288. Weighted deduction in respect of payment to scientific research association, etc., referred to in clause (ii) of sub-section (1) to be utilised for scientific research undertaken under a programme approved under sub-section (2A) – Whether, in a case where programme has already been approved, notified payments made by persons other than original sponsors can also qualify for weighted deduction or not

1. Section 35(2A) [prior to its amendment by the Finance Act, 1984], provides that where the assessee pays any sum to a scientific research association for university or college or other institution referred to in section 35(1)(ii) or to a public sector company to be utilised for scientific research undertaken under a programme approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, then, there shall be allowed a deduction of a sum equal to one and one-third times the sum so paid.

2. Notifications under section 35(2A) are issued by the Ministry of Finance on the basis of the recommendation of the prescribed authority, containing, inter alia, the details of the research programme, the name of the sponsors, the name of the institution conducting the research and the total estimated cost of the project of the research programme.  A question has been raised as to whether, in a case where research programme has already been approved, notified payments made by persons other than the original sponsors mentioned in the notification to the research programme can also qualify for weighted deduction or not.  The Board have been advised that the approval under section 35(2A) is of the “research” programme “and not of the sponsors and, therefore, any person other than the original sponsors making payments to the approved research programme can also claim the benefit of weighted deduction provided the amount collected from all the sponsors does not exceed the cost of the particular programme approved by the prescribed authority.  However, before allowing the weighted deduction, the ITO shall call for from the sponsor/contributor a certificate issued by the research association/institute certifying, inter alia, the amount actually paid by the sponsor/contributor to the research programme as approved and mentioned in the notification and also certifying that the total contribution received from all the sponsors/contributors do not exceed the cost of the programme as approved by the prescribed authority.

Circular : No. 294 [F. No. 203/111/78-IT(A-II)], dated 27-2-1981.

JUDICIAL ANALYSIS

The above Circular was referred to in Dy. CIT  v. Alarsin Marketing (P.) Ltd. 1995 Tax LR 309 (Bom. – Trib.), with the following observations:

“6. In the alternative, Shri Patil suggested that even if recog­nition under section 35(1)(ii) was a pre-condition, at least at the time when the research programme was approved under section 35(2A) of the Act, the trust did have recognition under section 35(1)(ii) and the said recognition at the time of approving the programme was sufficient. In support of this contention, he further argued that the recognition under section 35(1)( ii) of the Act was given for a period of three years at a time whereas the duration of the approval under section 35(2A) of the Act depended on the nature of the programme undertaken by the insti­tution. In further support of this contention, he drew strength from Board’s Circular No. 294, dated 27-2-1981 wherein at para 2, the following has been
mentioned :

‘The Board have been advised that the approved under section 35(2A) is of the ‘research programme’ and not of the sponsors and, therefore, any other person then the original sponsors making payment to the approved research programme can also claim the benefit of weighted deduction provided the amount collected from all the sponsors do not exceed the cost of the particular programme approved by the Prescribed Authority.’

In other words, he argued that the stress of the legislation is on the programme to be carried out and not on who sponsors the same or where it is carried out. This is so because while approv­ing the programme care is taken to see that the requisite facilities and infrastructure exist to undertake the proposed programme.

7. We have heard the rival submissions and come to the conclusion that the assessee should succeed. . . .” (pp. 310-311)

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