TMI Blog2010 (9) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, the assessing officer has deducted the entire amount of subsidy from the actual cost of fixed assets. 3. The main contention of the assessee s counsel is that impugned amount of subsidy is directly or indirectly not relating to the cost made towards acquisition of block of fixed assets. This subsidy was received after long time of investment made on fixed assets and the same has been invested to establish industries in backward areas and he submitted that this subsidy is not for the specific purpose of meeting any portion of cost of assets though quantified as a percentage of such cost and the same is therefore not deductible from actual cost for the purpose of depreciation. According to the learned counsel, the provisions of Explanation 10 to Sec. 43(1) is not applicable and he relied on the judgement in the case of Hon ble Supreme Court in the case of CIT Vs. PJ Chemicals (210 ITR 830) and judgement of Himachal Pradesh High Court in the case of CIT Vs. Himachal Engineering Company (P) Ltd. (301 ITR 116) (Himachal HC) for the same proposition. 4. The learned departmental representative submitted that the subsidy has to be reduced from the actual cost of fixed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, and, therefore, their income was not taxable in India u/s 9. Hence the provisions of section 40(a) (ia) are not applicable. iii) As per the CBDT circular No.786 dated 7.2.2002, where non resident commission agent operates outside India, no part of his commission arises in India and such payment also not taxable in India. Though this clarification has been given for sales commission, it is equally applicable to the payment made to a non resident. 7. According to the learned authorized representative for the assessee, the payments were not in the nature of payments for royalty or fees for technical services which could be subjected to TDS u/s 195 of the Act read with Sec. 9. He drew our attention to section 9. He submitted that the entire expenditure is incurred towards outright purchase of software modules and the assessee has acquired only right to use the software. As such provisions of section 40(a)(i) (a) are not applicable. He relied on the following judgements: ITO Vs. Prasad Productions Ltd. (125 ITD 263) (Chennai) SB Motorola Inc. Vs. DCIT (95 ITD 269) (Delhi SB) ITO Vs. Intel Tech India (P) Ltd. (32 SOT 227) CIT Vs. Promod Kumar Gupta (320 ITR 409) (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the definition of fees for technical services covered by section 9(1)(vii) of the IT Act. When the payments are made to non resident as royalty or fees for technical services, the requirement of having a permanent establishment or business connection, as mentioned in section 9(1)(i) of the IT Act is not applicable. Hence these payments would come within the ambit of TDS provisions contained in section 195 of the IT Act and, therefore, the non deduction of tax on these payments would result into disallowance of the relevant expenditure u/s 40(a) (ia) of the Act. 9. She placed reliance on the following judgement: 1. Before Authority for Advance Rulings Vs. Head start business solutions Private limited (285 ITR 530) 2. Ranga Rao Lottery Agencies Vs. CIT (287 ITR 540) (Mad.) 10. We have heard both the parties and perused the material available on record. We have also gone through the payments made by the assessee. By going through the invoices produced by the assessee, hese payments fall within the purview of Sec.9(1)(vi) 9(1) (vii). There is no necessity of having any permanent establishment in India, in view of Explanation 9 was inserted to Sec.9 by the Finance Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the present case, the payments were in the nature of royal or fees for technical services and there is an obligation on the assessee to deduct TDS as per provisions u/s 195(1) of the IT Act. Since there is failure on the part of the assessee, the assessee is covered by the provisions of section 40 (a) (i) and this ground taken by the assessee is dismissed. 12. The next ground is with regard to assessing the interest income on Fixed Deposits under the head income from other sources . 13. We have heard both the parties and perused the materials available on record. This issue is squarely covered by the order of this Tribunal in assessee s own case vide order dated 31.7.2007 in ITA No.1102/Hyd/2004 for the assessment year 2001-02 wherein the Tribunal followed the judgement in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. Vs. CIT (227 ITR 172) and the judgement of the Hon ble Supreme Court in the case of Pandian Chemicals Ltd. Vs. CIT (262 ITR 278) (SC). Respectfully following the above order of this Tribunal, we dismiss the ground taken by the assessee on this issue. 15. The next ground is with regard to deletion of communication expenditure and technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export turn over for the purposes of deduction u/s 10A of the Act. Consequently, the turnover has to be treated as export turnover. He relied on the judgement in the case of CIT Vs. Bombay Burmah Trading Corporation (242 ITR 298) (SC) and the order of this Tribunal in the case of SM Energy Teknik Vs. DCIT (10 SOT 679) (Mum). 18. We have heard both the parties and perused the materials available on record. The assessing officer has treated the profit from export of hardware export amounting to ₹ 3,72,335/- as not profit from export of software. On appeal, the CIT(A) directed the assessing officer to treat the profit from export of hardware as part of export profit entitled for deduction u/s 10A. In our opinion, the CIT(A) has erred in giving such direction without giving any direction how the turnover of export of hardware to be treated. Hence the entire issue requires to be reconsidered at the end of CIT(A) and accordingly, we set aside the entire issue to the file of CIT(A) for fresh consideration to see whether the profits from export of hardware forms part of export profit and hardware exports forms part of export turnover for the purpose of deduction u/s10A. 19. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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