TMI Blog2020 (12) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses under section 30 to 38, and, as a corollary to this legal position, when the related expenditure is not claimed as deduction under section 30 to 38, this disallowance cannot be pressed into service at all. To that extent, we uphold the plea of the assessee in principle- subject to factual verification about no such claim having been made in the computation of business income i.e. in the profit and loss account filed by the assessee alongwith computation of business income. In case the assessee has indeed accounted for the agency commission on these advertisement revenues, rather than taking entire billing revenues as billing revenues of the assessee and claiming deduction for the advertisement paid to Facebook Ireland Limited in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicate on this appeal, in our humble understanding, only a few material facts need to be taken note of. The assessee before us is, what is termed as, internet advertising agency. During the relevant previous year, the assessee appellant has made certain payments to Facebook Ireland Limited towards the cost of advertisements, carried by facebook, for its clients. In the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has not deducted tax at source from these payments to Facebook Ireland Limited, whereas, for the detailed reasons set out by the Assessing Officer, the tax was deductible from the same under section 195 of the Income Tax Act, 1961. It is for this reason that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under this Act, which is payable,- (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid 8[on or before the due date specified in sub-section (1) of section 139 6. A plain reading of the above statutory provision shows that section 40(a)(i) acts as a restriction on deductibility of expenses under section 30 to 38, but then, as a corollary to this legal position, when the related expenditure is not claimed as deduction under section 30 to 38, this disallowance cannot be pressed into service at all. In other words, a disallowance under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for deduction in respect of payments made to Facebook Ireland Limited is made in the computation of business income, there cannot be any occasion for invoking section 40(a)(i) for its disallowance in computation of business income. As we have analyzed earlier also in this order, section 40(a)(i) acts as a restriction on the deductibility of expenses under section 30 to 38, and, as a corollary to this legal position, when the related expenditure is not claimed as deduction under section 30 to 38, this disallowance cannot be pressed into service at all. To that extent, we uphold the plea of the assessee in principle- subject to factual verification about no such claim having been made in the computation of business income i.e. in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see no need to address the broader issue of whether or not tax is deductible from the payments made by the assessee to Facebook Ireland Limited for the advertisements placed on Facebook, and whether or not income embedded in such payments in taxable in India. Learned Departmental Representative informs us that the Facebook Ireland Limited is being assessed to tax in Hyderabad, and, at this stage and in the present context, we must refrain from making any observations that may have impact on determination of tax liability in respect of advertisement payments to the Facebook. Even though we had the benefit of hearing very erudite and profound arguments on that issue, by learned senior counsel as also by learned senior departmental representa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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