TaxTMI 
TaxTMI 
TaxTMI 
2011 (1) TMI 915
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....Rs. 10,37,42,694/-being bandwidth charges paid to foreign companies for data communication. The details of payment are as follows:- (1) AT & T Rs.8,68,44,524/- (2) MCI Telecommunications Rs.1,68,98,170/- Total = Rs.10,37,42,694 The contention of the assessee before the A.O. that the impugned payments made to AT&T and MCI Telecommunications are not in the nature of royalty, fees for technical services or relate to any item of expenditure covered u/s 40(a)(i) of the Act, was rejected by the AO. The A.O. held that the assessee was required to deduct tax at source in respect of the said amount u/s 195 of the Act and having not done so, disallowance u/s 40(a)(i) was attracted. In this regard, the A.O. referred to the earlier assessment orders in the case of the assessee relating to asst. years 1998-99,1999-2000 and 2002-03, wherein it was held that the impugned amounts fall within the provisions of section 195 of the Act and therefore, the assessee was liable to deduct the tax at source in respect of such payments. 4.2 Aggrieved, the assessee carried the matter in appeal before the first appellate authority. 4.3 The CIT(A) affirmed the action of the A.O. for two reaso....
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....he Act" in section 195(1) shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. If tax is not so assessable, there is no question of tax at source being deducted". In the light of the above decision of the Hon'ble Supreme Court, the CIT(A)'s reasoning that the only way out is to get a no-deduction certificate from the AO (TDS), is lacked merit in substance and this reasoning of the CIT(A) is to be outrightly rejected. 4.8 Software developed by companies in India is exported either in physical mode (i.e. through floppy disks) or through wireless communication using satellite links. When an Indian Company exports software to companies outside India using satellite communication facilities, the digital signals are converted into analog signals through earth stations and are transmitted to one of the geo-stationery satellites using the required bandwidth provided by Videsh Sanchar Nigal Ltd. (VSNL) or Software Technology Parks of India (STPI). The signals that have been beamed to the satellite will be downlinked to the earth station in the United States and sent to the client locations using the bandwidth and downlinking f....
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.... the following amounts as subscription amount to various international organizations:- Particulars Amount (Rs.) Subscription to Gartner Group 4,52,08,557.00 Subscription to Forrester Research Inc 1,96,97,148.00 Subscription toMetaGroup 92,86,484.00 Subscription to Giga Group 33,95,700.00 Total 7,75,87,889.00 The A.O., while completing the assessment as in the last year, held that the assessee company has got the benefit of technical consultation and it was concluded by the AO that the payment falls within the ambit of section 195 of the IT Act. Therefore, the AO was of the view that the assessee company was liable to deduct tax at source and hence, the subscription charges, claimed as deduction, was disallowed u/s 40(a)(i) of the IT Act. 5.1 The above view of the AO was affirmed by the CIT(A) in his impugned order vide paragraphs 7.14 to 7.17. 5.2 We have heard the rival submission and perused the material on record. The issue in question is covered by various orders of the Tribunal in assessee's own case. The orders of the Tribunal, which are in assessee's own case, are as follows:- l Infosys Technologies Ltd. v. ITO (In ITA Nos. 145 to 148....
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....uble Taxation Avoidance Agreement between India and USA. The data server was indisputably located outside India. Consequently the provision of services of offering the data base to its customers was an event outside the taxable territories of India. It was also an accepted fact that GG did not have any permanent establishment in India. Further such an access to data base could not fall within the scope of Article 12(3)(a), as found in the DTAA with USA. The 'experience' mentioned in the DTAA should be one's own experience in the realm of industrial, commercial and scientific and not compilation of somebody else's experience. Such experience should give rise to some known form of Intellectual Property rights. In the instant case, no such thing existed and consequently receipt of web based material offered by GG, outside India was not amenable for taxation in India. It is trite law that provision of Sec. 195 can be invoked only if the payment is otherwise taxable in India. The only provision invoked is sec. 9(1)(vi) to bring the payment as chargeable to tax in India. Since said section was not attracted, payment made was not subject to deduction of tax at source u/s 195. The law is ....
