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2018 (4) TMI 396 - AT - Income TaxDisallowance of provision of anticipated loss - construction & erection contracts - anticipated loss was a highly budgeted cost in excess of the budgeted revenue on the project - Held that:- FAA has not analysed the AS-7 properly and has applied it in a biased way -not in a fair manner. There is no need to cite any judicial authority to state that AS are applicable to the Act and have to be followed while determining the tax liability of a corporate-assesseee. AS-7 recognises theory of anticipated loss and the assessee had made a claim about it. FAA/AO have not doubted about genuineness of the expenditure. The FAA held that it should be allowed in next year and the expenditure claimed by the assessee in the immediate succeeding year should not be allowed. Thus, in his opinion, the issue was only year of allowability and not the genuineness of the expenditure itself. Ground no. 2 is decided in favour of the assessee. Disallowance made about expenditure incurred for purchasing software - AO and the FAA held that payment made by the assessee for purchasing software was royalty, that it had not deducted tax at source for such payment - Held that:- We find that the assessee had purchased copyrighted software. In our opinion, payments made on account of copyrighted software is not payment of royalty. Therefore same is not chargeable to tax in India. We would like to refer to the case of Infrasoft Ltd. (2013 (11) TMI 1382 - DELHI HIGH COURT) as held the right to make a backup copy purely as a temporary protection against loss, destruction or damage does not amount to acquiring a copyright in the software - What has been transferred is not copyright or the right to use copyright but a limited right to use the copyrighted material and does not give rise to any royalty income - The consideration received on grant of licences for use of software is not royalty within the meaning of Article 12(3) of the Double Taxation Avoidance Agreement between India and the United States of America – Decided against Revenue.
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