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TMI Blog2025 (2) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... account by Rs. 64,88,451/- on account of payments being made to these foreign agents. Total income earned for the year under consideration from the export of the software has been at Rs. 9,73,599/-. Payments to these agents were made after deduction of tax thereon and this is not in dispute. Out of total expenses of Rs. 64,88,451/- debited to the Profit and Loss Account, amount to the extent of Rs. 14,39,631/- was provisional entry, which was reversed on 31.10.2010 and taken to the income in A. Y. 2011-2012. Copy of ledger account of Rs. 64,88,451/- along with the bills raised by the appellant is placed at pages 73 to 82 of the paper book. (iii) The Ld. A.O. while framing the assessment order against the appellant disallowed the expenses of Rs. 64,88,451/- by observing that (a) The expenditure of Rs. 64,88,451/- is disallowed u/s 14A of the I.T. Act. (b) Income from "export of software " is only Rs. 9,73,599/- against which expenditure of Rs. 64,88,451/- is quite irrational and unjustified. (c) The genuineness of the expenditure could not be proved by the assessee and (iv) Before moving to comment on the observations made by the Ld. A.O. it is pertinent to mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) all the evidences containing more than 300 pages were filed to establish the genuineness of the expenses. The same was sent for the remand report. Ld. A.O. submitted his remand report and at no point of time, the documents / evidences submitted by the appellant were disputed. Even in remand report, the A.O. was insistent on the applicability of section 14A of the Act. The CIT(A) did neither appreciate the facts of the case nor legal aspects of the case and confirmed the addition. Moreover, with a view to assist the Hon'ble Bench, following papers are placed in paper book. (i) Copies of correspondences made with the foreign agents are placed at pages 178 to 235 of the paper book. (ii) Copy of bills/ invoices raised to foreign agents are placed at pages 167 to 177 of the paper book. (iii) Copy of work order is placed at pages 236 to 237 of the paper book. (iv) Copies of TDS certificates issued to LLC are placed at pages 156 to 158 of the paper book. (v) Copies of request letters to bank for clearing remittances to LLC are placed at pages 159 to 162 of the paper book. (vi) Copies of CA certificates are placed at pages 163 to 166 of the paper book. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (h) Pr. CIT vs. Mouan Export India (P) Ltd. 162 DTC 247 (Del) 2. No disallowances of expenses when TDS was deducted and deposited (a) ITO Vs. LGW Ltd 2016-(130)-ITR 201 (ITAT KOL) (Pages 280-298 of the paper book) 3. It is not required that expenditure must necessarily relate to earning of income. (a) Brihan Maharastra Sugar Syndicate Ltd and others Vs. DCIT 165 R 279 (Bom) (pages 299 to 313 of the paper bok) 2. Revised Ground No. 3 Ld. CIT(A) has not allowed the credit of TDS of Rs. 92,20,398/- Copy of acknowledgement of return along with computation of income showing credit of TDS is placed at pages 238 to 243 of the paper book." (A.1) Although several grounds of appeal have been raised by the assessee, in effect there are only two issues in dispute. The first issue is regarding the addition of Rs. 64,88,451/- made by the Assessing Officer u/s 14A of the I. T. Act. The second issue in dispute is regarding the assessee's claim for TDS. (A.2) In the course of appellate proceedings before the Income Tax Appellate Tribunal, the paper books, containing the following particulars were filed from the assessee's side: SL. NO. PARTICULARS 1 Copy of Balance She ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f TDS Certificates issued to LLC 33 Copies of request letter to bank for clearing remittances to LLC 34 Copy of CA Certificates required for remittance 35. Copies of bills/Invoices raised to the foreign buyers of aggregating Rs. 9,73,599/- 36. Copies of correspondences made with the ASP Services LLC and Tekorigin LLC 37. Copy of work order 38. Copy of acknowledgement of Return of Income for the A.Y. 2008-2009 along with computation of Income to demonstrate that TDS was claimed as deduction from the tax payable (B) As regards the addition of Rs. 64,88,451/- made by the Assessing Officer under section 14A of the Act, the learned A.R. for the assessee submitted that there was no exempt income in the hands of the assessee and therefore, there was no case for any disallowance u/s 14A of the Act. As regards the genuineness of the aforesaid expenditure of Rs. 64,88,451/-, he contended that there was no dispute. In this context, he highlighted that tax was deducted at source from payments made by the assessee by way of retainership fees. As regards whether the expenditure was incurred for the purposes of the assessee's business, he drew our attention to the various documents c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we categorically hold that any disallowance u/s 14A was unwarranted in this case. Further we find that the genuineness of the aforesaid expenditure is not in dispute. Further it is also found that the aforesaid entities namely ASP Services LLC and M/s Tekorigin LLC did provide services to the assessee. The services provided by the aforesaid entities to the assessee are evidenced by copies of correspondences forming part of the paper book as well as on the other documents referred to in the foregoing paragraphs (B) of this order. It is also not in dispute that the assessee got good business in USA in subsequent years. In view of the foregoing, we agree with the contention of learned A.R. for the assessee that the mere fact that the payment made to the aforesaid entities by way of retainership fee did not result in commensurate business in USA in the year relevant to assessment year 2008-09 does not imply that the expenditure incurred was not for the purpose of the assessee's business. We are further persuaded to take this view considering that the retainerships were terminated by the assessee within a short time when the assessee realized that the services provided by the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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