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.... dt. 2.11.2007) 6.6 The relevant finding of the Tribunal in the case of Infosys Technologies Ltd. v. JCIT (In ITA No. 1022/Bang/ 2003 - AY 1998-99 dt. 7.4.2006)reads as follows:- "We have carefully considered the relevant facts, arguments advanced and the decisions cited. In respect of sales effected during the year, the assessee collects entire sale proceeds. Such sale proceeds are part of income charged to tax. The assessee is also required to render post sales customer services in the nature of claims within the warranty period. Thus, though such warranty claims may or may not arise, the assessee is under obligation to fulfill such claim, if claim is made. The provision is made at the rate of 2% of sale price. Though no precise base is indicated by the assessee, yet it can be considered to be reasonable having regard to the claim made in the part. The provision is made on "matching principle" i.e. matching cost with revenue. Such matching principle has been recognized in the case of Taparia Tools Ltd. v. JCIT (260 ITR 102). Thus, the provision represents a liability in prasenti though discharged at a later date. In following cases, it has been held that the provision for warra....
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....ized". 6.9 Therefore, the estimation is implicit in the concept of provision and if the estimation is on reliable basis, it is to be accepted. In the case of Rotork Controls India (P) Ltd. v. CIT 314 ITR 62, it was held by the Hon'ble Supreme Court that provision for warranty at the rate of 2% of turnover based on past experience was found to be acceptable. 6.10 In the light of the above reasoning, ground No. 4.1 is allowed. Ground No. 5.1 - Reduction of telecommunication charges from the total turnover while calculating deduction u/s 10A of the Act. 7. The assessee, while computing deduction u/s 10A of the Act had reduced telecommunication charges of Rs. 10,37,42,694/- from both export turnover as well as total turnover. The A.O. recomputed the deduction u/s 10A of the Act by reducing from the export turnover the following items of expenditure:- Particulars Rs. Travel expenses 41,39,49,711 Professional charges 2,42,98,265 Data Communication charges 10,37,42,694 Employee related expenses 9,97,34,56,911 Total 10,51,54,47,581 According to the A.O., as per the definition of export turnover contained in clause (iv) of Explanation 2 to section 10A of the Act, the teleco....
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....ion from tax, the latter gives deduction of a part of the profits and gains of the concerned business from the gross total income. Both, however, are chapters which give relief to assessees from taxation subject to the conditions being fulfilled and in that sense they are of the same genre. The object of these sections is to encourage the earning of foreign exchange and provide incentive to promote exports. If some of the sections such as sections 80HHE and 80HHF provide for a formula for calculating the deduction which is identical with the formula prescribed by section 10B, it would be incongruous to interpret section 10B in a manner different from those two sections merely because there is no definition of "total turnover" in that section. "Export turnover" as defined in these sections excludes freight, telecom charges or insurance attributable to the delivery of the computer software outside India or expenses, if any, incurred in foreign exchange in providing technical services outside India. Thus statutorily parity is maintained between export turnover and total turnover in these sections. There is no reason why such parity cannot be maintained between export turnover and tota....
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....ly those units, which were eligible for deduction u/s 80HHE. The A.O. completed the assessment and adopted the entire turnover as per the P&L account in allowing deduction u/s 80HHE. 8.1 The assessee carried the matter in appeal before the first appellate authority. 8.2 It was contended by the assessee that the AO has erred in adopting the total turnover of the company as a whole in applying the formula u/s 80HHE, further submitting that once the components of profits or export turnover and total turnover have been considered for computing the deduction u/s 10A the same cannot again form part of the formula for computing the deduction u/s 80HHE. It was also submitted that assuming without admitting that the total turnover of the assessee as a whole is to be considered for the purposes of section 80HHE by the same logic it should be the entire profits of the assessee as a whole as well as the export turnover of the assessee as a whole that should be taken into account in applying the formula u/s 80HHE, further contending that picking and choosing or modifying only one of the limbs of the formula and not maintaining consistency in understanding the various terms of the formula woul....