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2015 (4) TMI 794 - AT - Income TaxDis-allowance u/s section 40(a)(i) of Income Tax Act, 1961 - Non deduction of TDS on Internet charges paid to non-resident - DTAA between USA and India - Deduction under section 10B available to 100% EOU - Held that:- As per order of CIT(A),the amount paid to the non-resident is towards hiring of storage space. The payment has been made to a person whose business is to make available storage space to various parties. Therefore.the payments made to the non-resident only constitutes its business income. The business income earned by a non resident who does not have a Permanent Establishment (PE) in India cannot be taxed in India as per DTAA between USA and India. On going through the CIT(A) order, we do not find any good reason to interfere with the findings of the Commissioner of Income Tax (Appeals) in deleting the disallowance made under section 40(a)(i) of the Act. The findings of the Commissioner of Income Tax (Appeals) have not been rebutted with any evidence by the Revenue. We have also gone through the assessment order and find that the Assessing Officer has not given any finding as to how data storage charges paid by the assessee are falling either under royalty or fees for technical services so as to deduct TDS on such payments made to non-resident outside India. In the circumstances, we uphold the order of the Commissioner of Income Tax (Appeals) in deleting the disallowance and reject the grounds raised in all the appeals of the Revenue on this issue. Deduction u/s 10B of Income Tax Act, 1961 - As could be seen from the definition of 100% EOU, in order to be 100% export-oriented undertaking and claim exemption under section 10B, an undertaking must have been approved by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and the rules made under that Act. In this case, the assessee is a unit recognized by the STPI. Nothing is placed on record to suggest that this is a hundred percent export oriented undertaking approved by the Board appointed by the Central Government under section 14 of the Industries (Development and Regulation) Act, 1951. An identical situation arose in the case of CIT Vs. Regency Creations Ltd. [2012 (9) TMI 627 - DELHI HIGH COURT] that units set up under STP scheme are different from those that govern units set up as hundred percent export oriented undertaking and so approved by the Board. The Hon’ble High Court held that a unit which is not approved by the Board appointed by the Central Govt. in exercise of powers conferred under section 14 of the Industries (Development and Regulation) Act, 1951 is not entitled for exemption under section 10B of the Act. The Hon’ble High Court held that assessee holding approval under Software Technology Park Scheme is not entitled to exemption under section 10B of the Act. This decision squarely applies to the assessee in the absence of any approval placed on record by the assessee from the Board appointed by the Central Govt. Neither the Assessing Officer nor the Commissioner of Income Tax (Appeals) considered whether the assessee is entitled for deduction under section 10A of the Act in the proceedings before them. In view of our above findings, we set aside the order of the Commissioner of Income Tax (Appeals) and remit the matter back to the file of the Assessing Officer to examine the claim of the assessee under section 10B of the Act in the light of the decision of the Hon’ble Delhi High Court in the case of Regency Creations Ltd. (supra) after providing adequate opportunity to the assessee. The alternative plea made by the assessee may also be examined by the Assessing Officer in case the assessee is not entitled for exemption under section 10B of the Act. - Decided partly in favour of revenue.
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