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2015 (7) TMI 1049 - ITAT BANGLORE

2015 (7) TMI 1049 - ITAT BANGLORE - TMI - Transfer pricing adjustment - selection of comparable - Held that:- Bodhtree Ltd., Tata Elxsi Ltd. and Infosys Technologies Ltd. as not comparable with a software development service provider such as the Assessee as dissimilar as compared to software development services provider.

Working capital adjustment - Held that:- On going through the TPO’s order as well as annexure D referred to in the transfer pricing order on working capital adjustme .....

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of working capital as per the calculation of the AO in annexure D annexed to the transfer pricing order.

Income tax of employee - whether treated as business expenditure or personal liability of the employee and is not the liability in the hands of the assessee-company ? - Held that:- Remuneration and the income-tax thereon paid on behalf of the employee therein, is an allowable expenditure u/s 37 of the Act. See Tata Yadogawa Ltd. vs. CIT [2010 (9) TMI 715 - Jharkhand High Court] and .....

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t:- The direction of the CIT(A) to reduce the expenditure incurred in travel, telecommunication etc., both from export turnover as well as total turnover for the purpose of computation of deduction u/s 10A of the Act as confirmed in the case of CIT vs. Tata Elxsi (2011 (8) TMI 782 - KARNATAKA HIGH COURT ) - Decided against revenue

Rate of depreciation at 60% on circuit test boards - Held that:- The assessee had submitted before CIT (Appeals) that the ‘Circuit Test Boards’ are used as .....

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allow depreciation at the rate of 60% and the learned Departmental Representative has not been able to rebut this finding with any evidence to the contrary. Therefore, we see no reason to interfere with the same.- Decided against revenue - IT(TP)A Nos.23 & 61/Bang/20115 - Dated:- 22-7-2015 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER And SHRI JASON P.BOAZ, ACCOUNTANT MEMBER For the Petitioner : Shri G.C.Srivastava, Advocate. For the Respondent : Dr.P.K.Srihari, Addl.CIT(DR). ORDER Per Smt. P. MADHAV .....

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/- after claiming deduction u/s 10A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' in short] of ₹ 5,21,48,541/-. The assessee also declared income under MAT provisions of sec.115JB at ₹ 2,20,24,606/-. During the assessment proceedings u/s 143(3) of the Act, the Assessing Officer (AO) observed that the assessee had entered into an international transaction with its Associated Enterprises (AE) for rendering software development services. The determination of .....

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O therefore, passed final assessment order making addition of the adjustment u/s 92CA of the Act as proposed by the TPO and also making the following disallowances: i. Salary expenses of Mr.Prakash Bare, an expatriate employee on whose behalf income-tax of ₹ 14,85,677/- was paid by the assessee and claimed as an expenditure. ii. Reimbursement of ₹ 9,37,988/- to M/s.Rambus Incorporation on account of Oracle license for failure of non-deduction of tax at source though it was in the nat .....

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. Aggrieved by these disallowances and the consequential additions, assessee preferred an appeal before the CIT(A) who partly allowed the same. Against denial of relief to the assessee, assessee is in appeal before us while against the relief given by the CIT(A), revenue also is in appeal before us. 4. In the assessee s appeal, assessee is challenging the adoption of certain companies as comparables by the TPO and also against exclusion of companies adopted by the assessee as comparable companie .....

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nterest u/s 234B of the Act. 4. At the time of hearing, the learned counsel for the assessee has stated that the assessee does not wish to press ground Nos.3(a) 3(c), 3(d) and (3e) and therefore they are rejected as not pressed. As regards ground Nos.1 and 2, we find that they are general in nature and need no adjudication. 5. As regards ground No.3(b) relating to transfer pricing issue, we find that it is against inclusion of certain companies in the final list of comparable companies on the gr .....

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ata Elxsi (segment) and Infosys Technologies Ltd., from the final list of comparables. It is stated by the learned counsel for the assessee that the assessee itself had adopted all these companies as comparables in its TP study, but however, it had challenged the said companies before the TPO as well as the CIT(A) on functional dissimilarity. The learned Departmental Representative was also heard who relied upon the orders of the authorities below. 6. Having regard to the rival contentions and t .....

