TMI Blog2017 (8) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the assessee has established even the source of the source by furnishing additional evidences, however, same has been rejected purely on technical consideration and the addition has been made and sustained on the aforesaid ground which is wholly unsustainable. - Decided in favour of assessee. Addition on expenditure on rent holding the same to be excessive - Held that:- The appellant has furnished the complete details of the expenditure, which expenditure has been incurred for the purpose of its business and there is not even any allegation that expenditure incurred by the appellant not genuine, as such, disallowance made by the AO and sustained by the learned CIT(A) is directed to be deleted.- Decided in favour of assessee. Addition of notional amount on the ground of nondisclosure of correct rental income - Held that:- As before the CIT(A), appellant filed its submissions and also enclosed the letter dated 31.08.2011 however learned CIT(A) without considering the aforesaid letter, merely on suspicion that agreement with Magnum did not provide for variation of rent, upheld the addition. In fact he has failed to appreciate that no such income accrued to the appellant as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the appellant company as such, disallowance made by the AO and sustained by the ld. CIT(A) is directed to be deleted.- Decided in favour of assessee. Unabsorbed depreciation brought forward - Held that:- The provisions relating to set off, carry' forward and set off of unabsorbed depreciation are contained in Section 32(2) provides that where full effect cannot be given to depreciation allowance as per sub-section (1) in any previous year, then the allowance or part of such allowance, which cannot be so set off, is deemed to be part of the depreciation allowance for the subsequent year(s) and is accordingly allowed as deduction in such succeeding previous year and so on for the succeeding year(s). In view of the aforesaid statutory' provision, the unabsorbed depreciation relating to assessment year 2009-10 which remained unadjusted on 01.04.2011, would merge with the depreciation of previous year relevant to the assessment year 2012-13 and the aggregate of such unabsorbed depreciation would be carried forward to succeeding years for indefinite period. Thus nabsorbed depreciation relating to assessment year 2009-10 is directed to be allowed to be carried forward. - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in the appellant company. 2.3 That the learned authorities have grossly erred in failing to appreciate that the preference shares allotted to such shareholders were subsequently converted in to equity shares and both the shareholders also became director in the appellant company, as such, once identity of the persons is undisputed, and such shareholders have made investment in appellant company through banking channels towards the furtherance of their business interest, addition made and sustained by doubting the creditworthiness of shareholders and genuineness of the transaction is wholly misconceived and hence deserves to be deleted. 2.4 That the learned Commissioner of Income Tax (Appeals) has grossly erred in failing to appreciate that during the course of the assessment proceedings, appellant has provided the complete details with respect to identity of the both the share applicants and has also provided the copy of the bank account, and both the share applicants have also confirmed the factum of investment in the appellant company, as such, appellant has discharged its burden u/s 68 of the Act. 2.5 That the learned Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,72,783/- to total income on account of excess purchase consideration paid over the book value of assets/liabilities forming part of the business acquired from M/s Kaizen Engineering Systems Pvt. Ltd., vide MOU dated 24.06.2011, for a total lumpsum consideration of ₹ 1.70 crores, and capitalized in the books of accounts under the head intangible assets/goodwill on the ground that the aforesaid excess consideration constituted royalty within the meaning of section 9(l)(vi) of the Act and therefore, the appellant failed to deduct tax at source therefrom u/s 194 J of the Act. 6.1. That the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding that excess consideration of ₹ 99,72,783/- paid over the book value of assets/liabilities forming part of the business acquired from Kaizen Engineering Systems Pvt. Ltd. is royalty within the meaning of u/s 9(l)(vi) of the Act. 6.2 Without prejudice to the aforesaid grounds that the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in not appreciating that even assuming that the appellant was liable to deduct tax at source from the aforesaid payment, since the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shriniwas Sharma 2,500 ₹ 25,000/- 9. Parmeet Chawla 2,500 ₹ 25,000/- 10. Sanjeev Mathur 15,000 ₹ 1,50,000/- Equity shares thus allotted were 8,54,700 of ₹ 10/- each. During the instant year it further allotted preference shares out of authorized share capital of ₹ 4,16,90,600/-. The said share capital had been contributed by the following shareholders: Sl. No Name of the shareholder No of shares held Date of allotment Amount [Rs.] 1. Patrick Brian Joseph 2,97,071 27.11.2011 2,97,07,077 2. Gregory Douglas Strohefldt 1,19,835 27.01.2012 1,19,83,520/- 4. Details of remittances received by the assessee company from the aforesaid two T shareholders are at pages 254 of Paper Book, Volume - 2. Said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 13,65,292/- 11. 