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2007 (5) TMI 204 - HC - Income TaxDisallowance royalty payment to non-resident company u/s 40(a)(ia) - On the ground that TDS was not paid by the assessee - HELD THAT:- On a plain reading of section 40(a)(i) of the Act, as long as the tax was deducted within the year, as was done in the present case, the provisions of the section come into play and the assessee must, therefore, be entitled to its benefit. There is no dispute about the fact that tax for the assessment year 1994-95 was deducted during the relevant previous year (but paid on September 6, 1994). For the assessment year 1995-96 the tax was deducted during the relevant previous year and while most of the amount (Rs. 1,97,23,418) was paid during the relevant previous year, a small amount of Rs. 11,011 was deposited on July 6, 1995. On a reading of section 40(a)(i) of the Act, we are of the view that the Assessing Officer erred while the appellate authorities rightly held in favour of the assessee. No substantial question of law arises for consideration. Deduction u/s 80-IA - whether the assessee manufactures any goods - HELD THAT:- It is true that the meaning of the word "manufacture" as used in the Central Excise Act, 1944 cannot be automatically applied to the provisions of the Income-tax Act, 1961, but in the absence of any definition of the word "manufacture" as used in section 80-IA of the Act, one has to appreciate its meaning as commonly understood by any reasonable person. Looked at from this point of view, the conversion of a blank disc, which has its own utility, to a software loaded disc clearly amounts to a manufacturing activity because a new commercial product enters the market which is a distinct and different product from the blank disc. On this issue, we see no reason to differ with the view taken by the Tribunal which merely follows the decision of the Supreme Court in Gramaphone Co. of India Ltd. v. Collector of Customs [1999 (11) TMI 62 - SUPREME COURT]. Thus, we are clearly of the view that the assessee would be entitled to the benefit of section 80-IA of the Act since it carries out a manufacturing activity. To substantial question of law arises for consideration. The appeals are dismissed.
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