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9 Operating (Profit)/Loss 1,34,40,581 Op Profit on cost% 4.79% *Excluding other income The most appropriate method (MAM) adopted by the assessee in its T.P. Study and accepted by the TPO is, TNMM. The assessee in its T.P. Study had adopted 17 companies as comparables whose average profit margin was 13% on cost and therefore the margin earned by the tax payer at 11% on cost was treated as being at Arm s Length, whereas the TPO has finalized 11 companies as comparable companies with the average ar .....

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able companies. The companies not specifically challenged by the assessee during this year are: i. Larsen & Toubro Infotech ii. Mindtree Ltd.(segment) iii. Zylog Systems Ltd. iv. Kals Information Systems Ltd. v. Akshay Software Technologies Ltd. vi. R K Software (India) Ltd. Let us now consider the companies, specifically challenged by the assessee for this year, i.e. Bodhtree Ltd., Tata Elxsi Ltd. and Infosys Technologies Ltd. 7. On perusal of the material on record and the decisions relied .....

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nd are engaged in providing software development services to their AEs. Further, we also find that the comparables adopted by the TPO in both the cases are also the same. Therefore, we agree with the contentions of the learned counsel for the assessee that the findings of this Tribunal in the case of M/s.Airbus India Operations Pvt. Ltd., are applicable to the case before us. i) As regards Bodhtree Consulting Co., is concerned, the learned counsel for the assessee submitted that though the asses .....

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revenue recognition method followed by it as against the cost plus method (CPM) followed by the assessee. The learned counsel for the assessee placed specific reliance upon the decision of this Tribunal in IT(TP)A No.35/Bang/2014 dated 10/10/2014 in the case of M/s.Airbus India Operations Pvt. Ltd., in support of his contentions. We find that Tribunal in the case of M/s. Airbus India Operations Pvt. Ltd., (cited supra) has considered the comparability of Bodhtree Consulting Ltd., with the assess .....

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ollows: 26.1 Bodhtree Consulting Ltd.:- As far as this company is concerned, it is not in dispute that in the list of comparables chosen by the assessee, this company was also included by the assessee. The assessee, however, submits before us that later on it came to the assessee s notice that this company is not being considered as a comparable company in the case of companies rendering software development services. In this regard, the ld. counsel for the assessee has brought to our notice the .....

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tions software consultancy and design & development of software using latest technology. The decision rendered by the Mumbai Bench of the Tribunal in the case of Nethawk Networks Pvt. Ltd. (supra) is in relation to A.Y. 2008- 09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Following the aforesaid dec .....

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red to above and taking note of the fact that the facts and circumstances under which the aforesaid company was considered by the TPO as comparable with a software development service provider such as the Assessee for identical reasons, we direct the TPO to exclude the aforesaid company from the list of comparable companies for the purpose of computation of ALP. Respectfully following the decision of the Tribunal on similar set of facts, we direct the AO/TPO to exclude Bodhtree Consulting Ltd. f .....

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ing regard to the rival contentions and the material on record and the decisions cited by the learned counsel for the assessee, we find that the Tribunal in the cases cited supra relied upon by the learned counsel for the assessee, has held that the Tata Elxsi is not engaged solely in the software development services but that the services of the company include embedded product design, industrial services and engineering services and visual computing labs and system integrating services which m .....

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for the Assessee was that though, Infosys Technologies Ltd., & Tata Elxsi Ltd. (seg.) have to be excluded by applying the Turnover filter, they are also additionally functionally not comparable as held by this Tribunal in the case of Genisys Integrating Systems (India) Ltd. (supra) and Cisco Systems (India) (supra). We have considered his submission and we find that in the case of Cisco Systems (India) (supra), this tribunal has also held that the aforesaid two companies are also not functio .....

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he Bangalore Bench of the Tribunal in the case of M/s. 3DPLM Software Solutions Ltd. v. DCIT, ITA No.1303/Bang/2012, by order dated 28.11.2013 with regard to this comparable has held as follows:- 11.0 Infosys Technologies Ltd. 11.1 This was a comparable selected by the TPO. Before the TPO, the assessee objected to the inclusion of the company in the set of comparables, on the grounds of turnover and brand attributable profit margin. The TPO, however, rejected these objections raised by the asses .....

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software development activities, whereas the assessee is merely a software service provider operating its business in India and does not possess either any brand value or own any intangible or intellectual property rights (IPRs). It was also submitted by the learned Authorised Representative that :- (i) the co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. in ITA No.227/Bang/2010 has held that a company owning intangibles cannot be compared to a low risk captive servi .....

