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2023 (10) TMI 1062 - AT - Income TaxDisallowance u/s 14A - absence of any exempt income during the year - DR before us vehemently relied on the amendment brought in Section 14A of the Act by the Finance Act 2022 and argued that the same need to be construed as retrospective in operation as according to him, it was merely clarificatory in nature - HELD THAT:- This argument of the ld. DR had been specifically addressed in the case of PCIT vs Era Infrastructure (India) [2022 (7) TMI 1093 - DELHI HIGH COURT] wherein it was held that the amendment made by Finance Act, 2022 to section 14A of the Act by inserting a non-obstante clause and Explanation will take effect from 1-4-2022 and cannot be presumed to have retrospective effect. It further held that no disallowance could be made under section 14A of the Act if no exempt income was earned by assessee during the year under consideration. Respectfully following the aforesaid judicial precedents, the Ground No. 1 raised by the revenue is dismissed. Deferred revenue expenditure - case of the assessee is that as per the Accounting Practice, the assessee was to recognize expenditure on deferred basis but for the purpose of income tax, the entire expenditure was allowable - AO did not agree to this contention of the assessee and proceeded to disallow the sum being the upfront fee attributable to the next year - HELD THAT:- The assessee had only sought to defer the said payment over the period of the loan of two years on a proportionate basis. In our considered opinion, this treatment in the books has got nothing to do with the claim of deduction under the provisions of the Act. For the purpose of income tax, the entire payment of Rs 8 crores, being incurred and paid during the year would become allowable, as long as the loan borrowed is utilized for the purpose of the business. In the instant case, there is no dispute that the term loan availed from Yes Bank is utilized for the purpose of business of the assessee. Hence the upfront fee / facilitation charges paid for the said loan would become squarely allowable as deduction in the year of incurrence itself. No infirmity in the order of the ld. CIT(A) granting relief to the assessee in this regard. Accordingly, the Ground No. 2 raised by the revenue is dismissed. TDS u/s 195 - disallowance u/s 40(a)(i) - non deduction of TDS on brokerage and commission paid at China to foreign agent - HELD THAT:- Once it is accepted that the services are rendered outside India by the commission agent, there is no chargeability to tax for them in India in terms of section 5(2) or section 9(1) of the Act as the commission does not accrue or arise in India. This issue is no longer res integra in view of the decision of Delhi Tribunal in the case of Welspring Universal [2015 (1) TMI 736 - ITAT DELHI] We hold that the payment of import commission by the assessee to Shye International Ltd is not eligible for withholding tax and hence the disallowance made u/s 40(a)(i) of the Act is liable to be deleted. Accordingly, the Grounds 1 to 4 raised by the assessee are allowed.
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