CBDT can't decide if organisation is involved in research: HC

MUMBAI: Tax authorities cannot decide on whether an organisation can be considered a `scientific research organisation' so as to avail tax concessions, the Bombay High Court has held.

Under section 35 of Income Tax Act, money given to research organisation can be deducted from income for the purpose of calculating tax.

For this purpose, the organisation must have the approval of the Central government.

Mumbai-based Indian Planetary Society, which conducts research in planetary sciences and works for popularising science, had moved the High Court against Central Board of Direct Taxes for not granting approval.

The Society said that since 2001, the Central Board of Direct Taxes (CBDT) had been consistently refusing to grant approval to it.

Ironically, the Department Of Scientific and Industrial Research in the Ministry of Science and Technology had granted the Society recognition as Scientific and Industrial Research Organisation in August 2001.

But the CBDT maintained that it did not fulfill the "basic requirement of undertaking scientific research".

A Division Bench headed by Justice F I Rebello held in judgment on July 10 observed that "CBDT by its very nature is composed of the officers from income tax department. By their very nature, they will really not be in a position to arrive at the finding as to whether activities carried on by petitioner amount to research".

Moreover, Section 35 confers power to grant approval on the Central Government and not on CBDT, the Bench pointed out.

Setting aside the CBDT orders, the Court has now asked the government to decide the issue within six months, "bearing in mind" the recognition granted by Ministry of Science and Technology.