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2010 (12) TMI 801 - AT - Income TaxDeduction u/s 35AB - Technical know how fees - issue is covered by the decision of the tribunal in assessee's own case in assessment years 1994-95, 1995-96 and 1996-97 in ITA Nos.5153/M/98 and 5687-5688/M/99 wherein it was held that though the assessee had not itself manufactured the goods, it had got the goods manufactured from others for which technical know how had been used. The tribunal also observed that there was no requirement in section 35AB that the assessee should itself manufacture the goods - Decided in favor of the assessee by way remand to AO Regarding disallowance u/s 40(a)(i) - assessee argued that the amounts received by the foreign telecasting companies were not taxable in India and therefore no tax was required to be deducted at source - the same issue had already been considered by the tribunal in assessee's own case in assessment years 1994-95 to 1996-97 in ITA No.5153/M/1998 and 5687-5688/M/199 Regarding termination of the manufacturing agreement for manufacture of detergent bar - It has been pointed out that after the termination, sales and profit both had improved. Accordingly it has been urged that the expenditure should be allowed as revenue expenditure - It is a settled legal position that in case an expenditure is incurred for better working of the existing profit earning apparatus, it will be revenue in nature but in case the expenditure relates to any change in the profit earning apparatus the expenditure would be capital in nature - the termination of managing agencies did not relate to the profit earning apparatus of the assessee and by termination the assessee could only gain advantage in the revenue field by way of saving of unnecessary expenditure. The case of the assessee is different as in this case payment was for termination of JVA which had impact on the profit earning apparatus - Held that expenditure is capital in nature Regarding nature of payment of Rs.21 crores made by the assessee to GSL under "safeguard confidentiality agreement - The payment had been made in terms of the confidentiality agreement dated 30.7.96 - GSL had acquired any confidential information for which the assessee had to make payment for protecting the information. As the purpose of payment is not established the expenditure cannot be allowed as incurred wholly and exclusively for the purpose of business - the purpose for not disclosing the information to any one else by GSL is also to ward off competition by not allowing others to use the information for manufacture of product. Therefore the real purpose of payment in such scenario assuming that GSL did have in its possession some confidential information would be to ward off competition - Held that payment was capital in nature - Appeal is dismissed
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