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2014 (3) TMI 1138 - AT - Income TaxDisallowance u/s 14A r.w. rule 8D - whether rule 8D has been rightly invoked in the impugned assessment year 2008-09 or not? - Held that:- Hon'ble Delhi high court in Maxopp Investment Ltd vs CIT [2011 (11) TMI 267 - DELHI HIGH COURT] has held in clear terms that rule 8D cannot be invoked for the accounting period preceding 24.3.2008 i.e date of its notification and any such disallowance pertaining to exempt income can be made only by following ‘reasonable’ computation method. Drawing support therefrom, we hold that instead of computing disallowance by following rule 8D, ‘reasonable’ method has to be adopted. In our considered opinion, computation of ‘reasonable’ expenditure @ 50% of the disallowance of ₹ 74,41,489/- already made would serve the ends of justice. Eligibility of deduction u/s 10A in respect of income derived from on-site and off-shore software application maintenance - Held that:- Section 10A is a deduction provision which has to be liberally construed. In course of arguments, the assessee has highlighted the fact that in preceding assessment years, it has been getting benefit of deduction qua the same on-site application maintenance operations. Apart from this, the Revenue’s argument only turns out to be a hyper technical approach since in the circular dated 17.1.2013 whose contents have already been reproduced hereinabove, it is nowhere necessary that the software in question has to be mandatorily deployed at the holding company or the agreement should be between the ultimate client and assessee. The latter argument of the Revenue that there was no subsisting contract already stand repelled in our findings hereinabove that indeed there existed agreements between the assessee and its clients/associated entities. No merit in the ground raised by the Revenue that assessee’s income of ₹ 20.43 crores is not eligible for deduction u/s 10A of the Act since it had arisen from on-site and offshore software application maintenance activity. Not to exclude the foreign currency expenditure from the export turnover - Held that:- As decided in M/S. PENTASOFT TECHNOLOGIES LTD. [2010 (7) TMI 75 - MADRAS HIGH COURT] holding therein that such gains have to be treated as part of income ‘derived’ from export for the purpose of deduction u/s 10A of the Act. On being granted opportunity to rebut, the Revenue only reiterates the pleadings in the grounds. In our view, once the hon'ble jurisdictional high court has decided the very question of law which has also been echoed in the assessee’s own case, there is hardly any reason to adopt a different approach in the impugned assessment year. Consequently, this ground is rejected. Disallowance of expenditure incurred by the SEZ units which had not commenced operation - Held that:- DRP had given a clear finding that losses of 10AA unit which had not commenced commercial operations were in the nature of pre-operative expenses not to be set off against taxable profits of other units and the 'tribunal' had overlooked the said aspect. In our view, once on merits the issue has been decided in assessee’s favour, the order in question does not lose its significance on a mere technical ground. Moreover, on a query being put up to the bench to point out any distinction on facts, the Revenue has failed to draw any. We follow the order of the 'tribunal' and affirm the findings of the CIT(A). TDS u/s 195 - Disallowance u/s 40(a)(ia) qua annual maintenance contract paid by the assessee to overseas entities - Held that:- The annual maintenance charges amount to ‘technical services’ within the meaning of section 9(1)(vii), go against the case law of GE India Technology Centre Pvt. Ltd vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] holding that section 195 applies only when the payment is taxable in India in the hands of non-resident payee which is not the case in hand as the concerned payees have carried out maintenance contracts outside India without ‘making available’ any technology. There is also no element of any technology changing hands as stipulated in the DTAA (supra). Thus, we agree with the findings of the CIT(A) that the assessee was not under any obligation to deduct TDS in question and section 9 r.w.s 195 is not applicable. In these circumstances, we reject the relevant grounds raised in the appeal
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