2014-15 NIL 12. 2015-16 ₹ 99,44,120/- ₹ 99,44,120/- 13. 2016-17 ₹ 3,09,09,5807- - 5. After the two aforesaid shareholders had been allotted preference shares when said shareholders had shown their interest having regard to the potentially and future prospects and had been taken as directors the company turned the table and not only wiped off the losses but paid tax on book profit for the AY 2014-15 and income has substantially been earned by the company. It would be seen that aforesaid company though had been incorporated on 4th February 2004, yet, till the close of the accounting year relevant for the instant assessment year, it had been incurring losses and such loss so suffered has duly been accepted, but soon the aforesaid two directors were taken as Board of directors and had contributed capital who were allotted preference shares, the appellant company started making profit. In fact the expenditure incurred on their trav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the carried forward loss) by making an aggregate addition of ₹ 5,28.62,408/-. Thereafter, the AO allowed a set off of business loss and depreciation carried forward of ₹ 1,17,27,592/- however he disallowed a sum of ₹ 7,07,187/- being the loss for the AY 2009-10. 15.04.2015: Aggrieved against the aforesaid order of assessment, assessee preferred an appeal before the learned CIT(A). 17.08.2016: Assessee also filed an application u/r 46A of the Income Tax Rules before the learned CIT(A) alongwith following additional evidences (see page 245-254 ofPB): A. Mr. Patrick Brian Joseph (Tax Resident of UK): 1. Copy of the income tax return filed in the source country i.e. UK alongwith computation of income for the following tax years: 06.04.2011 to 05.04.2012 256-289 06.04.2010 to 05.04.2011 290-325 2. Copy of the confirmation from UBS wealth management showing source of funds being extension of bank overdraft. 326-328 B Mr. Gregory Douglas (Tax Resident of Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had provided funds for acquiring preference shares by raising bank overdraft and by withdrawing funds from Superannuation Funds. 27.02.2017: Appellant filed its rejoinder submissions. In respect of the contention of the AO that sufficient and proper opportunity was granted to the appellant during the course of the assessment proceedings, it was submitted that such a statement is factually incorrect as during the course of the assessment, it was only on 18.02.2015 for the first time, the AO required the assessee to file the confirmation and to prove the creditworthiness of the shareholders and assessment had been made within one month on 16.03.2015, which clearly showed that no proper and meaningful opportunity was grantedto the appellant. It was submitted that the appellant neither had or is expected tohave the details of sources of investors funds of the aforesaid shareholders and the sums credited represented the amount of the share capital against the issue of shares. That appellant in rejoinder, also made its detailed counter submissions in respect of each objection of the AO made in his remand report (placed at page 423-439 of the PB). 27.02.2017:Apart from the rejoind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee from two non resident individuals towards allotment of preference shares, which shareholders also became directors of the appellant company w.e.f. 01.04.2012. 9. As was submitted hereinabove, the appellant is engaged in the business of printing PAN Cards, Driving Licenses, Vehicle Registration Certificates, providing services for issuance of Driving Licenses and Vehicle Registration Certificates and providing time and attendance services using biometric technology. However till the preceding assessment year, appellant was incurring losses as such, to expand the business operations and to augment the funds of the purpose of its business, appellant approached two non residents Mr. Gregory Douglas Strohfeldt (an Australian citizen) and Mr. Patrick Brian Joseph Curran (an UK citizen) who are technocrats and are well versed in the line of the business of the appellant company, for making investment in the applicant company and it was also agreed that after the appellant will receive the investment, such person will also become the directors of the appellant company w.e.f. 01.04.2012. In accordance with the aforesaid understanding, during the year under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shareholders who had duly confirmed. In fact, the AO never made any attempt ever to seek a response from such shareholders directly or even required the appellant to produce them from their statement. However, the AO for the first time vide order sheet entry dated 18.02.2015 required the appellant to furnish the confirmation and also prove the creditworthiness of such shareholders. Such confirmation in fact had been filed on 02.03.2015 and 09.03.2015 before framing of the assessment (placed at para 6.8 and 6.9 above). 