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2016 (4) TMI 1358 - AT - Income TaxDisallowance u/s 14A r.w. Rule 8D - AO made disallowance of managerial expenses being 0.5% of average value of average value of investments - HELD THAT:- The facts brought before us were that no dividend income or any other exempt income has been received by the assessee during the year under concern. This factual position has not been disputed by the Ld. DR. Under these circumstances, position of law is now very clear that no disallowance u/s 14A can be made in absence of actual receipt of any exempt income. We derive support for our view from the judgment in the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] it is further noted by us that in any case Ld. CIT(A) had sustained disallowance of ₹ 5,00,000/- against which the assessee has not filed any appeal. Thus, the order of Ld. CIT(A) is in accordance with law and facts, and no interference is called for therein and therefore, same is upheld. - Decided against revenue Addition u/s 40a(ia) - failure of the assessee in deduction of tax at source on the amount debited in the P & L account under the head software and project development expenses - payments are made by the assessee to the foreign parties - HELD THAT:- The liability of the assessee in deduction of tax at source cannot arises unless the AO holds that income in the hands of the payee is chargeable to tax in India, especially in view of judgment of GE India Technology Centre P. Ltd V/s. CIT and Another [2010 (9) TMI 7 - SUPREME COURT] Further, even if the liability of the payee is determined on the basis of retrospective amendments made by Finance Act, 2010 or Finance Act, 2012, even then, the obligation to deduct TDS cannot be created through retrospective legislation in view of detailed judgment of Hon’ble Delhi High Court in the case of New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] and CIT vs. Siemens Aktiongesellschaft [2008 (11) TMI 74 - BOMBAY HIGH COURT] and various other judgments directly on this issue. In those cases where the expenditure has been capitalized, the claim of depreciation if otherwise allowable under the law cannot be disallowed merely on the basis of application of section 40(a)(i) for failure to deduct tax at source. In support of his proposition, Ld. Counsel has relied upon the decision of Mumbai Bench of the Tribunal in the case of SKOL Breweries Ltd. [2013 (1) TMI 623 - ITAT MUMBAI] . The Ld. Counsel has also argued that there have been duplicate disallowances/additions by the officers. One item has been disallowed at more than one place. It is directed that the AO shall take into considerations these submissions and shall not make duplicate double disallowance/ additions of one item - assessee is free to take all the factual and legal issues before the AO as may be considered appropriate as per law, and AO is also free to ask for further details and evidences from the assessee as may be considered appropriate - Ground partly allowed for statistical purposes. Disallowance in respect of provisions of expenses u/s 40(a)(ia) - CIT-A deleted the addition - HELD THAT:- When payments were made TDS was deducted, has not been disputed by the Revenue. It is nobody’s case that any payment has been made subsequently without deduction of tax at source. Thus, admitted facts on record or that in the subsequent years, either the TDS has been deducted while making the payment or crediting the amount in the account of payee or the excess amount of provisions has been written back. Thus, factually, there is no loss to revenue. Under these circumstances we find that no interference is called for in the order of Ld. CIT(A), and therefore, same is upheld. Disallowance of capital work-in-progress written off by the assessee during the year as business loss - as per revenue these expenses are allegedly capital in nature - HELD THAT:- We differ with the views of the lower authorities. It is noted that expenses were incurred in connection with the existing business. Admittedly, the expenses incurred were of routine nature i.e. salary, professional fee etc. These expenditure are, otherwise clearly of the revenue in nature. It is further noted that the Ld. CIT(A) appears to have misread the judgment in the case of CIT vs. Tata Robins Fraser Ltd [2012 (10) TMI 59 - JHARKHAND HIGH COURT] as held that such expenses were allowable as revenue expenses. Also relying on M/S. MANGANESE ORE INDIA LIMITED [2016 (2) TMI 711 - BOMBAY HIGH COURT] we find the actions of lower authorities as contrary to law and facts and therefore we direct the AO to delete the disallowance and treat these expenses as revenue in nature. Thus, this ground is allowed.
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