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2014 (4) TMI 623 - AT - Income TaxDisallowance of product development expenses – Capital or revenue expenses – Depreciation on product development expenses – Held that:- The expenses has been outsourced as assessee did not have any skill/specialized personal - As per Section 35AB, where the assessee has paid in any previous year any lump sum consideration for acquiring any know-how for use for the purposes of his business, 1/6th of amount so paid shall be deducted in computing the P&L account of the business for that year - Know-how means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil well or other sources of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto) - The Product Development Report was dated 20.03.2009 and agreement was dated 12.12.2007, whereas the assessee had claimed this expenditure in A.Y. 2009- 10 - As per the agreement, the amount is to be paid in advance but assessee had not furnished any evidence for paying this amount to the developer during the year – thus, the matter is remitted back to the AO to verify whether the project Report was actually used for the business purposes in this year or not and accordingly, he had paid the money in the year under consideration – Decided in favour of assessee. Allowability of 100% depreciation on particle size analyzer and dust collector – Held that:- The AO had already allowed the 100% depreciation on Rs. 22,09,948/- in preceding year - When the AO had accepted the assets are depreciable @ 100%, the Revenue cannot deny 100% depreciation on remaining amount for 180 days - Further, addition made during the year is also having similar nature – thus, the AO is directed to re-calculate depreciation @ 100% but considering the date of purchase of machineries whether it is for 180 days or less than 180 days - The CIT(A) also allowed 100% depreciation on dust collector but it is allowable from the date of purchase not for the whole year – Decided in favour of Assessee. Reduction in disallowance u/s 14A of the Act - The CIT(A) had partially allowed the appeal of the assessee by observing that dividend from the foreign company is taxable and hence, such investment cannot be considered for making disallowance u/s. 14A – thus, when dividend from the foreign company is taxable then it could not be made part of disallowance u/s. 14A - CIT(A) is right in holding the disallowance of Rs. 6.31 lacs – Decided against Revenue. Addition on account of capitalization of interest - Held that:- IDBI's term loan was disbursed on 05.09.2008 at Rs. 219 lacs and Rs. 200 lacs on 31.03.2009 - The assessee had admitted before the CIT(A) that these funds were utilized towards capital work-in ITA progress at various location during the year under consideration - The assessee submitted before the CIT(A) that Rs. 209.21 lacs interest was paid on term loan - it had been capitalized Rs. 16.27 lacs in capital work-in-progress – the working made by the appellant before the CIT(A), which has been accepted by the CIT(A) without giving any opportunity to the AO - the disallowance in work-in-progress on account of interest does not appear proportionate to the term loan and interest expenditure debited in the P&L account – the issue is required further verification by the AO – thus, the matter is remitted back to the AO – Decided in favour of Revenue.
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