11. In response to the aforesaid vide its reply dated 02.03.2015, the appellant filed reply (placed at page 45 of PB), alongwith confirmation, copy of the bank from where such sum has been remitted and the copy of the passport of Mr. Gregory Douglas Strohfeidt. Further vide reply dated 09.03.2015 (placed at page 46 of PB), provided the following documentary evidences in respect of Mr. Patrick Brian Joseph from whom it has received investment in cumulative preference shares: i. Copy of confirmation ii. Copy of Passport iii. Copy of bank statement 12. After the aforesaid documentary evidences, no further queries were raised from the appellant and AO pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial statement of Fiwian Superannuation Fund, a communication from the financial advisor confirming that funds credited in the aforesaid Superannuation Fund belong to Mr. Douglas and also statement showing the movement of funds from the Superannuation. It is submitted that in accordance with the Australian laws, Mr. Douglas has founded the Superannuation Fund, in which, at the relevant time, he was the provisions of the Superannuation Fund Deed. Accordingly, from the Superannuation Fund, Mr. Douglas had remitted his contribution directly to the appellant company, in relation to the amount of investment made. It is reiterated that the aforesaid approach had been adopted by Mr. Douglas to avoid two-way traffic of the Fund of first receiving the funds to his account and thereafter remitting the funds to the appellant company from his account. However, learned CIT(A) firstly did not admit the additional evidences furnished by the appellant on the ground that such documents were not attested as per the provisions of Diplomatic and Consular Office (Oaths and Fees) Act. 1948. It is relevant to state that AO in his remand report dated 10.10.2016 did not dispute the veracity of the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount so received would be credited in the books of account of the company. The ITO would be entitled to enquire, and it would indeed be his duty to do so, whether the alleged shareholders do in fact exist or not. If the shareholders exist then, possibly, no further enquiry need Ire made,.. 16. It was submitted that aforesaid judgment of the Full Bench has been followed till date universally and also by the Apex Court in its judgment in the case of CIT vs. Lovely Exports (P.) Ltd. reported in 216 CTR 195 has adopted the same line of reasoning. It was further submitted that the aforesaid judgments of the Delhi High Court has also been also followed in the case of CIT vs. Peoples General Hospital Ltd. reported in 356 ITR 65 (MP) wherein the Hon ble Court relying on the judgment of the Apex Court in the case of Lovely Exports (P.) Ltd. (supra) has held as under: It is not the case of any of the parties that M/s Alliance Industries Limited, Shariah is a bogus company or a nonexistent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into between the parties through account payee cheques makes the question of identity of creditors fall into oblivion and it becomes absolutely irrelevant. The same view has been expressed by the Hon ble Calcutta High Court in the case of CIT v. Mather and Platt reported in 168 ITR 493. It was submitted that once the shareholders have duly confirmed the factum of investment made in the appellant company, addition made under section 68 of the Act in the hands of the appellant is wholly unwarranted, as held by the Apex Court in the judgment reported in 292 ITR 682, CIT vs. K. Chinnathamban (SC), where it has been held by their Lordships of the Apex Court where a transaction stands confirmed by the third party of an investment no addition could possibly be made u s 68 of the Act. in the hands of the assessee in whose, books of accounts credit appears . 19. It was further submitted that before making the impugned addition, it has not even been established that investment received by the assessee has been originated from the coffers of the assessee. In support of the aforesaid, the appellant seeks to place reliance on the judgment of the High Court of Delhi in the case of CIT vs V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer to come to the conclusion regarding any genuineness or fictitious identity of the entries or non capacity of the lender. 