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2014 (11) TMI 769 - AT - Income TaxExpenses incurred on contract research u/s 35(1)(iv) – revenue was of the view that such expenditure would facilitate the business of a third party and not that of the assessee – Held that:- Assessee is involved in R & D activities and has employed its activities of research for commercial purposes also - Assessee’s unit is recognized R&D unit and there is evidence that assessee is also indulging its own research - It has also exploited commercially and also has patents to its own – in CIT vs. Yamuna Digital Equipments P. Ltd., [1998 (8) TMI 56 - ANDHRA PRADESH High Court] it has clearly held that expenditure should be wholly and exclusively used for research and development - In the absence of word ‘wholly and exclusively used for research and development’ the contention of the Revenue cannot be accepted - the expenditure which is of a capital nature when used for scientific research relating to the business carried on by assessee, the assessee is entitled to the deduction of the claim - assessee has used the assets for scientific research and expenditure incurred is for the business carried on by assessee – Decided against revenue. Admission of additional evidence – Held that:- Since the CIT(A) undertook examination of documents placed and has also coterminus powers with that of AO - both AO as well as Addl. CIT misdirected themselves in rejecting the contentions of assessee - both A.O. and Addl. CIT acknowledges that assessee’s capital R & D expenditure was incurred with reference to in-house products as well as contract research – decided against revenue. Judgment delivered in M/s. Enem Nostrum Remedies P. Ltd., vs. ACIT [2008 (8) TMI 384 - ITAT BOMBAY-E] considered or not – Held that:- The facts in the case is entirely different from the facts of assessee, wherein the present assessee is not only involved in research for in-house products which are also commercially exploited but also for contract research of the excess capacity available in R & D, which is also yielding good returns to assessee - the case law relied on by Revenue does not apply to the facts of the case – Decided against revenue.
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