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TMI Blog2019 (3) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year being the 6th assessment year and assessee is not eligible for deduction of the other income @ 100% but only 30% and, therefore, following his own decision for assessment year 2004-05 he has restricted the total deduction being 30%. In view of this, the ground No. 2 of the Revenue does not survive, hence dismissed. Regarding 30% disallowance in the appeal of assessee - following earlier years order - set aside the whole issue back to the file of the Assessing Officer to test each of the income whether they are derived from the industrial undertaking or not by considering the decision of the Hon’ble Supreme Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] and then decide whether deduction under section 80IC of the Act is eligible or not on such income. Disallowance under section 14A - As the dividend income, if any, receivable from US company is not an exempt income thus CIT-A held that only half per cent of an average value of exempt income to the extent of investment in an Indian company could be disallowed under section 14A - HELD THAT:- No infirmity in the order of the CIT (Appeals) to this extent with respect to expenditure. Further with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant inter alia because. 2.1 That the addition of ₹ 2.53.03,398/- made by denying the deduction under Section 80IC of the Act on export incentives, interest incomes which were directly derived from the manufacturing activity of Unit II. 3. That on the facts and circumstances of the case and in law. the Hon'ble CIT (Appeals) has also erred in disallowing the product development expenses amounting to ₹ 18.86.648/- inter alia because. 3.1 The said expenditure was of the nature of revenue expenditure and not capital expenses as wrongly held by the Hon'ble CIT (Appeals), 3.2 The Hon'ble CIT (Appeals) has erred in holding that the said expenditure ought to be amortized in live equal installments without mentioning under which provision of the Act the amortization of expenses is permissible. 3.3 Without prejudice, the Hon ble CIT (Appeals) ought to have allowed depreciation under Section 32 at the prescribed rates on product development expenses. 3. The Revenue has preferred the following grounds of appeal :- 1. The Ld. CIT (Appeals) has erred in law and on facts in respect of profits / gains of the assessee in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance was that assessee could not justify the substantial expansion. He disallowed the deduction of ₹ 6,52,83,501/-. 7. He further disallowed a sum of ₹ 2,53,03,898/- for deduction under section 80IC in respect of unit No. II where export incentive of ₹ 2,52,75,146/- and interest on others amounting to ₹ 28,752/- was credited by the assessee and also claimed deduction under section 80IC thereon. According to the learned Assessing Officer such income is not derived from the industrial undertaking. 8. Further the software development expenses of ₹ 18,86,648/- was also disallowed holding it to be capital expenditure. Consequently the assessment order under section 143(3) of the Act was passed on 28.03.2013 at a total income of ₹ 29,69,07,632/- against the returned income of the assessee at ₹ 17,79,10,920/-. 9. The assessee aggrieved, preferred an appeal before the learned CIT (Appeals). He allowed the deduction to the assessee under section 80IC of the Act holding that unit I is not eligible on substantial expansion for such deduction. He further held that a sum of ₹ 1,06,34,057/- credited to the other income as unit I is also e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is eligible for deduction under section 80IC of the Act. In fact the ground is misconstrued by the Revenue. In fact the impugned assessment year being the 6th assessment year and assessee is not eligible for deduction of the other income @ 100% but only 30% and, therefore, following his own decision for assessment year 2004-05 he has restricted the total deduction at ₹ 31,90,217/- being 30% of ₹ 1,06,34,057/-. In view of this, the ground No. 2 of the Revenue does not survive, hence dismissed. 14. Now we come to ground No. 1 of the appeal of the assessee wherein the assessee contests the disallowance of ₹ 31,90,217/- being 30% of 1,06,34,057/-. It was contended before us that identical issue arose in case of the assessee for assessment years 2004-05 to 2006-07 wherein the Co-ordinate Bench vide order dated 18.01.2016 has set aside the whole issue back to the file of the learned Assessing Officer for proper adjudication with respect to each of the income. Similarly for assessment years 2007-08 and 2008-09, the Co-ordinate Bench set aside this issue back to the file of the Assessing Officer following the earlier decision of the Co-ordinate Bench. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the same is dismissed. 19. Now we come to ground No. 3 of the appeal where the assessee has incurred expenditure of ₹ 18,86,648/- on account of software development expenditure which was held to be capital expenditure by the Assessing Officer holding that it has given a benefit of enduring nature to the assessee. The claim of the assessee is that same is a license fee and, therefore, it cannot be giving any benefit of enduring nature. The learned CIT (Appeals) held that it was for the development of new products and, therefore, same is a capital expenditure. 20. We have heard the rival contentions. The above expenditure is product development expenditure and not software development expenditure. The above expenditure has been paid as a professional fees to M/s. Express Marketing, Dehradun, towards development of new product in unit I related to equipment required by rigs in oil industry. It was not a new line of business, but was merely expenditure in development of the existing line of the business. The assessee is engaged in the business of manufacturing of machineries and equipments and development is for the same product. In view of this such expenditure canno ..... X X X X Extracts X X X X X X X X Extracts X X X X
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