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2016 (8) TMI 1525 - AT - Income TaxDepreciation on Patent expenses which were capitalised in the books by the appellant - HELD THAT:- As pursuant to the recharacterisation of the patent expenses as “Capital expenditure” by the A.O, the assessee company as a result thereof was entitled towards depreciation on the “Block of assets- Patents”, i.e not only as regards the capitalized value of the “Patent expenses” pertaining to the year under consideration, but also as on the Opening W.D.V of those pertaining to the preceding years, to the extent the same had been capitalised in the said preceding years. We thus restore the issue to the file of the A.O with a direction that the entitlement of the assessee company towards deprecation on the capitalized value of the “Patent expenses” be computed Summarily acceptance of the Opening W.D.V of “Patent expenses” by the A.O while framing the assessment in the hands of the assessee company for A.Y. 2009-10, does not inspire much confidence, therefore as a word of caution the A.O is directed to work out the Op. W.D.V of the “Block-Patent expenses” as on 01/04/2009 after making necessary verifications to his satisfaction, and only on being convinced that no part of the said “Patent expenses” had in the said preceding years been allowed as a “revenue expenditure” in the hands of the assessee company, therein rework the entitlement of the assessee company towards deprecation on “Block of assets- Patent expenses” - Assessee ground allowed for statistical purposes. Disallowance of deduction U/s 35(2AB) - entitlement of the assessee company as regards weighted deduction u/s 35(2AB) - HELD THAT:- As find ourselves to be in agreement with the Ld. A.R and are of the considered view that as the aforesaid expenses had been incurred by the assessee company on the scientific research pertaining to its business of manufacturing pharmaceutical formulations (not being expenditure in the nature of cost of any land or building) on in-house research and development facility approved by the prescribed authority, therefore the same in the absence of any fact which could go to prove that the said claim of expenditure by the assessee company on rent and repairs does not pertain to the R &D premises, or the professional and legal charges has no nexus with the scientific research of the assessee company, thus stands duly eligible for claim of weighted deduction u/s 35(2AB) of the “Act”. Thus in light of our aforesaid observations, the disallowance Addition on account of bogus purchases - HELD THAT:- As submitted by the Ld. A.R that the purchases of ₹ 13,04,375/- (supra) made by the assessee company towards purchase of “fixed assets”, inadvertently had been capitalized under the head “Factory building”, in support of which contention the Ld. A.R has taken us through the relevant extracts of SAP placed on record, wherein the said transactions as claimed hereinabove, stood reflected. We have perused the facts of the case and the material furnished before us, and are of the considered opinion that the lower authorities had hushed through the matter and on the basis of premature findings therein made an addition of ₹ 13,04,375/-(supra) in the hands of the assessee company. Thus taking an overall view of the issue under consideration, we in all fairness herein restore the matter to the file of the A.O for verifying the aforesaid claim of the assessee company that the purchases under consideration had been capitalized under the head “factory building”, and in case if the said contention of the assessee company is found to be in order, therein direct the A.O to restrict the addition upto the amount of the corresponding depreciation so claimed on the said capitalized value. Appeal of the assessee company is partly allowed.
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