TMI Blog2012 (8) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... rities to allow in the year of payment was required while computing the income from house property but not allowing the expenditure under section 37(1) as business expenditure. Moreover, assessee has already furnished the evidence regarding the dispute with the owner and payment by way of deposit to the Court. No need for any dis-allowance. Dis-allowance u/s 40(a)(ia) - royalty payments made to Authors - AO disallowed amount on the reason that assessee did not file details of the authors to whom royalty was paid and basis on which royalty was paid - non-deduction of TDS - Held that:- Provisions of Section 194J cannot be made applicable to the payment made to the authors. Without establishing that the amounts are covered by any TDS provisions, there is no need for invoking the provisions of section 40(a)(ia). Deletion of dis-allowance confirmed - Decided against Revenue - ITA No. 2744 of 2010 - - - Dated:- 29-6-2012 - Shri B. Ramakotaiah, And Shri Vivek Varma, JJ. Department by: Shri Babab Patil, DR Assessee by: Shri Sanjeev Joshi O R D E R Per B. Ramakotaiah, A.M. This is a Revenue appeal against the orders of the CIT(A)-27 Mumbai dated 29.01.2010. The Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the books of account or sale and purchase vouchers. Further he also noticed that there was increase in royalty expenditure. Considering the fact of the trade of assessee, he considered that it is not possible to maintain stock of number of books. The CIT (A) deleted the addition. 4. After considering the rival submissions, we do not see any reason to interfere with the order of the CIT (A). AO has simply made an addition of Rs.1,75,000/- to the closing stock valuation without rejecting the books of account. He did not even bother to verify the valuation adopted by assessee for the closing stock. As discussed by the CIT (A), there was increase in the royalty expenditure and also turnover. We are of the opinion that there is no basis for making an addition of Rs.1,75,000/- by AO and accordingly the deletion by the CIT (A) is in order. Ground No.1 raised by the Revenue is rejected. 5. Ground No.2 pertains to the restriction of salary expenses to 15% instead of 50% of assessee s claim on part-time employees. AO disallowed 50% on the reason that assessee has not maintained salary register. The CIT (A) after considering the explanation of assessee that part-time employees were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40(a)(ia) holding that the amount is covered under the head royalty having the same meaning as in Explanation 2 to clause (vi) of sub-section 1 of section 9 and therefore, disallowance is called for on the entire amount. Assessee explained before the CIT (A) as under: In the course of the assessment proceedings, the AO called for the details of royalty paid and the agreement with the respective authors. Vide letter dated 22,06.2009 (pgs. 35-37 the details of royalty paid have been submitted. A break up the royalty paid is as per enclosed list (pgs 38-46). Vide letter dated 23.07.2009 (pgs (47-49) a copy of agreement with each of the author is submitted at S.No.3, Hence the contention of the AO in Para 14 that details called for have not been filed is incorrect. All the details called for are on record. It seems that in view of the voluminous details called these details have missed his attention. It is therefore prayed that the AO's allegation in connection with non production of details be overlooked or if desired be by calling for the case records. The AO has disallowed the royalty payment to author under section 40(a)(ia) r. w.s 194J of the Act. The provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the recipient under section 80QQB of the Act. Section 80QQB refers to rights granted in respect of books only whereas in the corresponding definition in section 9 there is no reference to books. It may be pointed out that the definition of royalty for the purpose of Section 9 was brought on the statute in the year 1976 when television was introduced in India. It was introduced in Mumbai in the said year and thereafter in other states. In order to tax the royalty on rights granted for the purpose of display on television this provision was introduced. Section 9 is a provision in the Act primarily for the purpose of taxing the income paid outside India but which is deemed to accrue or arise in India. It is submitted that Section 9 being a taxing provision and section 80QQB being a relief granting provision a harmonious interpretation be taken of ltion of royalty and the definition of royalty in Section 9 having no reference to royalty books and being different from the definition of royalty in Section 80QQS it held that the royalty to authors does not come within the purview of Section 194 of the Act and hence not liable to be disallowed u/s 40a(ia) of the Act. 7) Eight groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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