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2019 (9) TMI 1662 - AT - Income TaxTDS u/s 195 - disallowing expenditure representing remittance to a foreign concern by invoking Sec. 40(a)(i) on the ground that the requisite tax has not been deducted at source - whether the payments made by the assessee to Tekla Finland would constitute 'Royalty' as per the provisions of Sec. 9(1)(vi) of the Act and/or under the provisions of India-Finland Double Taxation Avoidance Agreement which governs the recipient of income? - HELD THAT:- Additional evidence now sought to be produced by the assessee does not enable the assessee to make out a new case but only would enable the assessee to support its assertions made before the authorities in an appropriate manner. Not only that, the Additional evidence will also enable Income tax authorities to determine the correct nature of the payments in accordance with the extant position of law. The assessee has consistently been asserting that the Re-seller agreement is merely a back to back arrangement whereby assessee distributes the software products developed by its holding company. In fact the emphasis by the AO of the Re-seller agreement would be suspect to treat payments in the nature of royalty, if factually assessee is able to demonstrate that it has not undertaken any separate development in the software products on its own in the course of selling the product to the customer. Be that as it may, in our considered opinion, the aforesaid Additional evidence is germane and in the interest of justice it deserves to be considered while determining the tax liability of the assessee, qua the impugned payments. Of course, the said evidence was not before the lower authorities and, therefore, we deem it fit and proper to remit the matter back to the Assessing Officer, who shall revisit the controversy after considering the submissions put forth by the assessee and as per law. Thus, on this aspect assessee succeeds for statistical purposes. Disallowance towards foreign exchange loss on account of restatement of trade receivables/ payables on the end of the year - HELD THAT:- AO as well as the CIT(A) disallowed the claim on the ground that it was a contingent liability. In this context, the Ld.Representative for the assessee relied upon the judgment of the Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India Private Limited [2009 (4) TMI 4 - SUPREME COURT] to contend that loss was allowable as an expenditure in computing the total income. Our attention has also been drawn to the judgment of Vassantram Mehta & Co. [2015 (5) TMI 269 - BOMBAY HIGH COURT] wherein it has been held that the loss incurred on account of fluctuation in foreign exchange rate was allowable on the date of making of balance sheet and its allowability could not be postponed to a future date. In view of the aforesaid precedents, we find that the claim of the assessee is justified and it is ordered to be allowed. Thus, on this aspect assessee succeeds.
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