TMI Blog2018 (11) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT-A. Ground no. 2 raised by the revenue is dismissed. Addition on account of loans - According to assessee an amount was outstanding - Held that:- In terms of settlement the assessee received only ₹ 1 crore as full and final settlement. The assessee contended that it suffered loss and as such made a claim of bad debt written off for the interest portion. The CIT-A considering the submissions of assessee granted the benefit of bad debt written off. We find that the amount recovered by the assessee is less than the principal amount as given by assessee under loan. The assessee recovered an amount of ₹ 1 crore out of total dues of ₹ 3,04,45,954/- only the interest portion of ₹ 81,95,954/- which is part of ₹ 3,04,45,954/- was claimed as bad debt. The same was allowed by the ld. CIT(A). We find no infirmity in the impugned order of the CIT-A. TDS u/s 195 - commission paid to selling agents, who are based abroad and has no permanent establishment in India - PE in India - Held that:- Since the commission has been paid to nonresident agents for services rendered outside India and the same is not chargeable to tax in India under the Act. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of this expenses had been claimed in the earlier year and was allowed by the AO in an order passed u/s. 143(3) of the Act. He opined that that on the principle of consistency his claim is to be allowed. In support of the contention, the assessee relied on the followings:- Radhasoami Satsang Vs. CIT 193 ITR 321(SC) Madras Industrial Investment Corprn Vs. CIT 225 ITR 802(Mad) 6. Considering the above, the CIT-A deleted the impugned addition as made by the AO by stating as under:- 4. The second ground relates to disallowance of ₹ 71,71,319/ being 1/5th of deferred revenue expenses, claimed in the computation of returned income. Note 8 of the schedule 18 of notes on accounts had mentioned that intangible assets of ₹ 70,91,078/ on account of expenditure on enhancement of business performance and ₹ 1,77,85,834/ on account of technical know how fees , totaling to ₹ 2,48,76,912/ being balances standing as deferred revenue expenditure was fully charged. When this was pointed out to the appellant, it was stated in reply that the assessee company had incurred certain business expenditure to increase the business performance in earlier years. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with expenses on acquisition of technical know how in the process of production. As a matter of policy by the company these technical know how is charged in the profit and loss account in 5/6 years. This practice is not knew to the assessee nor new to the department. Year after year the same has been accordingly allowed by the revenue to your assessee company. We enclose herewith a chart showing details (marked Annexure A) of both business enhancement expenses and technical fees amount being coming since earlier year and its allowance in such earlier assessment year. Relevant pages are also enclosed. During the year considering the fast changes in the company decided to write off the balance in this year not by debiting the P/ reducing the same from past general reserve and clarified the whole situation in the notes to account. This is fact on record. But of course while computing the income the relevant proportion of the aforesaid expenses were duly claimed as per consistency being followed by the assessee company. There is no question of any disallowance all of a sudden. There amount has been rightly claimed. The ld AO has disallowed the aforesaid revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y material change in facts of the case or the view taken in the earlier year is patently erroneous, same view should be taken in the subsequent years. It is not the case of assessing officer that the expenses were capital in nature or otherwise not allowable. He has only objected to their spreading over a number of years. However, Hon'ble Supreme Court has accepted the concept of spreadover in the case of Madras Industrial Investment Corporation v. CIT 225 ITR 802. Considering this, as well as the fact that similar deduction has been allowed in the earlier years, I am of the view that the assessing officer was not justified in disallowing the claim of ₹ 71,71,319/ being 1/5th of total deferred revenue expenses. The disallowance is accordingly deleted. 