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2016 (1) TMI 114 - AT - Income TaxEntitlement to deduction u/s 10B - Held that:- The agreement entered by the assessee with its customers clearly show that the parties expected definite results , be it in the nature of new or improved compounds or in the nature of research documentation and each step that assessee had to take for achieving this result was also set out. Such results were to be given to its customers. The activities done by the assessee used sophisticated equipment and methodologies resulting in speciality compounds and documentations. The payments effected by the clients, though based on manhour spent were for such results. Hon Madras High court had again in the case of CIT vs N Venkatraman (2000 (2) TMI 66 - MADRAS High Court ) clearly held that the nature of the state of the what is produced, ie whether an intermediary or final product, could not be criteria for deciding whether an assessee was manufacturing or producing an article or thing. Billing done by the assessee on man hour basis would at the best demonstrate the difficulty in fixing the value of the ultimate production, considering the inherent complexities of the processes involved and the value of the outcome as such. It will not be a reason to say that assessee was being compensated only for the research, irrespective of the final outcome. Thus not only was there exports but the exports were of articles or things produced by the assessee. We are alive to the fact that assessee had in its own books demarcated its receipts into two classes, one for research and other for sale of molecules. But this demarcation will not take away the sheen of its argument that the export earnings were only for the results of the research and this fell with in the meaning of production of an article or thing. In any case it is trite law that accounting entries are not decisive in determining the question of eligibility for a claim of deduction or exemption Thus in our opinion assessee was eligible for claiming the benefit of Section 10B of the Act. Ld CIT was justified in directing so - Decided in favour of assessee.
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