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and market leader assuming all risks leading to higher profits cannot be considered as comparable to captive service providers assuming limited risk ; (iii) the company has generated several inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the breakup of such revenues is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition .....

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ble profit margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies. 11.4 We have heard the rival submissions and perused and carefully considered the material on record. We find that the assessee has brought on record sufficient evidence to establish that this company is functionally dis-similar and different from the assessee and hence is not compar .....

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matter, we hold that this company ought to be omitted from the set of comparable companies. It is ordered accordingly. The decision rendered as aforesaid pertains to A.Y. 2008-09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Respectfully following the decision of the Tribunal referred to above, we hold th .....

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ccountant pleaded that out of the six comparables shortlisted above as comparables based on the turnover filter, the following two companies, namely (i) Tata Elxsi Ltd; and (ii) M/s. Flextronics Software Systems Ltd., deserve to be eliminated for the following reasons : (i) Tata Elxsi Ltd., : The company operates in the segments of software development services which comprises of embedded product design services, industrial design and engineering services and visual computing labs and system int .....

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learned TPO has considered this company as a comparable based on 133(6) reply wherein this company reflected its software development services revenues to be more than 75% of the "software products and services" segment revenues. Flextronics has a hybrid revenue model and hence should be rejected as functionally different. Based on the information provided under "Revenue recognition" in its annual report, it can be inferred that the software services revenues are earned on a .....

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sessee with that of a company following hybrid business model comprising of royalty income as well as regular software services income, for which revenue break-up is not available. He finally submitted that this was a good reason to exclude this company also from the list of comparables. 20. On the other hand, the learned DR supported the order of the lower authorities regarding the inclusion of Tata Elxsi and Flextronics Software Systems Ltd., in the list of comparables. He reiterated the conte .....

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ices. 3. The contribution of the embedded services segment is to the tune of ₹ 230 crores in the total segment revenue of ₹ 263 crores. Even if we consider the other two sub-segments pertain to IT enabled services, the 87.45% (›75%) of the segment's revenues is from software development services. 4. This segment qualifies all the filters applied by the TPO." Regarding Flextronics Software Systems, the following extract from page 143 of TPO's order was read out by .....

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Y 2005-06 but the same is not functionally similar for the subsequent FY 2006-07 even when no facts have been changed from the preceding year. Thus the taxpayer is arguing against this comparable as the company was not considered as a comparable by the taxpayer for the present FY 2006-07." 21. We have heard the rival submissions and considered the facts and materials on record. After considering the submissions, we find that Tata Elxsi and Flextronics are functionally different from that of .....

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ith a software development service provider such as the Assessee for identical reasons, we direct the TPO to exclude the aforesaid two companies from the list of comparable companies for the purpose of computation of ALP. Respectfully following the above decision to which one of us i.e. the Accountant Member is the signatory, we direct the AO/TPO to exclude these two companies also from the final list of comparable companies for the purpose of computation of ALP. The assessee is also seeking inc .....

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ow the directions of the CIT(A) while computing the ALP. 12. As regards ground of appeal No.3(g), the learned counsel for the assessee submitted that the assessee is challenging the rejection of otherwise comparable companies rejected by the TPO on account of working capital adjustment. At the time of hearing, this bench asked the learned counsel for the assessee, if the average arithmetic margin of the comparables after exclusion of the above mentioned companies would fall within + or -5% of th .....

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r inclusion of the companies as it would only result in academic exercise at this stage. Therefore, the ground of appeal No.3(g) is rejected as not contested by the assessee for the above reasons. 13. As regards ground No.3(f), learned counsel for the assessee submitted that the AO/TPO while considering the working capital adjustment to be made while computing the ALP, has arrived at the working capital adjustment in the case of the assessee at 5.97%, but while giving effect to the working capit .....

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hat the TPO has computed it at 5.97% but has not given any basis for restricting the adjustment to 1.71%. In various cases relating to transfer pricing adjustment, this Tribunal has been directing to give working capital adjustment on actual basis and the TPO, having arrived at 5.97%, ought to have adopted the same instead of restricting it to 1.71%. In view of the same, we deem it proper to remand this issue to the file of the AO/TPO for working out the ALP after giving adjustment of working ca .....

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h Bare and claimed the same as business expenditure. The AO held that income-tax of Mr.Prakash Bare is the personal liability of the employee and is not the liability in the hands of the assessee-company as per the provisions of the Act. Therefore, he disallowed the same and added it back to the returned income of the assessee. On appeal, the CIT(A) has confirmed the said disallowance. 17. The learned counsel for the assessee, has drawn our specific attention to pages 130 and 131 of paper book, .....

