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2016 (3) TMI 274 - AT - Income TaxTransfer pricing adjustment - whether international transaction being royalty payment of the assessee to its associated enterprises is held to be within the arms length price - A.O. was of the opinion that the assessee has not proved the necessity of Royalty payment - Held that:- We do not see any merits in the contention of the A.O. for the reason that, the assessee has furnished copies of invoices and bank remittance challans. The payment was made through banking channel and which was supported by bills and agreements. The TPO as well as AO has accepted the payment of Royalty as genuine and not sham transaction in the previous assessment year. The fact remains same for the assessment year under consideration. The revenue has failed to substantiate its arguments with any evidences to show that the royalty payment is not genuine. Therefore, we are of the opinion that the A.O. was not right in disallowing the Royalty payment. The CIT(A) has rightly deleted the additions and his order does not require any interference. Hence, we inclined to upheld the order of the CIT(A) and reject the ground raised by the revenue. - Decided in favour of assessee Disallowance of royalty payment u/s 40(a)(i) - non deduction of TDS on royalty payment as per section 195 - Held that:- A careful study of the provisions of section 40(a)(i) of the Act, it was clear that any payments referred to in the said section, which is payable outside India or in India to a non-resident on which tax is deductible under chapter XVIIB and such tax is not deducted or, after deduction has not been paid within the due dates under sec. 200(1) of the Act, then such payment is not allowed in computing the income from Business or Profession. In the present case on hand, though assessee deducted tax at source, it has deducted tax in subsequent year, but failed to deposit the same within the due date specified under sec. 200(1) of the Act. Therefore, we are of the opinion that the A.O. has rightly disallowed the Royalty payment under sec. 40(a)(i) of the Act. Eligibility for deduction towards Royalty - Held that:- A careful study of provisions of section 40(a)(i) of the Act and proviso provided therein, it is clear that where in respect of any such sum, tax has been deducted in any subsequent year or has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub section 1 of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. In the present case on hand, the assessee has deducted TDS on royalty payment and paid the amount into the Government account in the financial year 2007-08, relevant to the assessment year 2008-09. Therefore, we are of the opinion that the assessee is eligible for deduction towards Royalty payment, in the year in which the TDS is deducted and remitted into to the Govt. account, i.e. for the assessment year 2008-09. Accordingly, we direct the A.O. to allow the deduction for the assessment year 2008-09.
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