TMI Blog2011 (1) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... rience was found to be acceptable. Deduction u/s 10A - Reduction of telecommunication charges from the total turnover while calculating deduction u/s 10A of the Act. - held that:- decided in favor of assessee. Deduction u/s 80HHE - The assessee, while claiming deduction u/s 80HHE, considered the ‘total turnover’ of only those units, which were eligible for deduction u/s 80HHE. The A.O. completed the assessment and adopted the entire turnover as per the P&L account in allowing deduction u/s 80HHE. - Decided in favor of assessee. - ITA NO. 1140/BANG/2009 - - - Dated:- 21-1-2011 - ORDER Per George George K. This appeal instituted by the assessee is directed against the order of the learned CIT(A)-I, Bangalore dated 5/10/2009. The relevant asst. year is 2004-05. 2. Ground Nos. 1.1 and 10.1 are general in nature and no specific adjudication is called for. Hence, the same are dismissed. 3. Ground Nos. 8.1 and 9.1 are regarding levy of interest u/s 234B, and 234D of the Act. 3.1 The levy of interest u/s 234B and 234D of the Act is mandatory and consequential. Hence, these grounds are dismissed. 4. The rest of the grounds shall be dealt with in chronological order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A), the Hon ble Authority for Advance Ruling had held that fees/charges paid for internet access is royalty. 4.4 The assessee, being aggrieved, is in appeal before us. 4.5 It was contended that the CIT(A) has erred in holding that the assessee should have applied for and obtained a certificate u/s 195(2) of the Act before making the payment of bandwidth charges. The learned AR relied on the latest decision of the Hon ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. CIT 327 ITR 456. It was contended that the remittance to the foreign party has to be of a trading receipt, the whole or part of which is liable to be taxed in India. If it is not so assessable, it was submitted, there was no question deduction of tax at source. It was further submitted that the CIT(A) erred in relying on the decisions of the AAR which is distinguishable both on facts and law. It was further submitted that in the subsequent decision of the AAR in the case of Dell International Services India (P) Ltd. v. CIT (2008) 305 ITR 37 and in the case of ISRO Satellite Centre (ISAC) v. DIT (2008) 307 ITR 59, the AAR has held that the payment for two-way transmission of voice and dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as MCI Telecommunications or AT T only ensure that the sufficient bandwidth is available on an ongoing basis to the ultimate users to uplink and downlink the signals. 4.10 The Madras High Court in the case of Skycell Communication Services Ltd. v. DCIT 251ITR 53 has held that payment for use of mobile phone services would not constitute royalties or fees for technical services. Payments made for bandwidth are akin to the payment made for use of mobile phone services. 4.11 The Bangalore Bench of the ITAT in the case of Wipro Ltd. v. ITO 80 TTJ 191 has held that payment for bandwidth would constitute neither royalties nor fees for technical services either under the Act or under the agreement for Avoidance of Double Taxation with USA. This decision was followed the Tribunal in the assessee s own case (ITA Nos. 532 533/Bang/2002 ITA Nos. 365 367/Bang/2003 ITA Nos. 365 367/Bang/2005 dated 12.8.2005). Moreover, the recent decisions of the AAR in the following cases have decided the issue in favour of the assessee:- l Dell International Services India (P) Ltd. v. CIT 305 ITR 37; l ISRO Satellite Centre (ISAC) v. DIT 307 ITR 59; and l Cable and Wireles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x at source u/s 195 of the Act. The facts in the present case are identical wherein it was held thus:- It was undisputed that the GG was web based publishing house giving access to the data base to all those who were willing to pay. Those payments were towards obtaining of market data and client s strategy details, etc. Those were publications and not an information or advice given individually. The information was available on subscription to anyone willing to pay. Further, it was copyrighted information and could not be passed on to anyone else. There was no license granted to the assessee to use in any manner or quote to anyone else. Even the access was restricted to specific individuals named by the assessee and did not extend to anyone wanting to use. Annual subscription was an access fee to Gartner database maintained outside India. Fee was payable even if no service was utilized. It was like a gate pass or entry fee and could not be treated as imparting of information. The payment was for obtaining data and use in the way assessee wanted it to be used. It was for use of a copyrighted article and not for transfer of right in the copyright in the article. Just as a book i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es mentioned above are not chargeable to tax in India, the assessee is not liable for tax deduction at source. Hence, disallowance of these expenses cannot be made under the provisions of section 40(a)(i) of the Act. It is ordered accordingly. Therefore, ground Nos. 3.1 to 3.3 are allowed. Ground No. 4.1 - Provision for warranty for post sales customer support 6. The A.O., while completing the assessment, had disallowed the deduction claimed in respect of provision for warranty amounting to Rs. 29,87,075/-. According to A.O., provision for warranty is not required or the same is in excess of requirement. 