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2014 (6) TMI 438 - ITAT MUMBAIDeduction u/s 37(1) - pre-operative expenses – Scientific research for the purpose of its own business – Held that:- True, the assessee cannot be considered as engaged in scientific research related to its business in-as-much as the same is being undertaken in pursuance to an agreement with another, Eisai-Japan, which sponsors the same, so that the discovery, if any, resulting there-from, would vest with the latter. However, why is the same not admissible u/s. 37(1), we fail to fathom. The Revenue has in fact itself assessed the receipt by way of service charges for the three years under reference, claimed to be from Eisai-Japan, as business income u/s. 28. How could then the expenditure on a principal activity carried out be considered, even in part (as it would only be for that incurred and claimed for A.Y. 2006-07), as toward pre-operative expenditure? In-asmuch as the expenditure by way of sponsoring the activity of the NGOs (as ARDSI) also forms part of the Agreement dated 01.01.2005, though, as explained by the ld. AR, not subject to a mark-up of 10%, as is the expenditure incurred directly by the assessee, the same cannot be considered as donation, as considered by the Revenue. There being no finding by the authorities below with regard to a direct nexus of the impugned expenditure with the receipt afore-noted - matter remanded back - decided in favor of assessee.
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