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INCOME TAX OFFICER Versus. M/s M. TECH INDIA P LTD & vice versa

2015 (3) TMI 1132 - ITAT DELHI

Disallowance u/s. 40(a)(i) on payment to the licensor - non tds - AO made the disallowance treating the nature of the amount to be that of royalty - Held that:- Keeping in view of the decision of the Hon’ble Jurisdictional High Court passed in the case of CIT vs. Dynamic Vertical Sofware India (P) Ltd [2011 (2) TMI 77 - DELHI HIGH COURT] wherein held that the assessee has been purchasing the software from Microsoft and sold it further in Indian market - By no stretch of imagination it would be t .....

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resaid, the disallowance is not called for - Decided in favour of assessee.

Disallowance on account of expenditure made on Tour to Maldives - Held that:- The total expenses incurred on foreign travel to Maldives were ₹ 4,43,893 out of which an amount of ₹ 2,96,861 only has been disallowed which shows that the AO himself does not fully think the expenses not for business purposes. We also find that similar addition was made in AY 2007-08, which was deleted by CIT(A), the de .....

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. Rajiv Saxena, Sir Ganga Ram Hospital are placed which shows that the assessee has settled the claim of the client on 50% i.e. for ₹ 4,38,980. We find considerable force in the finding of the Ld. CIT(A) that the assessee has also filed a copy of the debit note dated 20.4.2007 raised by Sir Ganga Ram Hospital. In view of the facts of the case, Ld. CIT(A) was of the opinion that the liability to incur the expenditure arose during the year and the AO was not justified in holding it to be per .....

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ning to assessment year 2008-09. 2. The grounds raised in the Revenue s appeal read as under:- 1. The order of the Ld. CIT(A) is erroneous and contrary to the facts and law. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 76,23,426/- u/s. 40(a)(ia) on account of payment made to licensor. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 13,78,4 .....

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raves leave to add, to alter, or amend any grounds of appeal raised above at the time of hearing. 3. The grounds raised in the Assessee s Cross Objection read as under:- 1. On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment made under section 143(3) is bad in law being made by an AO and having proper jurisdiction. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred both .....

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income. The case was processed u/s. 143(1) and subsequently selected for scrutiny. Statutory notice u/s. 143(2) was issued and served on the assessee. The assessment was completed u/s. 143(3) vide order dated 28.12.2010 at an income of ₹ 77,46,180/- making various additions. 5. At the time of hearing, Ld. Counsel of the assessee filed Synopsis and stated that the facts of the case and the law applicable to the issues in dispute have already been decided in favor of the assessee in assessee .....

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ds the issue involved in Ground No. 1, the same is general in nature, therefore need not be adjudicated the same. 8. As regards Ground No. 2 relating to disallowance u/s. 40(A)(i) of the I.T. Act on payment to the licensor amounting to ₹ 76,23,426/-. We find that the AO has discussed this issue at para 1- 2 from pages 1-2 regarding the payment to M/s Tracer Health Pty. Ltd., Australian Company - ₹ 66,87,509/- and Speed Miners, Malaysia ₹ 9,35,987/-, the additions made by the AO .....

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B Pg. 30 onwards. There was no written agreement with Speed Miners. The assessee has actually been appointed on VAR (Value Added Reseller) by these entities. The AO made the disallowance invoking the provision of Section 40(a)(i), treating the nature of the amount to be that of royalty. In the past, the same transaction of purchase from Track Health has been treated as purchaser only. Assessments have been made under section 143(3) of the Act. No doubt the AO had relied on the order of Delhi ITA .....

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gination it would be termed as "royalty". 8.1 Keeping in view of the decision of the Hon ble Jurisdictional High Court passed in the case of CIT vs. Dynamic Vertical Sofware India (P) Ltd, (2011) 332 ITR 222 (Del.), we are of the considered view that the dispute is squarely covered in favor of the assessee. Respectfully, following the same precedent, the issue involved in Ground No. 2 is decided against the Revenue by upholding the order of the Ld. CIT(A) on this issue. 9. As regards G .....

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essee, we are of the view that the amount was paid to M/s Intersystem India Pvt. Ltd., Gurgaon relating to payment of Catche Licenses Procurement. This has also been disallowed by the AO invoking the provision of section 40(a)(ia) for non deduction of TDS, treating the nature of payment as royalty. In view of the submissions made under Ground No. 2, as aforesaid, the disallowance is not called for, therefore, we uphold the order of the Ld. CIT(A) on this issue also and accordingly, issue raised .....

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ussed the same at page 11 vide para 7. After going through the order of the Revenue Authorities and the Written submissions of the assessee, we are of the view that the Managing Director of the company visited Maldives for exploring the business prospects. The reason for disallowance given by the AO is that no business was explored during the year, hence the same does not pertain wholly and exclusively for business purposes. The assessee had business relationships with M/s M Plus Maldives Pvt. L .....

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total expenses incurred on foreign travel to Maldives were ₹ 4,43,893 out of which an amount of ₹ 2,96,861 only has been disallowed which shows that the AO himself does not fully think the expenses not for business purposes. We also find that similar addition was made in AY 2007-08, which was deleted by CIT(A), the department did not go in further appeal. In view of above detailed discussions, we are of the considered view that such adhoc disallowance cannot be upheld. Therefore, Ld. .....

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