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2012 (8) TMI 421 - AT - Income TaxIncome deemed to accrue or arise in India - TDS u/s.195 of the Act – DTAA agreement - expenditure on advertisements - assessee remitted the amount towards expenses to the advertising agencies of Russia through its parent company NPS which is a resident of Switzerland – Held that:- Entire advertisement activity had been carried out outside India. There are no facts brought on record that NPS has a PE in India. Considering above facts and also the fact that there is a DTAA agreement between India and Switzerland and also between India and Russia, the said amount remitted by the assessee towards advertisements even if assessable could be assessed as business profits as per section 9 of the Act but having regard to the fact that these non-resident companies i.e. recipients and/or advertising companies have no PE in India - amount could not be taxed in India under section 5(2) of the Act - assessee has not committed any default in not deducting TDS u/s.195 on the amount remitted by it to NPS in respect of advertisement campaign launched in Russia. Whether the expenditure incurred on TV films and commercial and other promotional films is capital in nature or not – Held that:- Onus lies on the assessee to prove that the expenditure has been incurred wholly and exclusively for the purposes of its business. It is observed that said expenditure has been incurred by NPS and paid by assessee on the basis of invoices raised - no document has been brought on record that the said expenditure was incurred by NPS at the instance of the assessee wholly and exclusively for the purposes of assessee's business - expenditure cannot be allowed to have been incurred by the assessee for the purposes of its business unless assessee proves that expenditure was incurred in connection with assessee's business with some documentary evidences – matter restored to the file of the AO to decide afresh with the liberty to assessee to place such document Disallowance on account of repairs to buildings - renovation of R&D Centre - Assessing Officer did not accept the contention of assessee that expenditure represents expenses of revenue nature such as civil modifications, ceiling repairs, electrical modification, partitions, etc – Held that:- If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitability while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future - expenditure incurred by assessee under the head "repairs" is on the existing assets by renovating the buildings and is revenue in nature – disallowance deleted Disallowance of deduction under section 80 HHC of the Act - assessee has not brought in sales proceeds of an amount of Rs. 1,19,06,264 within the extended period which was granted to the assessee and same is to be reduced from export turnover as per clause (b) of Explanation to Section (4C) of Section 80HHC of the Act., while computing the deduction to be allowed under section 80HHC of the Act - direct cost in respect of which goods which have been exported but the sales proceeds have not been brought in India in specified period, should be reduced while computing the deduction u/s.80HHC of the Act – addition confirmed – In favor of revenue
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