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2012 (10) TMI 178 - MADRAS HIGH COURTScrap sales - whether included in the total turnover while computing deduction u/s 80HHC - Held that:- As decided in COMMISSIONER OF INCOME-TAX Versus SHIVA DISTILLERIES LTD. [2007 (2) TMI 103 - HIGH COURT, MADRAS] scrap sales could not be taken as a part of turnover & should be excluded on the computation of the total turnover for the purpose of Section 80 HHC - in favour of assessee. Computation of deduction u/s 80HHC - whether 90% of gross interest without deducting expenses incurred in earning the interest income has to be excluded from the business profits - Held that:- As decided in ACG Associates Capsules Pvt. Ltd. vs. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business - in favor of assessee. Disallowance of depreciation - assessee claimed deduction u/s 35AB - Held that:- The expenditure incurred by the assessee was for the purpose of getting the technical knowhow by the assessee on manufacturing and processing of goods. Going by the provisions of Section 35AB and the Explanation on technical knowhow no hesitation in holding that the assessee is entitled to the relief under Section 35AB only, and not to the claim of depreciation under Section 32 relying on decision in case Godrej Soaps Limited, Escorts And Another Versus Union of India And Others [1992 (10) TMI 1 - SUPREME COURT] - against assessee. Non-compete fee paid to Sri.U.Mohan Rao - revenue expenditure v/s capital expenditure - Held that:- It is not denied by the Revenue that U.Mohanrao was the Chairman and Managing Director of some of the companies which got merged with the assessee company. The said U.Mohanrao had access to all information starting from manufacturing process, knowhow to the clientele and the products, including the pricing of the products. By a process of amalgamation, the assessee had acquired the business of the amalgamating companies. However, for the fruitful exercise of its business as a business proposition, the assessee thought it fit to enter into a non-compete agreement with a person who had the knowledge of the entire operations, so as to get the full yield of the amalgamated company's business. In that context the assessee took a commercial decision to pay non-compete fee to U.Mohanrao and going by decision reported in CIT vs. Coal Shipments P. Ltd (1971 (10) TMI 6 - SUPREME COURT) that the payment was in respect of the performing of the business of the assessee, hence no hesitation in holding that the expenditure is only on revenue account and not on capital account - in favour of assessee.
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