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2017 (10) TMI 371 - AT - Income TaxRevision u/s 263 - Eligibility to claim deduction u/s 35(1)(iv) - expenditure relates to the business of the parent company - Held that:- From the overall reading of the agreement between the assessee and SI Group US it becomes abundantly clear that the entire R&D activity is carried on for the benefit and development of business of SI Group US and does not pertain to the assessee’s business. The assessee is permitted to use the result of the R&D product only if the SI Group US grants license which is also subject to payment of royalty. These factors clearly demonstrate that the entire R&D activities carried on by the assessee is for the business of SI Group US and not for itself. This fact is further proved from assessee’s own admission that the entire revenue expenditure relating to R&D activities was reimbursed by SI Group US. Keeping in perspective the aforesaid factual position, it is hardly believable that the revenue expenditure on R&D relates to the business of the parent company whereas, the capital expenditure on R&D relates to the Assessee. As discussed earlier, the entire R&D activities was carried on by the assessee for the benefit of its parent company and not for itself. Therefore, one of the basic conditions of Section 35(1)(iv) of the Act is not fulfilled. - Decided against assessee.
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