2006 (5) TMI 58

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....ax Act. (ii) Whether the hon'ble Income-tax Appellate Tribunal was right in law in allowing deduction under section 35AB even after observing that the conditions for claim of the said deduction were not fulfilled." We have heard Shri Yogesh Putney, advocate for the Revenue, and Shri P. C. Jain, advocate for the respondent and with their consent, the appeals are disposed of finally. 3. The brief facts as stated in the memo of appeal are that the assessee filed a return of income on November 30, 1995, declaring its income at Rs. 30,43,17,955. At the time of filing the return, the assessee claimed deduction to the tune of Rs. 1,76,93,000 paid on account of royalty and cess of royalty to M/s. Hitachi Limited. Another deduction of Rs. 5....

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....ba Ltd. by the assessee under the agreement was not a lump sum consideration and, thus, the basic pre-requisite for application for section 35AB of the Act was not fulfilled. However, the Commissioner of Income-tax (Appeals) in appeal against that order accepted the claim of the assessee. In the appeal filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) before the Tribunal, the Tribunal came to a definite finding that the payments made by the assessee were not on acquiring any know-how as the same were paid towards services rendered by the personnel of M/s. Teba Ltd. for dismantling the plant at Finland and refurnishing of the same in India. After observing this, the Tribunal recorded the following findings in....

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....ection 35AB of the Act under some other provision so the deduction already permitted by the Commissioner of Income-tax (Appeals) should be allowed to remain as such. By filing the return the assessee had claimed such deduction under section 35AB of the Act which clearly has been found by the Tribunal to be not admissible under that provision. That being so, in our opinion, the findings of the Tribunal are not in conformity with the spirit of the law, hence, we set aside the same and hold that the assessee was not entitled to claim deduction under section 35AB of the Act on account of payments made to M/s. Teba Limited. So question No. 2 is answered in favour of the Revenue and against the assessee. 9. Faced with this situation, counsel f....