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2016 (10) TMI 1062 - AT - Income TaxDisallowance of Technical Fees - revenue or capital expenditure - Held that:- The assessee company was given only limited rights to use the prototype tooling and drawing developed by M/s Samlip by M&M (for which purpose the payment was paid by M/s M&M to the said MIs Samlip) in lieu of which payment of technical fee to M/s Mahindra & Mahindra was made for the purpose of manufacturing the IFS system for MIs Mahindra & Mahindra. It is obvious that the assessee company, being auto part manufacturer for M/s Mahindra & Mahindra is solely dependent upon the business given to it by M/s Mahindra & Mahindra. In view of the required modernization in the IFS system, the said M/s Mahindra & Mahindra made payment to the Korean company, M/s Samlip for developing the prototype tooling and allowed the assessee to use the same for manufacturing the IFS components as per the requirement of M/s Mahindra & Mahindra on payment of technical fee. Clearly in such a case, M/s Mahindra & Mahindra got the ownership over the asset and the assessee was granted limited rights to use the same by Mahindra & Mahindra to Manufacture IFS System, in accordance with their requirement, on payment of Technical fees. In view of the same, the payment was rightly held to be revenue in nature by the Ld. CIT(A), which was rightly claimed by the assessee and also rightly allowed by the AO in original assessment proceedings. - Decided against the Revenue. Addition on account of excess claim of deduction u/s. 80IB - Held that:- Allocation of "head office expenses" for the purpose of computation of deduction 80lB on the basis of ratio of eligible sale to total sales, is only in the nature of a thumb-Rule for practical ease for such allocation. However, there is no specific provision in the Income Tax Act, 1961, to provide that head office expense should be apportioned in a particular ratio and in a particular manner only. Therefore, merely for invoking the thumb-Rule, proceeding under section 147 should not have been initiated, since there will always be more than one opinion while adopting any thumb-Rule. Furthermore, we find that the principle of consistency is also an important one for the purpose of computation of taxable income as was held by Supreme Court in the case of M/s Radhasoamy Satsang vs. CIT (1991 (11) TMI 2 - SUPREME Court). On the other hand, the assessee’s claim under section 80lB is duly supported by the Auditors and which also, on examination, was found acceptable by the AO in the original assessment proceedings. In view thereof, the addition made on this ground was rightly deleted by the Ld. CIT(A). In view of the above, we are of the view that the Ld. CIT(A) has passed a well reasoned order on the issue in dispute, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute. Accordingly, the issue in dispute is decided against the Revenue.
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