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2016 (1) TMI 1338 - AT - Income TaxPayments made for collaborative project - assessee not carrying out scientific research itself, that it had the copy right of such scientific research, that it was not entitled to claim deduction u/s.35/35AB - Held that:- There were more than 10 parties with whom the assessee had entered into agreement during the year under appeal, that the AO had not discussed and analysed the agreement as suggested by the tribunal. We are of the opinion the matter needs further verification and investigation. Therefore, in the interest of justice we are restoring back the issue to the file of the AO. He is directed to decide the issue as per the directions given by the Tribunal for the last three AYs. Ground no. 1 is allowed in favour of the assessee, in part. Disallowance u/s. 80M - Held that:- Expenditure which are not directly relatable to earning of expenditure could not be deduction from dividend income on ad hoc basis for the purpose of allowing deduction u/s. 80M of the Act. We reverse the order of the FAA. See Zindal Iron and Steel Company case [2008 (7) TMI 606 - ITAT MUMBAI] - Ground no. 2 is decided in favour of the assessee. Adjustment made under the transfer pricing (TP) provisions - Held that:- The arm's length principle of transfer pricing is based on the premise that the amount charged by one related party to another for a product must be the same as if the parties were not related. An arm's length price in respect of a foreign transaction, therefore, is the price which that transaction would obtain in the open market. If the above basic principle is examined with regard to the facts of the case under appeal it becomes very clear that there is no shifting of income to the non-resident entity. Due to a bona-fide mistake the assessee adopted a particular figure, but, if the overall picture is looked in to, it becomes clear that there was act or intention of diverting the profits by the assessee. Considering the peculiar facts and circumstances of the case, we are of the opinion that view taken by the FAA cannot be endorsed. Reversing his order, we decide ground no.3 in favour of the assessee.
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