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2015 (6) TMI 356 - AT - Income TaxReopening of assessment - disallowance u/s 40(a)(ia) - Held that:- Carefully examining the orders of the lower authorities and we find that the ld. CIT(A) has examined this issue in the light of assessee’s contentions and was of the view that the royalty was not examined by the Assessing Officer during the course of original assessment proceedings. Therefore, the re-assessment proceedings were rightly initiated and the assumption of jurisdiction by the Assessing Officer is proper and is in order. Since no argument was raised to challenge the findings of the ld. CIT(A), we are of the view that the reopening is valid and accordingly we reject this ground of appeal. - Decided against assesse. Non deduction of TDS on payment of royalty - Held that:- On reading of clauses of the agreement, it is clear that the assessee was allowed to enjoy certain benefits in running the medical shop and for those benefits assessee was required to make payment of royalty per month to SRMS. It is also an undisputed fact that the assessee is well connected with SRMS, a Trust to whom payments are made. We have also carefully examined the definition of royalty given in Explanation 2 to clause (vi) of sub-section (1) of section 9 of the Act and we are of the view that these payments were made on account of facilities given to the assessee. Therefore, it is a royalty payment and the assessee is required to deduct TDS under section 194J of the Act. Decided against assesse. Applicability of provisions of section 40(a)(ia) - Held that:- During the course of hearing, though the assessee has contended that SRMS has taken into account the royalty receipts and has filed return of income under section 139(1) of the Act, but no evidence is placed on record in this regard. But, we are of the view that once these facts are established, disallowance under section 40(a)(ia) of the Act cannot be made. We accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer for necessary verification. If it is established that SRMS has credited the aforesaid receipts of royalty to its income & expenditure account and filed return of income under section 139(1) of the Act, no disallowance under section 40(a)(ia) of the Act can be made in the hands of the assessee. Decided in favour of assesse.
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