7. Aggrieved, the revenue is in appeal before us and contended that the action of the CIT-A in allowing such deduction was not correct. He relied on the order of the AO. 8. On other hand, the ld.AR supported the impugned order of the CIT-A and referred to para 4 of the order of the CIT-A. 9. Heard rival submissions and perused the record. We find that the revenue has accepted and allowed 1/5th of the some expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of the order of the CIT-A, we find that the disputed loss has arisen on account of transfer of shares and debentures in terms of said settlement approved by Hon ble High Court. The CIT-A examined the record and found that cost of share was made in terms of approval of the Hon ble High Court of Calcutta. Relevant portion of order of the CIT-A is reproduced herein below:- 6.2. I have considered facts of the case. It is undisputed, that the loss under consideration has arisen on account of transfer of shares and debentures as per terms of settlement approved by High Court. The shares were held by the appellant company since the long time and their cost was duly reflected in the balance sheet. The price at which they were transferred has been subsequently determined by Hon'ble High Court. Therefore, neither the incidence of sale, nor the cost and sale price of the shares, is in doubt. This being the position, there was no reason to not accept the resultant capital loss. The assessing officer has stated in a cryptic manner that the loss was contingent in nature. However, the term 'contingent' refers to situation where the something may or may not occur depending u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of ₹ 3,04,45,954/- was outstanding. However, in terms of settlement the assessee received only ₹ 1 crore as full and final settlement. The assessee contended that it suffered loss and as such made a claim of bad debt written off for the interest portion. The CIT-A considering the submissions of assessee granted the benefit of bad debt written off. We find that the amount recovered by the assessee is less than the principal amount as given by assessee under loan. The assessee recovered an amount of ₹ 1 crore out of total dues of ₹ 3,04,45,954/- only the interest portion of ₹ 81,95,954/- which is part of ₹ 3,04,45,954/- was claimed as bad debt. The same was allowed by the ld. CIT(A). We find no infirmity in the impugned order of the CIT-A. Ground no. 3 raised by the revenue is dismissed. 26. Ground no. 4 is relating to deletion of addition made on account of non deduction of TDS. 27. The AO found that the assessee could not discharge the onus to prove why the TDS could not be deducted and as such disallowed an amount of ₹ 1,68,40,499/- u/s. 40(a)(ia) of the Act. 28. Before the CIT-A, the assessee submitted that the AO added the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been section 40(a)(i) and not 40(a) (ia). That apart, as per the material on record, on foreign technicians' service charges of ₹ 36,37,271/ , technical knowhow fee of ₹ 96,50,8601 and royalty or ₹ 14,87,088/ , tax had been duly deducted and deposited within the prescribed time. The balance amount of ₹ 20,65,280/ was on account of commission to selling agents. It is seen that such commission was paid to the persons based abroad who had no permanent establishment in India and commission had as such neither accrued nor was received in India. Next question comes, as to whether the same can be deemed to accrue or arise in India. As per clause (i) of section 9(1) following income is deemed to have accrued or arisen in India: All income accruing / arisen whether directly or indirectly through or from any business connection in India or through or from abroad in India or through or from any asset source of income in India or through a transfer of capital asset situated in India Explanation 1 to the said section provide that: (a) in the case of a business of which all the operations are not carried out in India, the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and the services were rendered wholly outside India, no business income can be treated as accrued or deemed to accrue in India. Therefore, the appellant was not required to deduct tax on the payment made to them. Therefore, it is clear that the appellant has deducted tax where ever due and the payments on which no tax was deducted were not liable to TDS. Considering this, the disallowance u/s 40 (a) (ia) is deleted. 32. Further, we find that the similar issue basing on identical facts was decided by the Co-ordinate Bench of this Tribunal in the case of M/s. HSIL Ltd vide its order dt. 04-03-2016 and the relevant portion of which is reproduced herein below:- 7. During the assessment proceedings, the AO found that ₹ 1,38,03,604/ was paid to non resident towards commission in foreign currency and the AO disallowed above said amount under section 40(a)(ia) of the Act. 8. Before the CIT(A), as aggrieved by above, the assessee contended that payment made to non residents agents TDS is not deductible in view of the Circular no.786 dt: 27.2.2000 issued by the CBDT and as per the section 195 of the Act. Considering the same, the CIT(A) deleted the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
