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2019 (8) TMI 641 - AT - Income TaxDisallowance u/s.40(a)(i) - India USA DTAA - based on proceedings u/s.201(1)/(1A) for default in non-deduction of tax at source - HELD THAT:- It is a matter of record that the assessee preferred an appeal against the order passed by the ld. CIT(A) in relation to section 201(1)/(1A) before the Tribunal, which has since been decided by Tribunal [2019 (3) TMI 458 - ITAT PUNE] in favour of assessee. Payments made for leased line charges - Tribunal (supra) held that assessee did not default in non-deduction of tax at source out of the payments made for leased line charges and further the said leased line charges were in the nature of reimbursement of expenses. Purchase of software license is concerned, the Tribunal (supra) has discussed by holding that it was a case of purchase of copyrighted article which could not be considered as Royalty. Payment of I.T. Support service charges, the Tribunal (supra) held that the payment of I.T. Support charges, i.e. Internet charges, use of e-mail charges and backup support services etc. could not be considered as Royalty as no technology was made available to the assessee and it was only a service provided to the assessee by its USA Associated Enterprise. Enhancement made by the ld. CIT(A) on Reimbursement of salary paid to expatriates - Tribunal (supra) came to the conclusion that such an amount was not in the nature of `fees for technical services’ as the assessee had deducted tax at source from such salary payments u/s.192. Enhancement on Payment made on account of web based training, the Tribunal (supra) discussed that no technical knowledge was imparted by the service provider and hence, there was no liability upon the assessee to deduct tax at source on the aforesaid payments. Crux of the matter is that all the items of disallowance u/s.40(a)(i) in the instant proceedings, including the enhancement made by the ld. CIT(A) on two scores, have emanated from the order passed by the authorities u/s.201(1)/201(1A) . Since the Tribunal(supra) in its aforenoted order has held that the assessee is not liable for deduction of tax at source, the sequitur is that there cannot be any disallowance u/s.40(a)(i) as the same can be made only when a person responsible for paying any sum including royalty and fees for technical services etc., outside India or in India to a non-resident, not being a company or a foreign company, fails to deduct tax at source, on which tax is deductible. As the disallowance u/s.40(a)(i) is a corollary of liability of the assessee to deduct tax at source, no disallowance under this section can stand once the assessee has been held to be not responsible for deduction of tax at source on such amounts. In view of the foregoing discussion, we are satisfied that the disallowance made by the AO and as further enhanced by the ld. CIT(A), has no legal legs to stand on. The same is, therefore, deleted.
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