10. Under these circumstances, we do not find any infirmity or perversity in the order passed by the Tribunal and in our opinion no substantial question of law arises in this case. With the result, the present appeal is not maintainable and the same is hereby dismissed. [Emphasis Supplied] 21. Accordingly, the AO/CIT(A) have failed to appreciate that, entire funds for making the investment originated from the bank account of shareholders who are duly identifiable and have also confirmed the investment made in the appellant company, as such, addition made by the AO and sustained by the learned CIT(A) is unsustainable in law. Furtherr, it is settled law that if an assessee has furnished the evidences/material to establish the transaction, and the AO is not inclined to believe the material placed by assessee. then burden is on him to bring material to rebut the same as has been held by the Hon ble High Court of Delhi in the case of CIT V Genesis Commet (P) Ltd reported in 163 Taxman 482. The assessee also submits that where no adverse material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the genuineness of the transaction. In the present case, the assessee had produced the confirmation from the donors in the form of affidavits, the gift deeds between the donors and the assessee, copies of NRE accounts and passport of the donors. The order of CIT(A) reveals that Assessing Officer made enquiries from the bankers of the donors, who confirmed that gifted amounts were given from the accounts of the donors. No other enquiry was made by Assessing Officer. On these facts and circumstances of the case, we are in agreement with the order of CIT(A) that the initial burden which lies on the assessee has been discharged and the same was shifted to the Assessing Officer to disprove the same by bringing sufficient material on the record. As observed by the CIT(A), the Assessing Officer has not doubted the genuineness of any of the documents and the addition cannot be made merely on the basis of suspicion or surmises. The identity and capacity of the donors are well established. Since the money had come from NRE account, the genuineness of the transaction can also not be doubted. There is no material on the record to even suggest that any unaccounted money of the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of his proving the source from which he has received the cash credit. Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the Assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received money, Section 106 makes the Assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the subcreditors. If Section 106 and Section 68 are to stand together, which they must, then, the interpretation of Section 68 has to be in such a way that it does not make Section (06 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he onus was on the Assessee to prove the source of the sub-creditor. It was observed as under: With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the credit worthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being malafide. In our view the ITAT ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta branch of the Central Bank on November 15, 1944, and thereafter was transferred through Bombay head office of the bank to Jamnagar. There were also other circumstances which pointed to the falsity of the above explanation. The falsity of the above explanation of Biswanath, in the opinion of the High Court, did not warrant the conclusion that the amount of ₹ 5,00,000 belonged to the assessee. We can find no flaw or infirmity in the above reasoning of the High Court. The question which arose for determination in this case was not whether the amount of ₹ 5,00,000 belonged to Biswanath, but whether it belonged to the respondentfirm. The fact that Biswanath has not been able to give a satisfactory explanation regarding the source of ₹ 5,00.000 would not be decisive even of the matter as to whether Biswanath was or was not the owner of that amount. A person can still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money is found to be not correct. From the simple fact that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has failed to appreciate the provisions of section 69 of the Act and has misapplied the provisions of section 68 of the Act. Reliance is placed on the judgment of the jurisdictional High Court in the case of Addl. CIT vs. Precision Metal Works reported in 156 ITR 693, wherein at page 696, Hon ble Court has held as under: ... When the true picture was explained to the ITO. we think that he was right in adding the income to the persons to whom it belonged rather than to tax the wrong persons with the wrong amount... 