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2017 (7) TMI 692 - AT - Income TaxDisallowance u/s 40(a)(i) - various payments made by the assessee without deducting tax at source - Held that:- Disallowance made of such expenditure for non–deduction of tax cannot be sustained as there is no requirement for assessee to deduct tax at source while making such payments. As far as the payment made towards IVTC is concerned, nothing has been brought to our notice to conclusively prove that such services are not in the nature of technical services. The assessee has also failed to prove that such income does not accrue or arise in India. Therefore, we are not inclined to accept the arguments of the assessee that payment made are not in the nature of FTS, hence, no TDS was required. However, we agree with the conclusion of the Commissioner (Appeals) that the disallowance under section 40(a)(i) as per Article–21(1) of the India Switzerland DTAA has to be restricted to the amount actually paid during the relevant previous year. It needs to be mentioned, the assessee has made a without prejudice submission that as per Article 24(3) of the treaty disallowance on account of non–deduction of tax should be restricted to 30% of the amount paid, which is the quantum of disallowance applicable to domestic transactions as per section 40(a)(ia). It is submitted, the amendment to section 40(a)(ia) restricting disallowance to 30% of the amount paid should be made applicable retrospectively, since, it is clarificatory in nature. We are afraid, the contention of the assessee cannot be accepted. In our considered opinion, the amendment to section 40(a)(ia) brought by Finance Act, 2014, restricting the disallowance to 30% of the amount paid is substantive and not clarificatory, hence, will have no retrospective operation. Disallowing assessee’s claim to be taxed at lower rate on the dividend distribution tax (DDT) - Held that:- Keeping in perspective the provisions contained under section 115O vis–a–vis Article–10 of DTAA it needs to be examined whether the benefit of tax treaty can be extended to the DDT paid / payable by the assessee. We have noted, the various proposition advanced by the assessee claiming benefit under Article–10 of India Switzerland DTAA as contained in the written notes are nothing but repetition of submissions made before the learned Commissioner (Appeals) on 20th February 2014, a copy of which is at Page–112 of the paper book. Though, reading of Article–10 of India Switzerland DTAA prima–facie gives an impression that it will only apply to non–resident shareholder receiving the dividend, however, still it leaves a scope for examining the claim of the assessee that DDT being a tax on dividend, Article–10 of the DTAA would be applicable even if such dividend is payable by the domestic company. In our view, it will be too simplistic to reject the contention of the assessee on the plea that it will only apply where the non–resident recipient of dividend incurs the liability in respect of dividend. In our considered opinion, the learned Commissioner (Appeals), though, was required to deal with all propositions advanced by the assessee, he has not done so. Therefore, we are inclined to restore the matter back to the file of the learned Commissioner (Appeals) for fresh consideration after reasonable opportunity of being heard to the assessee. Addition made on account of transfer pricing adjustment on licence fee - Held that:- The learned Counsel appearing for both the parties have agreed before us that the issue stands covered by the decision of the Tribunal in assessee’s own case for assessment year 2002–03 to 2007–08. As could be seen, while deciding assessee’s appeal for assessment year 2002–03 and 2003–04 and other related appeals the Tribunal deleted the transfer pricing adjustment by accepting the arm's length price of the license fee declared at 3%. The same view was again reiterated in A.Y. 2004–05 and 2005–06 and, for assessment year 2006–07 and 2007–08. There being no material difference in facts brought to our notice by the learned Departmental Representative respectfully following the consistent view of the Tribunal, we upheld the order of the learned Commissioner (Appeals) on this issue. Addition on account of delayed payment of PF/ESIC dues - Held that:- Learned Counsels appearing for both the parties have agreed before us that the issue in dispute is covered in favour of the assessee by the decisions of the Tribunal. On a perusal of the order of the Tribunal for assessment year 2002–03 in assessee’s own case as referred to above, it is noticed that the Tribunal considering the fact that ESIC dues were paid before the due date of filing of return deleted the addition. The same view was again expressed by the Tribunal in assessee’s own case for assessment year 2006–07. Since the learned Commissioner (Appeals) has deleted the addition following the consistent view of the Tribunal in assessee’s own case, we do not find any reason to interfere with the order of the learned Commissioner (Appeals).
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