TMI Blog2014 (12) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... udes income deemed to accrue or arise in India and the source of such payment being in India and the source rule reigning over the situs rule the same is chargeable under the provisions of the Act or not - Held that:- As decided in assessee’s own case for the earlier assessment year, as decided in Clearwater Technology Services (P.) Ltd. Versus Income-tax Officer, Ward-11(1), Bangalore [2012 (11) TMI 903 - ITAT BANGALORE] wherein it was held that the payment was not fees for technical services rendered by the non-resident but was business income in the hands of the non-resident and since the non-resident did not have a permanent residence in India, the same is not chargeable to tax in the hands of the non-resident in India - there was no obligation on the part of the Assessee to deduct tax at source - the disallowance made by the AO u/s 40(a)(ia) of the Act relating to the payment made to M/s Novatel of the USA is deleted. Explanation 2 to section 195 inserted with retrospective effect from 1.04.1962 by the Finance Act, 2012 or not – whether a liability to deduct tax at source can be fastened on an assessee on the basis of a retrospective amendment to the law - Held that:- Thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.74,55,513/- Less: Brought forward losses for Assessment year 2003-04 Rs.8,17,767 Assessment year 2004-05 Rs.33,87,978 Rs.42,05,745/- Balance profit eligible for deduction U/s 10B Rs.32,49,768/- Less: Deduction U/s 10B Rs.32,49,768/- 5. On appeal by the assessee, the CIT(Appeals), following the decision of the Hon ble High Court of Karnataka in the case of Yokogawa India Ltd., 341 ITR 385 (Karn.), as also the decision of the ITAT in assessee s own case for the A.Y. 2008-09 in ITA No. 1297/Bang/2007 dated 28.9.2012, held that the deduction u/s. 10B was an exemption provision and therefore deduction has to be allowed before set off of brought forward business losses of the assessee for the A.Ys. 2003-04 2004-05. Aggrieved by the order of the CIT(A), the revenue has preferred ground Nos.2 3 before the Tribunal. 6. At the time of hearing of the appeal, the learned DR placed reliance on the decision of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra). This Tribunal on an identical issue held as follows: 23. We have given a very careful consideration to the rival submissions. The issue raised by the assessee in ground no.21 is identical to the ground raised by the assessee in Biocon (supra). The facts of the case before the Tribunal in the case of Biocon (supra) were that the assessee during the previous year had four units which were entitled to claim deduction u/s. 10B of the Act viz., CMZ Unit, SAP Unit, RHI Unit and IFP Unit. The assessee had claimed deduction u/s. 10B of the Act in respect of the aforesaid units totaling ₹ 157,22,33,066 which is the sum total of deduction u/s. 10B for the four units as follows:- (1) CMZ Unit 6,87,70,229 (2) SAP Unit 76,60,29,880 (3) RHI Unit 52,42,56,278 (4) IFP Unit 21,31,76,679 Total 157,22,33,066 The assessee had non-10B units as well. In those non-10B units, there was a loss of ₹ 105,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns Info Systems (Bangalore) Pvt. Ltd. v. ACIT, 120 TTJ 956. The CIT(A) found that in the case of Global Vantage Pvt. Ltd. (supra) decided by the Delhi Tribunal this decision has been held to be not in tune with the decision of the Hon ble High Court of Karnataka in the case of Himatsingike Seide Ltd. (supra). The CIT(A) also referred to the decision of the Chennai Bench of the Tribunal in the case of Sword Global India Pvt. Ltd. v. ITO, 306 ITR 286 (AT), wherein the provisions of section 10A and 10B have been held to be deduction provisions and not exemption provisions. For all the above reasons, the CIT(Appeals) confirmed the order of the Assessing Officer. Against the order of the CIT(A), the Assessee was in appeal before the Tribunal. 25. This Tribunal dealt with the issue in the following words : 63. We have given a careful consideration to the rival submissions. The issue as to whether the provisions of Sec.10B of the Act are deduction provisions or exemption provisions will assume great importance. The reason is that if the provisions are considered as exemption provisions then they will not enter the computation of total income and therefore the loss of the eligible un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible unit. The Hon ble Karnataka High Court in the case of Yokogawa (supra) was concerned with similar situation as set out above. In view of the aforesaid decision of the Hon ble Karnataka High Court, we are of the view that the claim as made by the Assessee for carry forward of loss of the non-eligible unit had to be allowed without set off of profits of the 10A/10B unit. We hold accordingly and allow the relevant grounds of appeal of the Assessee. 