TMI Blog2009 (2) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... bt written off amounting to Rs. 5,50,03,219. 4. We have heard the parties. The briefly stated facts of the case are that, the assessee-company is engaged in the business of research base stock broking, trading and investment banking. The assessee company is also member of the Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The assessee has written off sum of Rs. 5,50,03,219 on account of bad debts which were relating to the following parties : 1. Penta Soft Technology Ltd. Rs. 3,79,72,661 2. Global Telesystems Ltd. Rs.1,70,00,000 3. Wipro Rs. 30,558 5. The assessee contended that out of the above three parties, two parties namely Penta Soft Technology Ltd. (PTL) and Global Telesystems Ltd. (GTL) were continuously making losses and were in no position to pay the amounts due. In the opinion of the Assessing Officer, the assessee has not proved that the debts had become bad as required under section 36(1)( vii ) of the Act. The Assessing Officer therefore, after detail discussion on this issue disallowed the claim of the bad debts written off of Rs. 5,50,03,219 and made the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. ITO [2006] 101 TTJ 349 . We have also heard the ld. DR on this issue who fairly conceded that this issue has been already covered in favour of the assessee by the decision of the Tribunal in the immediate preceding assessment year The ld counsel has filed the copy of the Tribunal s order in assessee s own case for the assessment year 2001-02 which is placed on record. 11. On the perusal of the said order it is seen that Tribunal has allowed the claim of the assessee by following the decision in the case of Techno Shares Stocks Ltd. ( supra ). On the same reason in the assessment year 2002-03, Ground No. 3 taken by the assessee is allowed and Assessing Officer is directed to grant the depreciation on the WDV of the membership card of the BSE. 12. Next issue disallowance of the expenditure under section 14A, which is relating to expenditure incurred in relation to tax-free income and this issue arises from Ground No. 4. 13. The ld. counsel for the assessee submitted that he is not pressing Ground No. 4. As Ground No. 4 is not pressed the same is dismissed as not pressed. 14. Next issue is in respect of the loss arises on the dividend striping and this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the same issue the revenue has also preferred the appeal challenging the order of the CIT(A) giving part relief to the assessee. The Ground taken by the assessee reads as under : " 6. The learned CIT(A) erred in disallowing salary of Rs. 90,40,880 paid to Mr. Brian Brown, an expatriate employee, under section 40( a ) of the Act." [ 18. The Ground taken by the revenue is as under : " 1. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in holding that no disallowance under section 40( a ) is called for in view of the provisions of section 192(1) of the Income-tax Act, 1961 in respect of the salary paid to Mr. Brian Brown." 19. The briefly stated facts pertaining to the issue are that, the assessee has paid a salary of Rs. 4,17,30,478 to M/s. Solomon Smith International Operations Inc. New York, which as per agreement between the assessee and the company disburses the same to Mr. Brian Brown. There is no dispute about the genuineness of this salary. The assessee claimed the deduction on account of the payment of the said salary. It was noticed by the Assessing Officer that though the assessee had claimed the deduction in respect of the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable under the head "Salaries", if it is payable outside India and if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B." 21.2 The section 40( a )( iii ) is applicable in the following situations : 1.The payment should be chargeable under the head Salary . 2.The said payment should be payable outside India. 3.No tax is deducted under Chapter XVII-B of the Act. 21.3 As far as first two conditions of section 40( a )( iii ) are concerned, there is no dispute among the parties that the payment being a salary which is chargeable under the head Salary and also the said salary is payable out side India. The only controversy is the third condition that, whether the assessee was bound to deduct tax for claiming the deduction of the said expenditure and if the TDS is not made then what are the consequences. 22. The argument of the ld. counsel is that the actual payment of the salary was made in the month of June, 2002 as the same was remitted to Solomon Smith Operations Inc. New York and at the time of remittance the assessee has discharged its statutory obligation put on him under section 192 of the Act. The ld. counsel referred to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for deduction of tax in respect of the dividend, likewise sections 194B, 194BB, 194C etc., they provides for deduction of tax at source in respect of the nature of the income like amount received from winning lottery or cross-word puzzle or horse race or payment to the contractors. In respect of provisions regarding deduction of tax at source many of the sections have undergone amendment. We would like to refer here the CBDT Circular No. 550 in which scope and effect of amendments made by the Finance Act, 1989 are explained and more particularly the amendment made to section 193 which is one of the section in Chapter XVII of the Act. The CBDT explained said amendment which is found in para No. 26.3 which reads as under : "26.3 Under the existing provisions of section 193 of the Income-tax Act, tax has to be deducted at source by the person responsible for making any payment in the nature of interest on securities at the time of payment. The liability to deduct tax at source was being postponed by making a provision for such payment. In order to prevent the postponement of liability to deduct tax and payment to the credit of the Central Government, the Finance Act has provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y look fairly at the language used ." 28. In our opinion the assessee s statutory obligation was to deduct the tax at the time of payment or remittance and the said obligations has been discharged by the assessee and hence the claim of the expenditure towards the salary payment to Mr. Brian Brown is not hit by section 40( a )( iii ). We therefore, uphold the order of the CIT(A) that no disallowance is called for under section 40( a ) of the Act in respect of the salary payment relating to the assessment year 1992-93 and dismiss Ground taken by the revenue. 29. Now we will take the ground taken by the assessee raising the grievance of the perquisite of Rs. 90,40,880. 30. In our opinion, the assessee must succeed on his Ground. There is no dispute about the fact that the assessee being an employer made the valuation of the perquisite provided to Mr. Brian Brown at Rs. 90,40,880. The definition of the salary is given in section 17 of the Act and as per the said definition salary includes perquisites. The perquisites in its normal meaning means direct and indirect benefits enjoyed or derived by the employee from his employer as a part of terms of his contract with his empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave heard the parties. It is seen that in respect of salary for the month of February, 2003 and March, 2003, which was Rs. 10,10,803, the same was disbursed on 4-8-2003 and TDS of Rs. 2,90,395 was deducted and also deposited in the Government account. Identical issue has been decided by us in the immediate preceding year in this order. As the facts are identical in this year also, following the same reasons, we allow Ground No. 2 taken by the assessee and delete the addition made by the Assessing Officer. In the result, Ground No. 2 is allowed. 37. The Ground Nos. 3, 4 and 5 reads as under : " 3. Without prejudice to the appellant s remedies for assessment year 2002-03, the learned CIT(A) erred in disallowing the deduction in respect of bad debts received from Global Tele-Systems Ltd. amounting to Rs. 10,000,000 offered to tax in assessment year 2003-04, given that the bad debts were disallowed in assessment year 2002-03 ( i.e., the year of write-off), thus leading to double taxation of Rs. 10,000,000. 4. Without prejudice to the appellant s remedies for assessment year 2002-03, the learned CIT(A) erred in disallowing the deduction in respect of bad debts amounting to R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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