INCOME TAX ACT, 1961

Section 80-IC

Deduction under section 80-IC - Computation - AO restricted assessee's claim presuming inflation of profit on account of no payment made towards technical know-how fee -

Assessee engaged in manufacturing of electric items and sales thereof claimed deduction under section 80-IC amounting to Rs. 3 crores. AO noticed that assessee had not debited any expenses on account of technical know-how and no expenses on account of market/customer base or goodwill were debited. Assessee submitted that the partner 'M' so experienced person having ample knowldge was lookin after business of assessee. Therefore, no expense on account of technical know-how had been incurred/debited. AO not satisfied with the same, held that assessee was not eligible for deduction under section 80-IC on the profit amounting to Rs. 16 lakhs. Held: As apparent, AO only on the basis of presumption made disallowance by observing that assessee might have inflated net profit rate by not paying technical know-how fee and declaring higher net profit rate. However, he ignored explanation of assessee that increase in higher rate for the year under consideration was due to low expenses on account of interest and lesser amount of depreciation. The assessee also explained that one of the partner was experienced and that no expense on account of royalty/technical know how had been incurred by the assessee. The claim of assessee that neither in the preceding year nor in the succeeding year such disallowance had been made in the similar circumstances has not been rebutted. Therefore, considering the totality of the fact impugned disallowance made by AO could not be sustained.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 80-IC

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