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2013 (10) TMI 783 - AT - Income TaxAdjustment of arm's length price - Adjustment made on account of notional interest on Optionally Convertible Debenture to Foreign Subsidiary - Held that:- CIT(A) while deleting addition has noted that as per agreement, interest was payable only if conversion option was not exercised on expiry of 5 year period. If at any time during 5 year period conversion option was exercised and lowas converted into equity, no interest accrued or become payable. He further noted that funds were provided by Assessee as per RBI guidelines and in immediately next year, entire logiven to subsidiary was converted into equity shares of Zydus International Pvt. Ltd. He has further held that since Assessee has converted lointo equity in immediate next year, there was no question of taxing notional interest. He has further held that Assessee had not granted interest free lobut invested in optionally convertible lowith clause of interest in case, Conversion option was not exercised and further held Assessee’s transaction with subsidiary was at arms length. Before us, Revenue could not controvert findings of CIT(A) by bringing any contrary material on record - Decided against Revenue. Product Registration Expenses and reimbursement of Product Registration Support Services expenses - Trademark Registration Fees and Patent Registration Fees - capital v/s revenue - Held that:- Assessee has not acquired any new right of permanent character. licenses or registrations are required to be renewed and therefore part of day to day running expenditure of business. [ACIT v. Vodafone Essar Gujarat 2010 (1) TMI 941 - ITAT, AHMEDABAD]. If expenditure cgive benefit which is said to be endured for one year or even annually year after year then it is unreasonable to hold that any enduring benefit taken place to assessee. [Comsat Max Limited. 2009 (1) TMI 314 - ITAT DELHI-H]. expenditure incurred in existing line of business in order to run business smoothly in years to come but in absence of creation of "any new asset we hereby held that such enduring benefit may not tantamount to rendering of capital expenditure. [DCIT v. Core healthcare 2008 (10) TMI 74 - GUJARAT HIGH COURT]. Also as decided in CIT v. Finley Mills Ltd. [1951 (10) TMI 1 - SUPREME COURT] that expenditure incurred in registering for first time its trademark, then by registration owner is merely absolved thereafter from obligation to prove his ownership of trademark. Thus expenditure is neither for creation of asset nor advantage for ever - in favour of assessee. Weighted deduction for expenditure on Scientific Research u/s. 35(2AB) in respect of Clinical Trial and Bio-equivalence Study disallowed - Held that:- From contents of explanation of Section 25(2AB) it is found that not only expenditure incurred on clinical drug trial but expenditure incurred for obtaining approval from any regulatory authority under any Central, State or Provincial Act and also expenditure incurred for filing application for patent under Patent Act 1970 are stated to be covered within definition of expenditure on scientific research. For clinical drug trial, first stage is to enroll volunteers and/or patient into small pilot studies and subsequently large scale studies are carried out on patients and such clinical drug trial may be in one country or in multiple countries. Carrying out drug trial is essential for approval of drug in question to be sold in public and hence, clinical drug trial cannot be carried out inside in-house research facility i.e. usually laboratory. Hence, this explanation to Section 35(2AB)(1) does not require that these expenses which are included in this explanation are essentially to be incurred inside in-house research facility because in our considered opinion, it is not possible to incur these expenses inside in-house research facility - in favour of assessee. Disallowance u/s. 14A - Held that:- Matter be restored back to file of A.O. for fresh decision as was done by tribunal in assessment year 2006-07 because as per this judgement of Godrej & Boyce Manufacturing Co. Ltd. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] as Rule 8D is applicable from assessment year 2008-09 - in favour of assessee. Restricting deduction u/s. 80IC & 80IB - Held that:- stand of A.O. cannot be approved because it is not reasonable basis for computation of profit of eligible unit. profit has to be computed on basis of selling price less cost of goods produced along with various overheads and only where there is some inter unit transfer of goods or service between various units of same assessee, then it has to be ensured that recording of such transfer of goods or services should be at market value of such goods or services on date of transfer and even if such recording of transfer is not as per market value, A.O. cbring it to market value and he cannot proceed to estimate profits and gains on reasonable basis unless he establishes that there is any exceptional difficulty in adopting market value and even then, basis adopted by A.O. to compute profits and gains, should be reasonable basis. In present case, we have seen that neither pre requirement of sub-section (8) or its proviso to section 80-Ihas been fulfilled by A.O. nor basis adopted by him is reasonable basis and, therefore, we do not find any basis to confirm or approve action of A.O. - in favour of assessee. Addition as upward adjustment on international transactions - Transfer Pricing adjustment - Held that:- Since in earlier year [2013 (1) TMI 655 - ITAT AHMEDABAD], similar issue was restored back to file of A.O. for fresh decision, we restore this mater back to file of A.O. for fresh decision for this year also with similar directions - in favour of assessee. Adjustment on account of 'Expenses disallowed u/s. 14A' for purposes of computation of book profit u/s. 115JB - Held that:- Following decision of Goetz (India) Ltd. v. CIT [2009 (5) TMI 615 - ITAT DELHI ] & there is no contrary decision on this issue till date - Decided in favour of assessee.
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