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2021 (7) TMI 1286 - AT - Income TaxTP Adjustment of royalty - HELD THAT:- As these services are ultimately benefitting the assessee in terms of increasing its turnover, sales of the assessee is taken as the basis for allocation. This method is consistently followed by the assessee over the years and by the group companies world over. The royalty payment is based on the agreement between the assessee and its parent company. The agreement is dated 15.12.2001. This issue of payment of royalty was subject matter the appeal be fore the Tribunal for the assessment year 2005-06 [2020 (12) TMI 723 - ITAT DELHI] Thus AO is directed to delete the addition made on account adjustment of royalty. Tax withholding u/s 192 on Global Accounting Manager (GAM) expenses - AO considered these expenses as payment of salary to non-resident and accordingly held that the same is liable to withholding tax under section 192 of the Act. In the absence of tax withholding, AO disallowed the expense under section 40(a) - HELD THAT:- We find that this issue stands adjudicated by the Coordinate Bench of the Tribunal in taxpayer’s own case for AY 2005-06 [2020 (12) TMI 723 - ITAT DELHI] upheld the order passed by the ld. CIT (A) while deciding the issue in assessee’s favour has given a finding that the payments made by the assessee as GAM charges cannot be treated as payment of salary to non-resident but were in the nature of reimbursement of expenses and there fore assessee was not required to deduct TDS on such payments. - Decided in favour of assessee. TDS on payment of lease rent charges do not fall in the category of FTS - HELD THAT:- payment of lease rent charges do not fall in the category of FTS. In the absence of any material change in the factual as for A.Y. 2005-06 [2020 (12) TMI 723 - ITAT DELHI] as well as the legal aspect of the assessee, we hereby hold that the disallowance made by the AO is directed to be deleted. Capital Advance - Assessee purchased software for the purpose managing fixed assets database, cheque preparation software, MIS etc. which was returned due to operational deficiencies - HELD THAT:- The software was at first instance capitalized by the assessee in. its books of accounts and after returning the software, the Assessee had written off the advances paid to Softline considering the same to be irrecoverable.Subsequent to this, during the AY 2011-12, the Assessee received half of the advance written off from Softline which was duly offered to tax by the Assessee under the head ‘other income' in the profit and loss account as evident from schedule 11 of the signed financial statements for the AY 2011-12. From the facts, it can be concluded that the expense went into drain by de fault and the assessee could recover 50% of the expenses paid. Since, the expenses involved pertain to the purpose of the business and not in the nature of any capital expenditure in real sense, the same can be treated as allowable revenue expenditure. The ground of the assessee is treated as allowed. TDS u/s 194H - Disallowance u/s 40(a)(ia) - disallowing bank guarantee commission charges and cash management charges under section 40(a)(ia) of the act on basis of Notification No. 56 - 2012 dated 31.03.2012 and holding that TDS was deductible on such payments - HELD THAT:- The Co-ordinate Bench of ITAT Mumbai Benches, Mumbai in the case of Kotak Securities Ltd. [2012 (2) TMI 77 - ITAT MUMBAI] had held that there was no principal agent relationship between a bank issuing bank guarantee and the taxpayer and hence the payment though termed as commission was not covered under section 194H - Thus the ground of appeal is decided in favour of the assessee by the ld. CIT (A). The addition made by the AO is dismissed. Education cess paid on the income tax - Whether an allowable deduction for computing total income given the fact that the same was not hit by the provisions of Section 40(a)(ii)? - HELD THAT:- Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income ‘Tax’ is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction. Keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66- ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements of the Hon’ble High Court of Bombay and Hon’ble High Court of Rajasthan, we hereby hold that the assessee is eligible to claim the deduction of the ‘Education Cess’ as per the provisions of Section 37 of the Income Tax Act.
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