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2014 (3) TMI 362 - AT - Income TaxReduction in computation of deduction u/s 80IA of the Act - Conversion and service charges apportioned – Held that:- The AO had not examined the books of accounts of the respective units of the assessee before arriving at the conclusion that the amount of ₹ 1crore received by the assessee as know-how fees are to be apportioned - AO had also not examined to the nature of work executed by the assessee and the unit which imparted the know-how – he merely came to the conclusion on the basis of certain presumptions inferred from some of the communications transacted between the assessee and its client – though, the CIT (A) has examined the issue in detail and arrived at the conclusion that the assessee had engaged its Pondicherry unit for technical knowhow services - There was nothing brought to suggest that the Chennai/Trichy unit of the assessee has extended any know-how to the client of the assessee – thus, there is no reason to interfere n the findings of CIT(A) – Decided against Revenue. Apportionment of labour charges to Pondicherry unit – Held that:- The entire labour charges was incurred by the assessee at the work site Nagda - The assessee's Pondicherry unit was a specialized unit for manufacturing the critical items such as Saturator, Reactors, Clarifier, Filters, and Tanks & Pumps - Though the work undertaken by the assessee is a composite contract, the role of the assessee's Pondicherry unit was to supply only the above products - the assessee's Pondicherry unit did not have any role in the fabrication work undertaken by the assessee in the site – also, no materials were brought to show that the assessee's Pondicherry unit had any role in the execution of the activities rendered at the assessee's clients' site – thus, it is not necessity to allocate the expenses incurred by the assessee for the payment made to M/s.KRR Engineering Pvt. Ltd., by the Madras unit, to Pondicherry unit – there is no infirmity in the order of the CIT (A) – Decided against Revenue. Restriction of disallowance u/s 35AB of the Act – Technical know-how – Held that:- Disallowance of technical know-how fees of ₹ 10 lakhs which is restricted to 1/6th in view of Sec.35AB of the Act:- CIT (A) held that the amount paid by the assessee was only for rendering services for the manufacturing of specialized machinery parts for barium sulphet plant and since the appellant is a manufacturer of chemical equipments, the amount was paid for assisting the assessee in the manufacture of specialized machinery for Ashok Organics Industries Ltd. - the entire expenditure as allowable deduction by observing that Sec. 35AB of the Act is inapplicable considering the facts of the case - no further explanations were tendered by the Revenue to establish that the expenditure incurred by the assessee was a lump sum payment made for acquiring technical know-how - the assessee is a manufacturer of specialized equipments in chemical industry – Decided in favour of Assessee.
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