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2019 (5) TMI 1543 - AT - Income TaxTDS u/s 195 - Addition u/s 40(a)(i) - non-deduction of TDS from the payment made for Microsoft licence fees - mere reimbursement of expenditure - India-Netherland DTAA - HELD THAT:- It was held by the Tribunal [2018 (8) TMI 1056 - ITAT KOLKATA] that the amount in question paid by the assessee was not in the nature of royalty. It was held that since the said amount was paid towards purchase of software, it would have been assessable as business profits in the hands of Netherland based Associated Enterprise and since the said Associated Enterprise did not have a permanent establishment in India, the business profits could not be taxed in India under Article 7 of the Indo Netherland DTAA. It was held by the Tribunal that there was no element of profit involved in the transactions representing remittance made towards purchase of licence software for use by the assessee, which was taxable in India in the hands of the Associated Enterprise and the assessee, therefore, was not required to deduct tax at source from the said payment u/s 195. It was further held by the Tribunal that the assessee was entitled for relief on this issue even on the basis of non-discrimination clause contained in Article 24(4) of the Indo-Netherland DTAA. We, therefore, respectfully follow the decision of the Tribunal rendered in assessee’s own case and delete the disallowance made by the AO u/s 40(a)(i) and confirmed by the ld. CIT(Appeals) - Decided in favour of assessee Disallowance of conversion charges on account of prior period expenses - HELD THAT:- The amount in question payable by the assessee on account of difference between the actual conversion charges and minimum conversion charges for the year under consideration representing contractual liability was in dispute and the same was settled and crystallized only in the F.Y. 2006-07 relevant to A.Y. 2007-08. As rightly contended by the ld. D.R., the assessee, therefore, was not entitled for deduction on account of this contractual liability pertaining to the year under consideration as the same represented disputed liability and since this dispute was settled and the liability was crystallized only in the F.Y. 2006-07, the assessee was entitled for the deduction of the same only in A.Y. 2007-08. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on this issue and upholding the same, we dismiss Grounds of the assessee’s appeal. TP adjustment - comparison of segment involving export of goods to unrelated parties which was substantially higher than the PLI of other segment involving export of goods to Associated Enterprise - HELD THAT:- We find that not only the nature of products manufactured in both these segments compared by the Transfer Pricing Officer as well as the risk undertaken by the assessee in these two segments was different, even the business model or business process adopted by the assessee in these two segments was different and the same cannot be taken as comparables for the purpose of transfer pricing analysis in order to determine the arm’s length price. We, therefore, delete the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of transfer pricing adjustment and allow Grounds of the assessee’s appeal. TP adjustment made in respect of international transactions with its AE involving payment of audit fees - HELD THAT:- Certain specific benefits were derived by the assessee-company from the internal audit services rendered by its Associated Enterprise and the authorities below were not justified in making the impugned addition on account of transfer pricing adjustment by taking the arm’s length price of the internal audit services rendered by its Associated Enterprise to the assessee at ‘nil’ on the ground that no benefit, directly or indirectly, was received by the assessee by availing the said services. In that view of the matter, we delete the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) by way of transfer pricing adjustment on this issue and allow Ground of the assessee’s appeal.
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