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2017 (4) TMI 1006 - AT - Income TaxTPA - rejecting the foreign AE as the tested party is that no reliable data in respect of foreign comparables is available - Held that:- For determining the ALP of the international transactions relating to marketing services provided by IDS-A and IDS-UK also, we find, that the assessee had taken the foreign entities as the tested party. These were not rejected by the TPO. Clearly, therefore, there is inconsistency in the stand of the TPO rejecting the selection of foreign entity as a tested party for the purpose of IT enabled services while accepting the same for marketing support services. For this reason also, the rejection of the foreign entities as a tested party needs to be set aside. Also the assessee had taken IDS-A as its tested party, which was duly examined by the TPO. Submissions in this regard were also placed before the TPO, placed before us at Paper Book page Nos. 455-483. The TPO in the preceding year had accepted the same and made no adjustment in this regard. Thus, having accepted foreign entity as a tested party in the preceding year ,the Revenue cannot now take a different stand without pointing out any change in facts vis a vis the preceding year. Thus we hold that the action of the TPO, accepted by the Assessing Officer and Ld. CIT (Appeals), in rejecting the foreign entity in the controlled transaction i.e. IDS-A, as a tested party is wrong and is, therefore, set aside. We may add that with regard to the rejection of the foreign entity as the tested party, we have considered all the arguments raised before us and no other arguments were raised before us. The decision rendered by us is on the context of solely the arguments which were raised before us.- Decided in favour of assessee TDS u/s 195 - Disallowance made u/s. 40(a)(ia) - non deduction of TDS on commission, legal and professional charges, marketing and selling expenses and outsourcing and business development expenses - Held that:- In the present case are identical to that in the case of assessee for assessment year 2009-10, with the impugned disallowance of expenses having been made for the reason that the same were taxable in India since they were sourced from India on account of the agreement entered into with the assessee an Indian Company and also on account of the utilization of the services for the benefit of the assessee Indian Company. In the present case also we find that there is no finding of the lower authorities with regard to the fact that the income to the payees of the said expenses arose or was deemed to arise in India as per the provisions of section 9 of the Act. There is no finding regarding the existence of any business connection, as defined, under section 9(1) of the Act nor of any permanent establishment of the payees in India. Moreover in the present case also there is no finding that the payments in question were "fees for technical services". Therefore the decision laid down in the preceding year will squarely apply to the present case also, following which we delete the disallowance made u/s. 40(a)(ia) - Decided in favour of assessee Non deduction of tax u/s. 194-I applying the provisions of Section 40a(ia) - Held that:- It is evident from the said lease deeds, which was there even before the Assessing Officer, that there are several co-owners of the properties which have been taken on lease by the assessee and rent paid thereon. The income in such circumstances cannot, therefore, be said to be the income of the recipient of the rent only. When they have received the same only on behalf of other co-owners the rent paid constitutes the income of all the co-owners and the same is to be apportioned among them as per the method prescribed, if any, in the lease agreement or in proportion of their co-ownership and thereafter only if the rental income in the case of any co-owners exceeds the prescribed limit for the purpose of deduction of tax u/s. 194-I the tax is to be deducted at source. In the light of the above, we, therefore, restore the matter back to the Assessing Officer to apportion the rental income in the hands of the co-owners as per legally permissible, determine the rental income attributable to each co-owner and thereafter apply the provisions of section 194(I) of the Act to the same as also the provisions of section 40(a)(ia) of the Act for non deduction of tax, if found in any case. This ground of appeal of the assessee is, therefore, allowed for statistical purposes. Non deduction of tax on salaries paid outside India applying the provisions of Section 40a(iii) - Held that:- Going by the provisions of section 9(1)(ii), clearly and undisputedly the salary has not been earned in India. Having said so, the income of the non-residents on account of this salary is not deemed to have accrued or arisen in India and, therefore, was not chargeable to tax in India as salary. Thus, in such circumstances, section 192 was not applicable requiring the assessee to deduct tax at source on the said payment of salary and consequently, provisions of section 40(a)(iii) could also not be invoked to disallow the same. The contention of the Revenue all along we find, has been that section 40(a)(iii) is attracted because the payments have been made outside India to non-residents. The Revenue, we find, has picked up only one of the conditions enumerated u/s. 40(a)(iii) for making disallowance, choosing to completely ignore the basic condition required to be fulfilled, which is taxability of the said salary in India. Therefore, the disallowance, we hold, has been made on an incorrect interpretation of law. In view of the above, we hold that no disallowance u/s. 40(a)(iii) on account of non deduction of tax on salary paid outside India is warranted and the disallowance made is directed to be deleted - Decided in favour of assessee Disallowance of interest paid up by applying the provisions of section 36(1)(iii) - Held that:- The facts in the present case, we find are identical to that in assessment year 2009-10, wherein, disallowance has been made on account of investment made by the assessee company in wholly owned subsidiary. Since the ITAT in the preceding year has held the said investment to be for business purposes, being commercially expedient, following the same, we hold the identical investment in the impugned year also to be commercial expedient for the assessee company and having held so, there can be no case for making any disallowance u/s. 36(1)(iii) on account of making the aforesaid investment. In view of the same, the disallowance made u/s. 36(1)(iii) is therefore, deleted and the order of the CIT (A) on this ground is therefore, set aside. - Decided in favour of assessee Non declaration of receipts on sale of assets - Held that:- We find merit in the contention the Ld. counsel for the assessee. On perusal of the above documents produced before us, we find that the sale of Catia V5 licence of M/s. Aeromatrix Info Solutions Pvt. has been duly reflected in the ledger account of M/s. Aeromatrix Info Solutions Pvt., the software account, in the fixed asset chart shown by the assessee and depreciation on account of sale of the said asset has been also duly reversed in the ledger of depreciation. All books of account were produced before the lower authorities and it can, therefore, be safely concluded that all material was placed before the lower authorities to substantiate its claim. The disallowance having been made on account of the fact that the assessee had not reflected the said amount in its books, the same is directed to be deleted in view of our above observations in this regard.- Decided in favour of assessee
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