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ed upon by the assessee and is wholly and exclusively for the purpose of business of the assessee and is an allowable deduction u/s 37 of the Act. The learned counsel for the assessee placed reliance upon the following decisions in support of his contention that it is an allowable expenditure: i. Tata Yadogawa Ltd. vs. CIT (2011) 196 Taxman 353 (Jharkhand) and ii. ABN Amro Bank vs. JCIT (2005) 96 TTJ Kol. 1041 The learned Departmental Representative, however, supported the orders of the authorit .....

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ompany, ESW to acquire know-how for certain consideration in terms of which taxes, if any, on payment of consideration were also to be borne by the assessee therein. The assessee therein had applied for grant of permission u/s 195(2) to remit the said consideration without deduction of tax at source which was rejected by the AO and which travelled up to the Hon ble High Court. The Hon ble High Court at para.15 of its order has considered the liability of the assessee to pay income-tax on behalf .....

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in view of the terms of the collaboration agreement. Therefore, payment of these taxes are as integral a part of the consideration as the payment of two million DM. In fact, the income tax department is itself treating not merely the amount of two million DM paid to ESW but also the R&D Cess, as part of consideration . In these circumstances we find no logical reason for not treating the income tax paid by the assessee in terms of the collaboration agreement as part of the consideration for .....

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he words lumpsum as used before the word consideration in section 35AB, only exclude periodical or turnover based payments like royalty etc., and any one time payment for the know-how would fall within the expression lump sum if it is fixed and specified in the agreement, although it may be payable in instalments. Further, the Special Bench of the Tribunal at Calcutta in the case of ABN Amro Bank (cited supra) was seized of similar issue i.e. whether tax and interest on the offshore remuneration .....

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over the world. The assessee has taken into account the tax perquisite while working out the tax deductible in respect of remuneration paid to expatriate employees. In asst. yr. 1994-95 in the written submissions filed before the CIT(A), reproduced by him in the appellate order, we find a reference to the policy of the assessee in regard to the payment of remuneration to its employees working in all branches around the world. Since it is relevant for deciding the issue on hand, it will be worth .....

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in regard to taxation of expatriate employee's income is given hereunder : Expatriate employees all over the world cannot be transferred from one country to another country if there is not a continuity and consistency in their remuneration. Therefore, the bank has a worldwide salary policy for its expatriate staff. This policy is laid down in the Bank's Guide Expatriate Staff and Guide International Career Bankers. 'Guide Expatriate Staff'-Principle Expatriate employees all over .....

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by head office. Both the expatriate staff member and the local management will be duly informed by International Human Resources of the actual amounts to be paid. Gross up : Once an employee's net salary, allowance and benefits are determined, his/her gross income for (a part of) the current fiscal year should be calculated by or in consultation with the bank's external tax adviser. Payment of taxes and social security Taxes and social security premiums (employer's as well as employ .....

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triate allowances. Net Guarantee/Gross up The ICB's salary is a net salary which means that tax, social security premiums, etc., related to the employment income will be for account of the bank. Exception is made for the Line of Business Bonus. Tax and social security premiums from other personal income are not for account of the bank. We, thus, submit that it is the bank's responsibility and obligation to bear the Indian taxes on offshore remuneration of expatriate employees rendering s .....

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increasing/grossing up the amount of tax has been done in accordance with the provisions of Section 195A of the Act. The amount by which the income is thus grossed up is in the nature of a taxable perquisite under Section 17(2) in the hands of the employee and thereby an allowable expenditure in the hands of the appellant. To summarise we wish to state as under with regard to the local remuneration and perquisites. Without prejudice to our contention that offshore remuneration is an allowable de .....

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nefit for inclusion in the total income as such the result (is the additional remuneration) does not partake the character of tax. Reference is drawn to the Supreme Court judgment in the case of Senairam Doongarmall v. CIT . From the above reasons the local remuneration (which includes, inter alia, the gross up of the tax) is an allowable expense. We enclose a copy of letter from International Human Resource Department of the bank at Amsterdam confirming that the tax in respect of the offshore r .....

