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TMI Blog2016 (1) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... .30 crores under the head 'collaborative projects undertaken'. He found that payment was made to Indian Institute of Technology, Indian Institute of Science, Dr. C. Manohar, Mumbai, Avastha Gengiline Technologies Pvt. Ltd., University of Mumbai, Madhurai Kamraj University, Madhurai, NMHANS, Sofia University, TIFR, Unilever Port Sunlight-UK and others. The AO was of the opinion that nature of the expenses on collaborative projects was of expenditure on knowhow acquired for the purpose of the assessee's business. He held that assessee had made long term arrangements with the above-referred institutions/persons, that the agreement with Indian Institute of Science was for a collaborative project between Unilever Industry Pvt. Ltd. and the institute for the project in the area of Tea. He also referred to the agreement entered into with Dr. Manohar. Finally, he held the expenses were not in the nature of revenue expenses as claimed by the assessee, that same were incurred for long term benefit, that the amount paid by the assessee had to be treated as payment to acquire no know-how being intangible assets of the nature of capital expenses as per the provisions of sections 35AB of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the then FAA. Deferring with the view of his predecessor, he held that the assessee was not carrying out scientific research itself, that it had the copy right of such scientific research, that it was not entitled to claim deduction u/s.35/35AB of the Act. 4.During the course of hearing before us, the Authorised Representative(AR)of the assessee argued that similar issue had arisen in the earlier AY. That the Tribunal had restored the issue to the file of the AO(ITA/5461/Mum/2004-AY.2000-01,ITA/1409/Mum/2005-AY.2001-02 and ITA/996/Mum/2006-AY.2002-03, dated 27.8.2014).He further argued that the FAA, while deciding the appeal for AY 2002-03,had allowed the similar expenditure. The Departmental Representative(DR) supported the order of FAA. 5.We have heard the rival submissions and perused the material before us.We find that while deciding the appeal for the earlier years the Tribunal had decided the issue as under : "8. We have considered the rival submissions and carefully perused the orders of the authorities below. As per the Memorandum of Association of the assessee, it is not in dispute that one of the objects of the assessee company is to conduct scientific technical and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue as per the directions given by the Tribunal for the last three AYs. Ground no. 1 is allowed in favour of the assessee, in part. 6. Second ground is about disallowance made by the AO u/s. 80M of the Act. During the assessment proceeding, the AO found that the assessee had received dividend of Rs. 50.07 lacs on shares of Indian companies, that it had claimed deduction u/s 80M on the ground that the dividend of Rs. 60 lacs was disbursed for the year under consideration. He directed the assessee to furnish the justification for the claim made u/s 80M of the Act and to file details of expenses incurred for earning the dividend income. He also enquired as to why the claim of deduction should not be considered on the basis of the net dividend(gross receipt - expenses).The assessee contended that it had received dividend from two companies only, that no expenses had been incurred for earning a said dividend. The AO did not accept the explanation of the assessee and held that certain expenses which formed part of total expenditure must have been incurred towards earning the dividend that the assessee had not maintained or furnished any details of expenses. Finally, he made a disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80M , on the other hand, comes under Chapter VI-A of the Income-tax Act, 1961. Chapter VI-A refers to special deduction. Chapter VI-A constitutes a separate code dealing with deductions to be made in computing the total income. In order to compute deduction under section 80M , one has to compute the amount of dividend in accordance with the Act after deducting interest on monies borrowed for earning such income. The deductions contemplated by section 80M refer to actual expenditure whereas, deductions contemplated by section 20 (1) are estimated proportionate expenses and interest. Therefore, one cannot import deductions from interest on securities in the case of a banking company under section 20 (1) into the deductions contemplated by section 80M . Section 20 (1) contains a rule of proportionality of expenses and interest and that rule is based on estimation of expenditure whereas, deduction under section 80M is allowable on net dividend arrived at after taking into account actual expenditure incurred for the purposes of earning such dividend unless the facts of a particular case warrant other-wise." From the above order, it is cleared that expenditure which are not directly rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the operations of the provisions of the said Act, that the assessee had not pointed out any discrepancy in the calculation made by the TPO. 12. During the course of hearing before us, the AR stated that the TPO had not considered the expenses, that the value of the brought out/purchase services and the amount of service tax should have been reduced for the purpose of mark up, that TPO had shown as to how the conditions stipulated in s.92(3) were not fulfil, that the TPO had to determine the ALP as per the provisions of section 92C(1)of the Act, that the assessee had followed one of the methods mentioned in the Act, that it had adopted TNMM/CUP method, that it was not within the domain of the TPO to disturb the method adopted by the assessee, that the accrual of income could not be determined u/s. 92 of the Act, that the identical issue was decided in favour of the assessee by the FAA.s while decide the appeals for AY.s. 2002-03 and 2004-05, that the department had not challenged the orders of the FAA in that regard before the Tribunal, that brought out component was more than the finance cost. He referred page nos.28, 32, 34, 37- 39, 242-245 of the paper book. The DR relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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