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2013 (11) TMI 522 - ITAT MUMBAIDisallowance u/s 40(a)(i) - Deduction for fees paid to Master Card - Held that:- The assessee in this case has made certain payments to US company for allowing use of certain services, etc. in India - US companies; as per the own admission of the learned counsel for the assessee, have chosen to agree with the contention of the Income-tax department that they are liable to pay tax under the Indian Income-tax Act. These US companies have also remitted the amount of income-tax - Deduction, if any, can be allowed, only in the year in which the tax has been paid or deducted under Chapter XVII-B. As in the impugned assessment year no tax has been deducted while remitting these amounts to companies situated outside India, we hold that the first appellate authority was right in upholding the disallowance made by the Assessing Officer - Similar view has also been adopted by the Tribunal in assessee's previous case alo - Therefore, matter decided in favour of Revenue. Disallowance of deduction in respect of New York Branch State Franchise, Tokyo Branch business tax and pre factural municipal tax - Documentry evidence not produced to prove payments - Held that:- CIT(A) has given direction to the AO to verify the claim and allow the claim on the basis of actual payment in respect of taxes paid relating to assessee's New York and Tokyo Branch and hence, there is no grievance of the assessee - Therefore, decided in favour of Revenue. Disallowance u/s 14A - Expenses incurred in relation to exempt income - Disallowance of expenditure of 0.5% of average investments - Held that:- disallowance made by the AO by following 12% of the income as expenses is not justified and is not based on any rational basis. There is no dispute to the fact that for making the disallowance u/s.14A of the Act, the expenditure which is related to the income which does not form part of total income under the Act has to be identified. AO has to identify the expenditure which can reasonably said to have been incurred on tax exempt income before making any disallowance u/s.14A of the Act - Assessee in the assessment for the year 2003-04 has stated that the disallowance of 0.5% of tax free income would be reasonable - It is prudent to restore this issue to the file of AO with a direction to make reasonable disallowance u/s.14A as per law and taking into consideration the details as may be filed by the assessee and the decisions of the coordinate benches that may be relied upon before him - Decided against Revenue for statistical purposes. Disallowance of fees paid to Master Card International - Whether CIT (A) erred in setting aside this issue to the AO with a direction to allow as per law after verification of taxes paid - Held that:- Assessee bank has paid to Master Card International without deducting tax. Hence, AO is justified in disallowing the payments. However, CIT(A) has directed the AO to verify the claim of the assessee regarding taxes paid in this year under consideration in respect of earlier years and allow them as per law - there is no discussion on this issue in the assessment order but CIT(A) has given the direction to the AO to allow the claim as per law on verification and there should be no grievance to the assessee on it - Decided in favour of Revenue.
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