28. It is well settled law by the judgment of the Apex Court in the case of ITO vs. Ch. Atchaiah reported in (1966)218 ITR 239 (SC) that the assessing officer has to only assess right person instead of wrong person. The appellant even at the cost of repetition, seeks to submit that despite appellant having discharged its initial onus to establish that the identity of the creditors, creditworthiness of the transaction and genuineness of the transaction, the addition has been sustained primarily on the ground the assessee has failed to establish the source of the source. It is submitted that in the instant case, the assessee has established even the source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax component added to cost ₹ 12,358 Total ₹ 27,89,114 32. However, the AO made a disallowance of a sum of ₹ 88,114/- on the ground that under the rent agreement with Cepco Industries Private Limited and total rent expenditure incurred during the year aggregated to ₹ 27.00 lacs ₹ 2,25,000/- per month for a period of 12 months whereas appellant has debited a sum of ₹ 27,89,114/- as such it was held by him that a sum of ₹ 89,114/- is the excess rent (see para 5c of the order of the AO). It 4s submitted that during the course of the assessment no specific query was raised regarding any query whatsoever. That before the learned CIT(A), however appellant filed its submissions dated 27.02.2017 (placed at page 447-450 of PB). However learned CIT(A) without appreciating the submissions of the appellant rejected the submissions of the appellant. In the submissions made before the learned CIT(A) the appellant had submitted that apart from the rent paid to M/s Cepco of ₹ 25,62,000/- being the rend payable under the agreement (and not ₹ 27 lacs as allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant company was entitled to receive a monthly rental of ₹ 1,50,000 from Magnum Technology Pvt. Ltd and a monthly rental of ₹ 50,000 from Bell Securitas Pvt. Ltd. It is however submitted that the rental agreement with Magnum Technology Solution Pvt. Ltd was terminated after November, 2011 i.e. during the year, lease continued only for a period of 8 months, viz. from April to November, 2011, and thus the appellant had only received rental income from Magnum for a period of 8 months and not the entire year which had duly been shown. It is submitted that unless an income accrues, no income can be brought to tax. Thus in the absence of accrual of an income, the learned Authorities had committed gross error of law to bring to tax a sum which has not accrued to it and as such the addition made is contrary to section 5 of the act which is a charging section. 36. It is relevant to state here itself that Magnum Technologies, vide letter dated 31.08.2011 (placed at page 475 of PB), in view of reduced business activities and consequent inability to continue with rented premises, sought for reduction of lease rent payable under the agreement of ₹ 1,50,000/- to ₹ 50,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided all necessary infrastructure including operational, supervisory, maintenance, manpower and inventory of smart cards, print media and stationery, etc. 38. During the relevant previous year, the assessee pursuant to MOU dated 24.05.2011 (placed at pages 143-156 of the PB), acquired the aforesaid business of Kaizan, along with all the related assets and liabilities; lock stock and barrel, from Kaizan at a total lumpsum consideration of ₹ 1.70 crores. The book value of assets forming part of the aforesaid business in the hands of Kaizan aggregated to ₹ 70,27,217, which was incorporated as such in the books of the assessee company, post acquisition of business. The difference between the total agreed lumpsum consideration of ₹ 1.70 crores and the aforesaid book value (Rs.70.27.217) of assets amounting to ₹ 99,72,783 was capitalized in the books of account under the head intangible assets (placed at page 26 of PB). It would be pertinent to point out that neither any depreciation on the aforesaid capitalized value under the head intangible assets was claimed, nor any deduction for the aforesaid amount was claimed in the books of accounts or return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of Delhi High Court in the case of Asia Satellite Telecommunications Co. Ltd. vs DIT: 332 ITR 340. where, while succinctly explaining the provisions of aforesaid Explanation to section 9(1) (vi) of the Act, the High Court held that consideration paid towards outright purchase of asset, as opposed to acquiring a right to use such asset, does not fall within the meaning of 'royalty' under the aforesaid section: 55. Keeping in view the aforesaid principles, we now embark upon the interpretative process in defining the ambit and scope of term 'royalty' appearing in Explanation 2 to sub-clause (vi) of Section 9(1) of the Act. Sub-clause (i) deals with the transfer of all or any rights (including the granting of a licence) in respect of a patent, etc. Thus, what this sub-clause envisages is the