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2011 (12) TMI 351 - AT - Income TaxDisallowance of license and technology fees - Revenue or capital expenditure - assessee was a joint venture formed between Burlington Mills Inc., USA (BMI) and Mafatlal Industries Ltd. (MFI) and known as Mafatlal Burlington Industries Ltd for manufacture of certain special form of denim fabrics - assessee, entered into the License and Technical Assistance Agreement dated 13.06.1996, separately with BMI and MIL to provide for licensing of technical information and trade mark to the assessee on payment of license and technology fees @ 4% of the sales to each of them in respect of sales made through them - AO observed that, in the relevant years, there was no reimbursement of expenses for deployment of personnel of both the companies for providing any technical assistance and, therefore, the entire payments in the form of license and technical fees had to be considered for the use of trade mark or technical information - AO concluded that the technical information was a capital asset acquired by the assessee with the right to use in perpetuity and the royalty paid @ 2% of net sales was capital in nature - license and technical co-operation agreement only grant the license to the assessee to use the trade mark as well as the technical information owned by BMI and MIL - High Court of Bombay in the case of Genon Norton Metal Diamond Dies Ltd. (1983 -TMI - 26281 - BOMBAY High Court) - Decided in favor of the assessee Regarding book profit u/s. 115JB - The dispute is regarding the allowability of deduction on account of profit eligible for deduction u/s.80HHC while computing the book profit u/s. 115 JB under the provision of Clause (iv) of Explanation 1 of Section 115JB(2) - Held that: there being no eligible profit of business for the purpose of deduction u/s.80HHC, the claim of deduction of the assessee has been rightly disallowed by the AO - Decided against the assessee
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