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994-95. However, in asst. yr. 1995-96, the assessee has paid the tax deductible at source. Therefore, in principle the assessee would be entitled to deduction in respect of the tax component of the salary also if the salary is found to be deductible as per the directions of the Tribunal for asst. yr. 1996-97 (supra), which has also been adopted by us. So, however, no deduction will be permissible in asst. yrs. 1992-93 to 1994-95 by operation of Section 40(a)(i) of the IT Act, 1961. The claim for .....

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tion 40(a)(i). For asst. yr. 1995-96, the assessee has paid the tax and, therefore, Section 40(a) is not attracted. The assessee shall be entitled to deduction in respect of remuneration as well as the tax paid pertaining to asst. yr. 1995-96. It is pertinent to mention that the objection raised by the Revenue about the assessee having failed to establish as to whether the services have been rendered by the expatriate employees in regard to the PE of the assessee in India, we find, is uncalled f .....

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paid the tax deducted at source and not the tax on behalf of the expatriate employees. This objection is also, in our view, unfounded. Section 199 provides that any deduction made in accordance with provisions of Section 192 and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income deduction is made. Under Section 205 of the IT Act, 1961, there is a bar for the Revenue to demand tax from the assessee to the extent the amount has been deduct .....

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r of refund in the hands of the appellant. Therefore, the objection of the Revenue is overruled. We, accordingly, direct the AO to consider the claim of the assessee in regard to the remuneration and the taxes paid relating to asst. yrs. 1992-93 to 1995-96 in asst. yr. 1995-96 in accordance with the directions contained in this order. 27. In asst. yr. 1995-96, the assessee has also claimed a deduction for remuneration and tax paid in regard to the asst. yrs. 1990-91 and 1991-92. No evidence has .....

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in earlier years, the benefit is not permissible in asst. yr. 1995-96 merely because the tax has been paid in the year under appeal. The benefit of the proviso to Section 40(a)(i) is thus not available to the assessee for which no claim is made in the respective assessment years. Therefore, the claim of the assessee does not fall for consideration in asst. yr. 1995-96 on the basis of provisions ofSection 40(a) read with proviso. The disallowance pertaining to asst. yrs. 1990-91 and 1991-92 in r .....

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at the very outset the claim of interest pertaining to the period falling in asst. yrs. 1990-91 to 1994-95 is disallowable in any case for the reason that no such claim has ever been made for the relevant years. 29. We now proceed to consider if the claim is otherwise allowable. At the cost of repetition, it is stated that the assessee had not deducted tax in respect of remuneration paid to expatriate employees for the services rendered in India, for which the payment was made abroad by the head .....

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reme Court in the cases of Mahalakshmi Sugar Mills Co. Ltd. v. CIT ,Prakash Cotton Mills (P) Ltd. v. CIT and CIT v. Ahmedabad Cotton Mfg. Co. Ltd. and Ors. . The learned counsel contended that Section 221 provides for payment of penalty in the event of default for non-payment of TDS. Section 271C provides for penalty for non-deduction of tax. Section 201(1A) provides for payment of interest. According to the learned counsel, it is evident from the aforesaid provisions of the Act that the interes .....

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the assessee is not entitled to deduction on account of interest for non-deduction of tax and nonpayment of the same as it is neither part of remuneration nor as an expenditure incurred for purposes of business. 31. We have given our careful consideration to the rival contentions. The issue relating to the claim of interest is peculiar in this case insofar as the interest is on account of income-tax, which the assessee was required to deduct at source and pay to the Government. We have dealt wit .....

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consider as to whether the income-tax is allowable as a deduction. If income-tax is allowable as a deduction, the interest payable on such tax being compensatory in nature may qualify for deduction. Interest on sales-tax of compensatory nature is allowable as a deduction not merely because it is not penal in character but because the sales-tax is chargeable on the commodities sold by the assessee as an incidence of business. The interest is thus allowable as part of tax. In this case the assesse .....

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n circumstances, qualify for deduction as an incidence of business. Section 17(2)(iv) treats any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the employee as perquisite assessable in the hands of the employee. So, however, it is interesting to note that in this case the assessee has not discharged the obligation on behalf of the expatriate employees insofar as taxes have not been paid as an obligation on behalf of the employees. Th .....

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by the assessee and payment thereof to the Government does not by itself qualify for deduction as business expenditure by reason of the compliance of statutory obligation made by the assessee. It is important to bear in mind that the deduction of tax claimed by the assessee is as part of the agreement for payment of remuneration net of salary and not as part of the fulfillment of the statutory obligation. For better appreciation of this issue, relevant sections may be quoted hereunder : "1 .....