transfer of 'rights in respect of property and not transfer of 'right in the property . The two transfers are distinct and have different legal effects. In first category, the rights are purchased, which enable use of those rights, while in the second category, no purchase is involved, only right to use has been granted. Ownership denotes the relationship betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een a sale of property and the transfer of the right to use the property in the following words : There is a well-known distinction between the out and out sale of properly and allowing use of the property or technical knowhow. In the former case property, which may include person's business transferred unconditionally, becomes property of the purchaser. In the latter case the purchaser only gets the right to use the property. The payment in the latter case may be treated as licensing fee or royalty but the payment in the first category of cases cannot be treated as royalty... Similarly, in CIT vs. Davy Ashmore India Limited (1990) (190 ITR 626), the Calcutta High Court held (at page 635) that the import of designs and drawings postulates an out and out transfer or sale of such designs and drawings and the non-resident company does not retain any property in them leaving the grantee to use or exploit them. It was held that the consideration paid for the transfer of the designs and drawings cannot be treated as royalty falling under Article XIII of the Double Tax Avoidance Agreement between India and U.K. In CIT vs. Klavman Porcelains Limited (1998) (229 ITR 735 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r scientific experience. The CTT(A) has stressed on the words model or design . It must be noticed that there are a number of words used both in the section and in the treaty. All the words signify a form or kind of intellectual property. The words model or design have to be understood in the context. When these two words are surrounded by words meaning or referring to intellectual property rights, it may not be proper, having regard to the well-settled rules of interpretation, to hold that these two words will have to be understood in a different sense. .. If this principle of interpretation is applied to clasue (i) of Explanation 2 to section 9(1)((vi) of the Act, it seems to us that the words such as, patent, invention, secret formula or process or trade-mark, which are all species of intellectual property, as rightly contended by the learned counsel for the assessee. These two words cannot therefore refer to drawings and designs which are sold outright, without the seller retaining any proprietary rights over them The model or design in order to be roped in by the provision. should be a specie of intellectual property in the same manner as a pat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, it is submitted that since the aforesaid payment did not fall within the meaning of royalty u/'s 9(1) (vi), the same was not subject to TDS u s 194J and, therefore, there was no default on the part of assessee in deducting tax at source under the said section. 40. It was submitted that despite the aforesaid submission learned CIT(A) in a wholly arbitrary manner uphold the addition by holding that payment made by the appellant is for technical services as defined under Explanation 9(1 )(vii) of the Act. It is submitted that payment made by the appellant cannot be termed as fee for technical services as per Explanation 2 of section 9(1 )(vii) of the Act. For the sake of convenience, aforesaid provision is extracted hereinbelow: Explanation [2], For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental agreements. As discussed in detail supra, the appellant had leased office premises at Kalkaji and Patparganj and sub-let part thereof to sister concerns. That learned disallowed the aforesaid sums by holding that such an expenditure is capital expenditure. Learned CIT(A) though admitted that registration charges paid on lease agreements cannot be held to be capital expenditure, however arbitrarily uphold the addition. It was submitted that since the stamp duty charges were payable in connection with the rental agreement, the same were in the nature of revenue expenses in the absence of any capital asset coming into existence in the hands of the appellant company as such, disallowance made by the AO and sustained by the ld. CIT(A) is directed to be deleted. 44. As regards Ground No. 8 being unabsorbed depreciation relating to AY 2009-10 we find that for the previous year, relevant to the assessment year under consideration, the appellant had brought forward, inter-alia, unabsorbed depreciation of assessment year 2009- 10 amounting of ₹ 7,07,187 and claimed set-off the reagainst in the return of income for the relevant year. The copy of computation of income for AY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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