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2018 (5) TMI 253 - AT - Income TaxDisallowance of expenses pertained to a period prior to the relevant previous year - Held that:- Even on the first principles and under the mercantile method of accounting, the expenses are deductible in the year in which the liability to pay crystallizes particularly when expenses are of very small amounts having regard to the scale of operations and in view of the accounting concept of materiality. DR very fairly accepts that it is neither a case of double deduction of same expenses nor there is an issue about bonafides of these expenses which were admittedly not claimed in any of the earlier years as well. Hyper technical and pedantic view adopted by the AO has rightly been reversed by the CIT(A). The relief granted by the CIT(A) was, therefore, quite justified. We approve the same and decline to interfere in the matter. TDS on related payments to non-residents - Held that:- Unless there is a transfer of technology in the sense that recipient of service is enabled to provide the same service on his own, without recourse to the original service provider, the 'make available' clause is not satisfied and, accordingly, the consideration for such services cannot be taxed under Article 13 (4) of Indo UK DTAA. Whether rendition of consultancy services makes available any technical knowledge, skill, know how so as the recipient of services can render the same services without recourse to the service provider? - Held that:- Merely because consultancy services has technical inputs, these services donot become technical services and simply because the recipient of a technical consultancy services learns something with each consultancy, there is no transfer of technology in the sense that recipient of service is enabled to provide the same service without recourse to the service provider. Our careful perusal of the consultancy services agreement does not help us find any provision for transfer of technology either. Thus uphold the relief granted by the CIT(A) with respect to payments made to O&O, particularly as it is not even revenue’s case that O&O had any PE in India. On this point, the conclusions arrived at by the CIT(A) are confirmed. As for the payment made to Pharma Action, we find that the details placed on record are not really sufficient to form any opinion one way or the other. Prima facie these details show that the payment is made to a French resident for consultancy services but having regard to the fact that al that the assessee has furnished is a copy of invoice without any further details on facts, we deem it fit and proper to remit the matter to the file of the Assessing Officer for fresh adjudication on merits after giving yet another opportunity of hearing to the assessee Disallowance of interest - interest free advances granted by the assessee are less than interest free funds available to the assessee - Held that:- We remit the matter back to the file of the Assessing Officer for the limited verification to the effect that interest free loans granted by the assessee are less than interest free funds available to him or not. If the factual elements embedded in the plea of the assessee are indeed correct, entire disallowance will have to be deleted. Disallowance of depreciation - assets are not covered by the specific items set out under ‘plant and machinery’ and are in the nature of office equipment - Held that:- CIT(A) correctly said that functionality test needs to be applied in this context and when equipment is relatable to plant and machinery, depreciation at the rate admissible for plant and machinery needs to be applied as followed Hon’ble Bombay High Court’s judgment in the case of CIT vs Park Davis India Ltd (1994 (12) TMI 46 - BOMBAY High Court). Disallowance of additional depreciation even though the product has not undergone any transformation and no new distinctive article has come into existence - Held that:- conversion of acrylic sheets into intra ocular lens is clearly manufacture of new product and the grievance of the Assessing Officer does not merit acceptance. We reject the same. Disallowance u/s 40(a)(i) - commission paid to Kuntal Joshi, a US based individual - Held that:- As decided in Welspun’s case [2017 (1) TMI 1084 - ITAT AHMEDABAD] unless there is a specific and identifiable consideration for the rendition of technical services, taxability under section 9(1)(vii) does not get triggered. Therefore, irrespective of whether any technical services are rendered during the course of carrying on such agency commission business on behalf of Indian principal, the consideration for securing business cannot be taxed under section 9(1)(vii) at all. This profits of such a business can have taxability in India only to the extent such profits relate to the business operations in India, but then, as are the admitted facts of this case, no part of operations of business were carried out in India. The commission agents employed by the assessee, therefore, did not have any tax liability in India in respect of the commission agency business so carried out. Addition u/s 40(a)(ia) - assessee did not deduct tax at source from the related payment of conference charges - Held that:- In accordance with the law laid down by Hon’ble Delhi High Court in the case of CIT vs Ansal Landmark Township Pvt Ltd (2015 (9) TMI 79 - DELHI HIGH COURT) with the direction that in case the recipient has discharged his tax liability in respect of income embedded in these payments, the disallowance under section 40(a)(ia) will stand deleted.
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