66. We may also observe that the Hon ble Karnataka High Court s decision in the case of Himatasingike Seide (supra) has held that unabsorbed depreciation (and business loss) of same (s. 10A/10B) unit brought forward from earlier years have to be set off against the profits before computing exempt profits. The assessee in that case set up a 100% EOU in AY 1988-89. For want of profits it did not claim benefits u/s 10B in AYs 1988- 89 to 1990-91. From AY 1992-93 it claimed the said benefits for a connective period of 5 years. In AY 1994- 95, the assessee computed the profits of the EOU without adjusting the brought forward unabsorbed depreciation of AY 1988-89. It claimed that as s. 10B conferred exemption for the profits of the EO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f setting off the loss of the current year s or the brought forward business loss (and unabsorbed depreciation) against the s. 10A profits does not arise. Therefore the decision of the Hon ble Karnataka High Court in the case of Himatasingike Seide (supra) will not apply to the facts of the present case. 26. In view of the aforesaid decision, we are of the view that the claim made by the assessee deserves to be accepted. We may also observe that CBDT circular No.7 dated 16.07.2013, on the facts and circumstances of the present case is not a benevolent circular vis- -vis, the assessee, and therefore the decision to the contrary of the Hon'ble Karnataka High Court in the case of Yokogawa India (supra) will continue to apply. For the reasons given above, we direct the Assessing Officer to accept the claim of the assessee, as raised in ground no.21. 8. The reasoning given by the Tribunal for allowing the claim of the Assessee as set out above will equally apply to the facts and circumstances of the present case. We therefore following the aforesaid decision, find no grounds to interfere with the order of the CIT(A). Grounds No.2 3 raised by the Revenue are accordingly dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure deductible while computing total income of the Assessee. The total income of the Assessee came to be determined at ₹ 48,28,382/- due to this disallowance. 11. On appeal by the Assessee, the CIT(A) found that the ITAT in Assessee s own case for the assessment year 2008-09 in ITA No.1297/Bang/2011 order dated 28.9.2012 in respect of an identical payment to M/S. Novatel, USA, held that the payment was not fees for technical services rendered by the non-resident but was business income in the hands of the non-resident and since the non-resident did not have a permanent residence in India, the same is not chargeable to tax in the hands of the non-resident in India. The Tribunal therefore held that there was no obligation on the part of the Assessee to deduct tax at source. Consequently the disallowance u/s.40(a)(ia) of the Act was deleted by the CIT(A). 12. Aggrieved by the order of the CIT(A), the revenue has raised ground No.4 5 before the Tribunal. We have heard the rival submissions. The learned DR relied on the order of the AO and the grounds of appeal raised before the Tribunal. The learned counsel for the Assessee relied on the order of the ITAT in Assessee s ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in conformity with the ruling of the Hon ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. DCIT reported in 327 ITR 456(SC), the Hon ble earlier Bench had decided the issue in favour of the assessee. The relevant portion of the findings of the Hon ble Bench is reproduced as under: 4.9 The payments made to service providers such as AT and T or MCI Telecommunications are for the use of bandwidth provided for down linking signals in the United States. The payments made are not in the nature of managerial, consultancy or technical services nor is it for the use of or right to use industrial, commercial or scientific equipment. The service providers such as MCI Telecommunications or AT and T only ensures 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 Sky Cell Communication Services Ltd. v. DCIT Manu/TN/0461/2001 2521 ITR 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 payments for use of mobile phone services. 4.11 The Bang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fastened on an assessee on the basis of a retrospective amendment to the law. The amendment brought in by the Finance Act with retrospective effect, which was passed in the year subsequent to the year under consideration, should not be considered for penalizing the assessee by way of disallowance u/s 40(a)(ia) of the Act. 16. In the case of Kerala Vision Ltd. Vs. Asstt. CIT (ITAT Cochin), ITAT No. 794/Coch/2013, order dated 06.06.2014 question that came up for consideration was whether the retrospective amendment to Sec.195 can fasten obligation to deduct tax at source. The Tribunal found that the Hon ble Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd Vs. DIT (332 ITR 340) had taken the view that the transmission of television signals through Satellite / transponders would not fall in the category of royalty as defined under Explanation 2 to sec. 9(1) of the Act. Subsequently Explanation 6, which expanded the scope of the expression process was inserted by the Finance Act, 2012 with retrospective effect, to nullify the decision rendered by the Hon ble Delhi High Court. The Assessee submitted before the Tribunal that the view entertained by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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