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2018 (1) TMI 739 - DELHI HIGH COURTAddition u/s 40(a)(ia) - ITAT deleted the addition - Fee for Technical Services (FTS) - Held that:- Since the ITAT has rendered findings that the amounts paid were not Fee for Technical Services (FTS) under Explanation 7 to Section 9(2), similar treatment would arise. ITAT relied upon the interpretation given to similar provisions of various DTAAs in Cushman & Wakefield Pte. Ltd. in Re. [2008 (7) TMI 8 - AUTHORITY FOR ADVANCE RULINGS]; Dieter Eberhard Gustav v. CIT 1998 (11) TMI 663 - AUTHORITY FOR ADVANCE RULINGS etc.[1998 (11) TMI 663 - AUTHORITY FOR ADVANCE RULINGS] and held that since these were not in the nature of FTS, the deduction under Section 40(a)(ia) was not warranted. Reliance by the Revenue upon the retrospective amendment, in the opinion of this Court, is not justified, given the ruling in Director of Income Tax v. New Skies Satellite BV (2016 (2) TMI 415 - DELHI HIGH COURT). Disallowance under Section 36(1)(iii) - ITAT deleted the addition - Held that:- the addition was made purely on the basis that the funds were borrowed by a Director and that interest needed to be charged. This was wholly erroneous premise because the amounts were given to the Director for purely business purpose of the entity, i.e. to acquire guest house. The proposal did not materialize and eventually the money was returned. It is not Revenue’s case that the amounts were utilized by the Director for her own purpose. In these circumstances, the ITAT appropriately relied under CIT v. Bharti Televentures Ltd. (2011 (1) TMI 326 - DELHI HIGH COURT ). The finding with respect to commercial expediency, in the circumstances, does not call for interference. Revenue appeal dismissed.
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