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2021 (1) TMI 923 - HC - Income TaxDeduction u/s 35D - claim of the assessee with regard to stamp duty disallowed on the ground that the expenditure is capital in nature and not revenue expenditure - HELD THAT:- The expression 'in connection with issue for public subscription of shares in or debentures of the company' is an expression of wide import. The Supreme Court in 'INDIA CEMENTS LTD. Vs. CIT'[1965 (12) TMI 22 - SUPREME COURT] has held that expenditure on account of stamp duty even after introduction of 35D, is an admissible expenditure in connection with issue of public subscription. The aforesaid decision was relied upon in MAHINDRA UGINE AND STEEL CO. LTD [2000 (2) TMI 26 - BOMBAY HIGH COURT] and it was held that the aforesaid expression would improve stamp duty payable by the assessee on the debenture issue. In view of aforesaid enunciation of law, the expenses incurred by the assessee towards stamp duty in connection with issue for public subscription of shares in or debentures of the company is an allowable expenditure under Section 35D - Decided in favour of assessee. Deduction u/s 10A - assessee is engaged in the business of mobile added value services, which involve content development in its STP unit - HELD THAT:- Tribunal held that assessee has a dedicated studio in this STP unit where music related content is developed. The assessee procures music and other contents on the third parties. The assessee also uses its studios for content development - assessee is engaged in the activity of developing content and conversion of procured content into mobile readable format and the same would qualify to be classified as content development or data processing and the same would be covered under the notification dated 26.09.2000 issued by the Central Board of Direct Taxes. The High Court of Delhi in ML OUTSOURCING P. LTD [2014 (9) TMI 396 - DELHI HIGH COURT] and MCKINSEY [2015 (3) TMI 1226 - DELHI HIGH COURT] has interpreted the notification and has held that intention of the legislature is not to constrain or restrict but to enable the Board to include several services of products of similar nature in the ambit of Section 10A - notification covers within its ambit even the services which cannot be sent abroad. Thus, the Tribunal has rightly held that the assessee is entitled to benefit of deduction under Section 10A . Nature of expenditure - Expenditure incurred as legal and professional charges - AO held the same to be in the nature of capital expenditure - Tribunal, by following the decision of its co-ordinate Benches, has held that expenditure incurred by the assessee for conducting due diligence in report of a company which was to be acquired by the assessee is revenue in nature and has treated the same to be deductible expenditure under Section 37(1) - HELD THAT:- The aforesaid finding of the Tribunal is based on meticulous appreciation of material on record and does not call for any interference. In the result, the fourth substantial question of law is also answered against the revenue and in favour of the assessee. Depreciation on block of assets @60% - AO held that the media resource board is plant and machinery but is not a computer by holding it to be a telecom equipment and allowed depreciation at 15% as applicable to plant and machinery - HELD THAT:- The media resource boards work in conjunction and as part of computer servers and cannot be served as telecom equipment. In support of aforesaid finding, the Tribunal has relied the decision of special bench of Mumbai Tribunal in DCIT Vs. DATA CRAFT INDIA LTD. [2010 (7) TMI 642 - ITAT, MUMBAI] - Therefore, the Tribunal has rightly held that media resource boards cannot be treated as plant and machinery. The aforesaid finding cannot be termed as perverse. Thus, the fifth substantial question of law is also answered against the revenue and in favour of the assessee. Deduction under Section 80JJAA - assessee is providing telecom services and therefore, the assessee cannot be termed as an industrial undertaking - HELD THAT:- Tribunal by placing reliance on the decision of the TEXAS INSTRUMENTS (INDIA) P. LTD. allowed the claim of the assessee but it is pertinent to note that the decision of TEXAS INSTRUMENTS (INDIA) P. LTD. supra was challenged before this Court [2014 (3) TMI 150 - KARNATAKA HIGH COURT] and the matter was remitted to decide the matter afresh. However, we find that the Tribunal in paragraph 6.5.4 has rather recorded the conclusions and has failed to assign any reasons. Therefore, the matter insofar as it pertains to claim of the assessee for deduction under Section 80JJAA of the Act requires reconsideration by the Tribunal. Accordingly, the second substantial question of law is answered.
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