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2015 (11) TMI 862 - AT - Income TaxDisallowance of overseas taxes paid - AO disallowed deduction holding that such taxes are covered by the provisions of section 40(a)(ii) - Held that:- Tribunal has decided this issue against the assessee in the case of “Tata Sons Ltd.” (2010 (11) TMI 709 - ITAT, MUMBAI ), and the said decision has not been stated to have been stayed on appeal, respectfully following the same, this issue is decided against the assessee Software expenses under section 40(a)(i) on account of non-deduction of TDS u/s 195 - Held that:- Withholding tax obligation on the payer applies on payments to nonresidents onlys if there is income chargeable to tax in India. It was held that accordingly, there was no obligation of the assessee to deduct tax at source u/s 195 of the Act, from making remittances to non-residents. The ld. CIT(A) correctly held that he agreed with the assessee’s contention that no tax was deductible on the same and accordingly, no disallowance could be made u/s 40(a)(i) of the Act. The locally acquired software expenses have been treated as capital expenditure, placing reliance on various judicial decisions, which hold that the expenses on software are in the nature of capital expenditure and depreciation is to be allowed on the same. As such, expenses on imported software are also in the nature of capital expenditure and deprecation needs to be allowed thereon. The AO, therefore, is directed to allow depreciation on the imported software purchased by the assessee. This alternative plea raised by the assessee is, hence, accepted. Claim u/s 10A of the Act on units on which deduction u/s 80HHE was allowed in the past - Held that:- Since both the sections, i.e., section 80HHE and section 10A entitle the benefit, the assessee would legitimately be entitled to the benefit of that provision of law, which enables a larger benefit being earned by him. This finds support from the decision of the Hon’ble Supreme Court in “Collector Central Excise vs. Indian Petro Chemicals”, (1996 (12) TMI 66 - SUPREME COURT OF INDIA). We, therefore, do not find any justification in the action of the ld. CIT(A) to hold that the assessee being an old unit and having once claimed deduction u/s 80HHE, was not entitled to claim deduction u/s 10A from the profits of its units. The expenditures which are required to be reduced from the export turnover as per the provisions of section 10A of the Act should also be reduced from the total turnover. Addition on account of TP adjustments in relation to transaction with AE, M/s. Tata America International Corporation Inc. ( TAIC) - CIT(A) deleted the addition - Held that:- The AO erred in not himself examining the issue of TP and with the approval of the ld. CIT, made a reference to the TPO u/s 92CA(1) of the Act; that the AO as well as the ld. CIT(A) failed to apply their mind to the TP Report filed by the assessee, or to any other material or information or document furnished. The TPO made an adjustment which was incorporated by the AO in the assessment order. Thereby, the AO as well as the ld. CIT(A) did not discharge necessary respective judicial functions conferred on them under sections 92C and 92CA of the Act. Further, the assessee is also correct in contending that no TP adjustment can be made in a case like the present one, where the assessee enjoys u/s 10A or 80HHE of the Act, or where the tax rate in the country of the Associated Enterprises is higher than the rate of tax in India and where the establishment of tax avoidance or manipulation of prices or establishment of shifting of profits is not possible. - Decided in favour of assessee.
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