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TMI Blog2013 (12) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had claimed the following expenses in P&L Account. 1. Farm Expenses Rs. 2,02,225 2. Legal and Professional Fees Rs. 2,46,900 3. R&D Cess Rs. 78,210 4. Communication expenses Rs. 1,709 5. Travelling and conveyance Rs. 13,005 6. Technology transfer fees Rs. 15,81,770 7. Interest paid on Custom Duty Rs. 1,23,25,000 8. Sales Tax Penalty Rs. 86,049 Sales Tax Rs. 57,191 Total Rs. 1,45,92,059 2.1 The AO further noted from the audit report that accounts of the assessee had been prepared as a non going concern and the assets had been valued at their net realizable value as estimated by the management of the company. In the notes to account, it was mentioned that company ceased to be a going conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paid to Mitsubishi Corporation (MC) against the termination of agreement dated 25.10.1995 entered into by the assessee with the said party. The agreement had been terminated vide termination agreement dated 23.9.2002. The assessee pointed out that para 2 and 3 of the termination agreement clearly mentioned that certain disputes and differences had arisen between the parties and, therefore, the agreement had been terminated through compromise and settlement. AO however referred to para 9 of the agreement as per which MC and the assessee were entitled to terminate the agreement on happening of certain events, such as substantial breach of material term etc. AO observed that there was nothing to show that there was any breach of contract bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out by the assessee and the business had closed. Similarly the interest paid on delayed payment of Sales Tax was not allowable as deduction. As regards the technology transfer fees, the assessee submitted that in terms of the agreement, MC was required to advise the assessee in the purchase of capital equipment, training of personnel and for suggesting ways for improving the quality for reducing the cost of production. Thus the agreement for technical know how was to facilitate manufacturing of silk yarn for smooth conduct of business. There was no reference to setting up of new business. Moreover the ownership of technical know how had not been transferred to the assessee. It was, therefore, requested that the claim should be allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in connection with the business of the assessee and was allowable. Therefore, it was submitted that disallowance of entire expenses by the AO except the miscellaneous expenses of Rs.5,26/-, office expenses of Rs.66/-, and legal and professional expenses of Rs.1,17,000/- was not justified. It was accordingly urged that the order of CIT(A) should be set aside. The learned DR on the other hand supported the orders of authorities below and submitted that the claim had been rightly disallowed by the authorities below. He placed reliance on the findings given in the orders of authorities below. 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding the allowability of various expenses claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure as custom duty and therefore it could be allowed on payment basis, but the details filed on record show that the payment had not been made this year. The payment had been made in the immediate preceding year and in the subsequent year. Therefore, the interest of Rs.1,23,25,000/- is not allowable even otherwise. As regards the technology transfer fees, the assessee has entered into the technical collaboration agreement with MC for production of International grade bivoltine silk cocoons. The agreement dated 25.10.1995 shows that the technical collaboration agreement had been entered into for starting a nursery of 125 acres and going upto 1,000 acres for commercial production of bivoltine silk cocoons in India. The project ultimately beca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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