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2015 (11) TMI 932 - HC - Income TaxTDS under Section 194H - fee for services rendered - disallowance under Section 40(a)(ia) - Held that:- ITAT examined the nature of the MoU between Finian and VEEPL with particular reference to the clauses therein and concluded that Finian was transacting with VEEPL "on a principal to principal basis" and that it could not be said that the payment to VEEPL was for rendering services. Consequently, it was held that Section 194H of the Act was "not at all applicable". The ITAT noted that in terms of Clause 3.2 of the MoU no sum was due to be paid to VEEPL for the services rendered by it till it procured 27 acres of land. The amount paid to VEEPL was duly reflected by Finian in its purchases and the closing stock and no sales had been made during the year in question. The payment of 2% of the sale amount to VEEPL as consideration for transferring VEEPL's rights in the land was in terms of Clause 3.2 of the MoU and it had not been shown that such payment was not a fair compensation. Payment made to VEEPL which was corrected as ₹ 1,24,33,326. It was held that "this amount is related to payment of service charge for effecting consolidation of land and is a revenue expense to (be) separately debited to the Profit & Loss account." With the Revenue having accepted the decision of the ITAT in the case of Finian, and with the Revenue being unable to bring out any distinguishing feature as far as the case of PBDPL, the Court sees no reason why it should interfere with the impugned order of the ITAT.
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