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ovisions of this Chapter is to be borne by the person by whom the income is payable, then, for the purposes of deduction of tax under those provisions, such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement. 200. Any person deducting any sum in accordance with the provisions of Sections 192 to 194, Section 194A, Secti .....

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e principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee-in-default in respect of the tax : Provided that no penalty shall be charged under Section 221 from such person, principal officer or company unless the AO is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reaso .....

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been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in Subsection (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in Sub-section (1)." 34. It is noteworthy from abovementioned provisions of the Act that the interest levied by the Department is for the assessee having been treated as the "assessee-in-default" for the payment of tax deductible at .....

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ted/deductible at source also does not qualify for deduction. Reference may be useful to the decision of the Calcutta High Court in the case of Jubilee Investments & Industries Ltd. v. Asstt. CIT and Ors. . Their Lordships observed as under : "The Asstt. CIT has rightly pointed out that once the TDS is deducted from the income of somebody, the assessee is merely a custodian of the TDS amount. He cannot touch the amount. That amount is to be deposited within the time prescribed in the Ce .....

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imposed relating to those taxes;" It is evident from the above definition that even DTAA does not cover such a levy. It may also be pertinent to mention that income-tax paid by the assessee does not qualify for deduction as such. This view is supported by the decision of the Supreme Court in the case of Smt. Padmavati Jaikrishna v. Addl. CIT . In the case of East India Pharmaceutical Works Ltd. v. CIT their Lordships of the Supreme Court held that the interest paid on the overdraft utilize .....

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cordingly inapplicable to the facts of this case. 19. We find that in both the above decisions, it has been held that remuneration and the income-tax thereon paid on behalf of the employee therein, is an allowable expenditure u/s 37 of the Act. In view of the same, we allow the assessee s ground of appeal. 20. As regards groundNo.5 against the disallowance of reimbursement of software expenses, we find that during the assessment proceedings, the AO has observed that the assesseecompany has claim .....

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iew of the judgment of the jurisdictional High Court in the case of Samsung Electronics Co. Ltd. reported in 345 ITR 494. 22. The learned counsel for the assessee, though fairly agreed that the issue is covered against the assessee by the decision of the jurisdictional High Court, placed reliance upon the following judgments in favour of the assessee: (i) Director of Income-tax vs. Infrasoft Ltd. (220 Taxmann 274(HC)(Delhi) (ii)Director of Income-tax vs. Ericsson A.B. (16 Taxman.com 371)(2011) 3 .....

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. 25. In the result, the assessee s appeal is partly allowed. IT(TP)A No.61/Bang/2015 (Revenue s appeal): 26. In the revenue s appeal, the only grievance of the revenue is against the direction of the CIT(A) to reduce the expenditure incurred in travel, telecommunication etc., both from export turnover as well as total turnover for the purpose of computation of deduction u/s 10A of the Act and also in directing the AO to allow depreciation at the rate of 60% on Circuit Test Boards as against 25% .....

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t. However, since the issue is covered in favour of the assessee by the decision of the jurisdictional High Court which has neither been stayed nor set aside, we see no reason to interfere with the order of the CIT(A). The revenue s grounds No.1 and 2 are rejected. 27. As regards ground No.3 relating to the rate of depreciation at 60% on circuit test boards, brief facts are that during the assessment proceedings, the AO, while considering the claim of the assessee of ₹ 2,57,232/- towards p .....

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rds are to be classified as computers for the purpose of allowing depreciation in accordance with the depreciation schedule annexed to the Act and further that when an asset is included in a particular block, customs duty paid thereon should also take the same colour. Therefore, he submitted that the customs duty paid on circuit test boards would also be eligible for depreciation @ 60% as is applicable to computers. Further the learned counsel for the assessee drew our attention to the definitio .....

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hence should be classified accordingly. In support of his contention, the learned counsel for the assessee has placed reliance upon the following decisions: a. CIT vs. BSES Rajadhani Powers Ltd. in ITA 1266 of 2010 wherein the Hon ble High Court of Delhi held that computer accessories and peripheral form an integral part of computers and are eligible for depreciation at the rate of 60%. b. ITO vs. Samiran Majumdar (2006) 98 ITD 119 (Cal) c. DCIT vs. Datacraft India Ltd. (2010) 40 SOT 295 (Mumbai .....

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