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2019 (9) TMI 1683 - AT - Income TaxDisallowance u/s 40(a)(i) - re-characterizing the reimbursement of expenses paid by assessee to its associated enterprise as royalty - disallowing the said claim u/s 40(a)(i) of the Act for non deduction of tax at source - HELD THAT:- First of all, the said payment has been made by assessee to the entities in earlier years also and no disallowance whatsoever has been made either by AO or TPO in this regard. Assessee before us has produced assessment orders / TPO’s orders for the earlier years. Further, as far as the nature of payment is concerned, wherein the assessee has filed necessary documentation before the authorities below and even before us, it cannot be said that reimbursement of expenses for leaseline are in the realm of royalty and section 9 of the Act or Article 12 of DTAA is attracted. First of all, we observe that since there is no amendment to the provisions of DTAA and same being beneficial, would be applicable and the payment made by assessee cannot be held to be royalty. Payment of leaseline charges is not equipment royalty. Vide para 101, it was further held that where it is case of reimbursement of expenses, there is no requirement to deduct tax at source. Hon'ble Supreme Court also in DIT (IT) Vs. A.P. Moller Maersk A S [2017 (2) TMI 993 - SUPREME COURT] and BNP Paribas SA [2018 (3) TMI 1987 - BOMBAY HIGH COURT] have held that when it is case of reimbursement of expenses, then there is no requirement of deduction of tax from such payments. Accordingly, we hold that there is no merit in the orders of authorities below in holding the assessee liable for such non deduction of tax at source. Reversing the same, we allow the claim of assessee and disallowance made under section 40(a)(i) of the Act is thus, deleted. The ground of appeal No.2 raised by assessee is thus, allowed. Unabsorbed depreciation in the hands of assessee - HELD THAT:- As assessee pointed out that the same was consequential to the decision in earlier years. So, we direct the Assessing Officer to verify the plea of assessee in this regard and re-work the unabsorbed depreciation to be adjusted against current year’s income. Assessee pointed out that there is double disallowance made by AO, that there are no brought forward losses of earlier years and credit for the same cannot be allowed merely because the assessee had contested the additions in appeal before the Tribunal. We direct the Assessing Officer that in case there is some relief given by the Tribunal in earlier years, effect of the same may be allowed to re-compute the unabsorbed depreciation in the hands of assessee. The ground of appeal No.3 is thus, allowed.
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