6.1 The view of the AO was affirmed by the CIT(A) in paragraph 8.4 of his impugned order. 6.2 The assessee, being aggrieved, is in appeal before us. 6.3 The learned counsel for the assessee reiterated the submission, made before the Income Tax authorities. 6.4 The learned DR, on the other hand, supported the finding/ conclusion of the first appellate authority. 6.5 On identical issue in assessee s own case, the Tribunal has held that the provision for warranty at the rate of 2% of the sales turnover is justifiable. The following are the details of the Tribunal Orders: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 337) held that provision made for the warranty liability was an ascertained liability and that it could not be treated as a contingent liability. In view of the above, we hold that the liability cannot be considered as contingent liability as held in the case by ITAT, Pune. Since the liability is a accrued liability and the estimate is on sound accounting principle, the liability is allowable. The disallowance of Rs. 46,77,452/- is deleted . 6.7 The concept of provision is integral to the principle of prudence. The term provision is defined in paragraph 7(1)(a) of Part III of Schedule VI to the Companies Act to mean any amount written off or retained by way of providing for depreciation, renewals or diminution in the value of assets or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy . 6.8 The Hon ble Supreme Court in the case of Rotork Control India (P) Ltd. v. CIT (314 ITR 62) held A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion and perused the material placed on record. The issue in question stands covered directly in favour of the assessee by the order of the Tribunal in assessees own case for the asst. year 2005-06 (ITA No. 406/Bang/2008 dated 10.7.2009), which in turn, followed the decision of the Special Bench cited supra. The relevant portion of the Tribunal s order in assessees own case cited supra reads as follows: - We have heard the rival contentions and perused the material available on record. On our careful perusal of the facts and circumstances of the assessees case, our considered opinion is that now the issue stands settled by the Special Bench decision of the ITAT, Chennai in the case of ITO v Sak Soft Ltd. reported in 313 ITR (AT) 353 dated 6.3.09, therefore, does not require any further deliberation. The issue stands covered as also held by the learned CIT(A) which does not call for any further interference . 9. The Special Bench of Tribunal in the case of ITO v. Sak Soft Ltd. reported in 313 ITR (AT) 353 was considering an identical situation wherein it was held as follows: - The common thread running through sections 80HHC, 80HHE and 80HHF is that they are all provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh the sales aggregate before and after deduction of returns and trade discounts . The Word total turnover is not defined u/s 44AB of the IT Act, 1961. Hence, this definition is being considered as guiding definition to determine turnover for tax audit. The first appellate authority has adopted the meaning of words stated in section 44AB, which is wholly unnecessary in the instant case and has concluded that turnover and gross receipts are synonym and can be used interchangeably. This line of analysis cannot be applied in this case because gross receipt is used for services rendered by business enterprise or for professional income and word turnover for sales effected or for business income. The assessee s business is wholly of export of manufactured silk fabric and hence word gross receipt cannot be applied to export turnover here. 11. For the above said reasons, we reverse the order of the authorities below and direct the Assessing Officer to exclude from the export turnover as well as from the total turnover a sum of Rs. 96,39,523/- and Rs. 2,43,763/- being freight and insurance expenses respectively, while calculating deduction u/s 10B of the Act . 7.3 In the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputer software. The total turnover for the purpose of section 80HHE can only mean the total turnover of the computer software both in India and outside India. Under the scheme of the said section, it is not correct to include any other turnover not connected with the computer software business. We are, therefore, of the opinion that the denominator adopted by the department is wrong and is not in accordance with the scheme of deduction u/s 80HHE of the Act. If we approve the calculation of the department, the very object of intending and giving deduction u/s 80HHE is likely to be defeated if the assessee is having other turnover not connected with the computer software . 8.5 In the light of the above, we decide the ground Nos. 6.1 to 6.3 in favour of assessee. Ground No. 7 - levy of surcharge before granting relief under Double Taxation 9. In the return of income, the assessee first claimed double taxation relief and thereafter, computed surcharge on the amount of tax remaining after claiming such relief. However, in the assessment completed, the A.O. first computed surcharge and thereafter allowed double taxation relief. 9.1 On further appeal, the CIT(A), following the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
