQUIPMENT AND COMPUTER AND WE ARE OF THE OPINION, THAT THESE TWO ASSETS ARE ELIGIBLE FOR WEIGHTED DEDUCTION IF THE A SSETS IN QUESTION ARE USED IN CLINICAL 7 TRIALS IN DRUG AND PHARMACEUTICAL INDUSTRY OF THE A SSESSEE. NOW QUESTION IS IF THEY USED IN THE CLINICAL TRIALS OF THE DRUGS BY THE ASS ESSEE. IT IS THE CLAIM OF THE ASSESSEE BEFORE US THAT THEY ARE USED ONLY FOR CLINICAL TRAI LS. IN THIS REGARD, LD COUNSEL ARGUED THAT THE ORDERS OF THE REVENUE DO NOT CONTAIN ANY A DVERSE FINDING OF FACT ON THIS ISSUE OF USE OF THE SAID ASSETS FOR THE SPECIFIED P URPOSE OF CLINICAL TRIALS IN THE SPECIFIED INDUSTRY. THE NOMENCLATURE OF THE IMPUGNE D ASSETS IE LABORATORY EQUIPMENT AND THE COMPUTER ALSO INDICATE THE RELATI ONSHIP OF THE ASSETS TO THE ACTIVITIES RELATING TO CLINICAL TRIALS. THUS, THE D ESCRIPTION OF THE ASSETS AND STATEMENT OF THE ASSESSEES COUNSEL AT BAR WEIGHS MORE FOR AC CEPTING THE CLAIM OF THE ASSESSEE. THEREFORE, IN OUR OPINION, THE ASSESSEE I S ENTITLED TO WEIGHTED DEDUCTION IN ACCORDANCE WITH THE PROVISIONS OF SECTION 35(2AB) O F THE ACT. ACCORDINGLY, THE RELEVANT PARTS OF THE GROUND ARE ALLOWED . 13. THE OTHER CAPITAL ASSET IS THE MOTOR CAR. DURI NG THE PROCEEDINGS, LD COUNSEL FOR THE ASSESSEE FAIRLY MENTIONED THAT THE WEIGHTED DEDUCTION U/S 35(2AB) OF THE ACT IN RESPECT OF THE CAPITAL EXPENDITURE ON MOTOR CAR IS NOT ALLOWED BY THE HONBLE KERALA HIGH COURT IN THE CASE OF SMITHKLINE & FRENC H (INDIA) LIMITED (SUPRA). HOWEVER, LD COUNSEL RAISED AN ALTERNATE GROUND FOR ALLOWING NORMAL DEDUCTION U/S 35(1)(IV) OF THE ACT. HOWEVER, ALLOWABILITY OF THE DEDUCTION U/S 35(1)(IV) OF THE ACT, CONSIDERING THE EXPRESSIONS IE ANY EXPENDITURE OF A CAPITAL NATURE ON SCIENTIFIC R ESEARCH RELATED TO THE BUSINESS CARRIED ON BY THE ASSESSEE THE ASSESSEE IS ELIGIBLE FOR DEDUCTION PROVIDED ASSESSEE ESTABLISH THAT THE EXPENDITURE ON PURCHASE OF MOTOR CAR IS OF THE NATURE ON SCIENTIFIC RESEARCH RELATED TO THE BUSINE SS CARRIED ON BY HIM. IT IS A FACT THE BUS WHICH IS USED FOR RESEARCH PERSONNEL CANNOT BE EQUATED WITH THE IMPUGNED MOTOR CAR, WHICH IS OFTEN USED FOR MANAGERS OF THE COMPANY IN GENERAL AND FOR R &D MANAGERS. WHETHER THE ASSESSEE PURCHASED THE MOTOR CAR AND USED THE SAME FOR RESEARCH PERSONNEL OF THE ASSESSEES BUSINESS OR NO T IS AN OPEN ISSUE, WHICH REQUIRES EXAMINATION. FOR ALLOWABILITY OF THE CLAIM U/S 35(1 )(IV) OF THE ACT, ASSESSEE IS REQUIRED TO DEMONSTRATE THE USE OF THE CAPITAL EXPE NDITURE FOR SCIENTIFIC RESEARCH BY FURNISHING RELEVANT DOCUMENTS AND EVIDENCES TO SUGG EST THAT CAR WAS USED ON SCIENTIFIC RESEARCH AS MENTIONED IN CLAUSE (IV) OF SECTION 35(1) OF THE ACT. AO IS DIRECTED TO ENTERTAIN ANY EVIDENCE OR ADDITIONAL EV IDENCE IN THIS REGARD AND DECIDE 8 THE ISSUE IN THE LIGHT OF THE ABOVE DISCUSSION. ACC ORDINGLY, THIS PART OF THE GROUND IS SET ASIDE FOR WANT OF MORE FACTS. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2012. SD/- SD/- (D. MANMOHAN) (D. KARUNAKARA RAO) VICE PRESIDENT ACCOUNTANT MEMBER DATE : 30 .11.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR E, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI