TaxTMI 
TaxTMI 
2012 (12) TMI 90
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....axing of Right to receive Royalty/fees Rs.4,75,000/- (3) Taxing of expenditure on scientific research u/s 41(1) Rs.25,00,000/- (4) Increase in value of closing stock of finished goods Rs.18,20,000/- (5) Taxing of Profit u/s 41(3) being Capital Expenditure on Scientific Research Rs. 1,50,000/- (6) Legality of Order However, issue no.(6) regarding legality of order was not pressed at the time of hearing and, therefore, it does not require any adjudication. 3. For the sake of convenience, we will deal with Issue nos.(1), (3), (4) and (5) together. Brief facts of the case are that the return of income was filed by the assessee-company on 31- 03-1979 showing total income of Rs.27,40,806/-. The original as....
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....ding company Ofisade Pvt. Ltd., w.e.f. 1-3-77 as under:- (a) Profit u/s 41(2) being depreciation on plant & machinery Rs.87,26,224/- (b) Profit u/s 41(3) being capital expenditure On Scientific Research Rs. 1,50,000/- (c) Profit u/s 41(1) being revenue expenditure on Scientific Research Rs.25,00,000/- (d) Difference in value of finished products Rs.18,20,000/- Rs.131,96,224 The holding company agreed to purchase the transfer and assignment and goodwill of these business and activities as well as other intangible benefits thereof accruing or appurtenant thereto under all licence and quotas etc. As per agreement all stocks of finished goods, raw materials etc. were transferred to the purchasing compan....
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....tailed guidelines given in the said decision. The ld. counsel pointed out that this decision has been followed in other group cases by the Hon'ble Gujarat High Court and therefore similar guidelines may be laid down for fresh determination of the issues by the AO. The ld. counsel invited our attention to para 20 of the decision of High Court which reads as under: "Before concluding, we must note that even while not accepting the major arguments urged on behalf of the assessee, there is some substance in the contention of Mr. R K Patel for the assessee that the provisions of sec. 41(2) govern only building, machinery, plant or furniture and that, therefore, other assets cannot be included within the scope of sec. 41(2) for taxing the diff....
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.... given by the assessee. Assessee has simply given the details of depreciation on know how, vehicles, lift, laboratory equipments, however, assessee has not substantiated their claims and has also not given any details as regards sale consideration of individual items of assets. In the absence of these details and since assessee has not substantiated the claims, the profits u/s 41(2) as taxed originally Rs.87,26,224/- are not deleted." (b) Profit u/s 41(3) being capital expenditure On Scientific Research Rs. 1,50,000/- (c) Profit u/s 41(1) being revenue expenditure on Scientific Research Rs.25,00,000/- (d) Difference in value of finished products Rs.18,20,000/- As regards item (b), (c) & (d), assessee has not produced any a....
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.... therefore, we are not inclined to interfere with the orders passed by the lower authorities, and the same are hereby upheld. The grounds in respect of issue nos. 1, 3, 4 & 5 are dismissed. 9. As regards the addition of Rs.4,75,000/-, the Tribunal vide its order dated 25-10-1991 has dealt with the issue as under:- "5. Ground No.5 is against sustaining the addition of Rs.4,75,000/- on account of right to receive royalty fees. The AO has dealt with the matter vide para 16 of the assessment order as under: "The asseasee company entered into agreement with Dr. Syed Mohd. won Syed Hussein and Dr. Lourdenedin of Kaulalumpur on 28.8.7S. The company agreed to provide technical knowhow. The company had already rendered serv....