TaxTMI 
TaxTMI 
2013 (11) TMI 169
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....reiterated the pleadings above said and submitted that the addition in hand of software expenditure which was made by the Assessing Officer has wrongly been deleted by the CIT(A) and that too, without adverting to the facts of the case. Accordingly, she has prayed that the ground be accepted in favour of the Revenue. 4. Per contra, the assessee has argued that the CIT(A) has rightly deleted the addition in hand and placed reliance on the order passed by the CIT(A) as well as the reasons contained. 5. Admitted facts of the case are that the assessee is a company; engaged in the business of providing internet access and corporate network/ data services. 6. On 30.10.2001, the assessee had filed its 'return' for the impugned assessment year disclosing loss of Rs.234,55,02,850/-. On 05.09.2002, it chose to file a 'revised return'. This time, the loss declared was reduced to Rs.112,57,29,850/-, which was attributed to withdrawal of claim regarding allowance of decrease in value of investment amounting to Rs.121,97,73,000/-. In 'scrutiny' proceedings, the Assessing Officer noticed that the assessee had debited an amount of 3,12,21,000/- in its profit and loss account as softwa....
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.... shall redecide it in accordance with law after affording adequate opportunity of hearing to the assessee. 9. Accordingly, the appeal is accepted for statistical purpose. I.T.A. No. 436/Mds/2010 10. This Revenue's appeal is directed against the order of the Commissioner of Income Tax (Appeals) LTU, Chennai dated 11.12.2009 in ITA Tr.No. 4/09-10/LTU(A) for the assessment year 2003-04, in proceedings under section 143(3) of the Income Tax Act 1961 [in short the "Act"]. 11. The Revenue has raised following substantive pleadings in the appeal: "1. xxxxxxxxxxxx 2.1. The learned CIT(A) erred in deleting the addition of Rs.27,68,83,000/- made by the assessing officer towards 'unearned income', relying upon the Hon'ble Chennai Tribunal's order in ITA No.1954/Mds/2007 In the assessee's group of cases (Slfy e-learning Ltd.). 2.2. It is submitted that the relied upon order has not become final and appeal before the Hon'ble Jurisdictional High Court has already been preferred. 2.3. Having regard to the Hon'ble Kerala High Court decision in the case of CIT v. Southern Cables & Engineering. Works (289 ITR 167), the learn....
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....on charges incurred in foreign currency during the relevant previous year. Its plea in support was that the said payments did not relate to any entity having permanent establishment or business connections in India and no equipment had been used requiring it to deduct any tax at source. The Assessing Officer did not agree with the above said contentions. Therefore, in the assessment order dated 30.03.2006, he held that the payment in question were in the nature of royalty necessitating deduction of tax at source. So, he invoked section 40(a)(ia) and disallowed the expenditure in question and added it in assessee's income. 15. Aggrieved by above said two additions, the assessee preferred appeal, wherein, the CIT(A) has deleted both additions on the basis of orders passed in assessee's case in preceding assessment year. In this backdrop of the facts, the present appeal has been preferred at the behest of the Revenue. 16. In the course of hearing, the DR has vehemently argued that the CIT(A) has erred in deleting both additions in question made by the Assessing Officer and urged for their restoration. 17. Opposing this, the AR representing the assessee has relied on CIT(A)....
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....mercantile system of accounting. 4.3 The learned CIT(A) ought to have seen that the assessee adopted a device to postpone the income for the purpose of Income Tax only. 4.4 The learned CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Thanthi Trust (239 ITR 502) has approved in principle the proposition that book entries to have a legal effect and cannot be ignored merely because they are book entries. 31. It was noticed by the AO during assessment proceeding that in the balance sheet as on 31.03.2003 Rs.45,67,354 was shown as 'unearned income' under the head 'current liabilities' as against Rs.15,13,162 shown as on 31.03.2002. The details furnished by the assessee showed that Rs. 39,68,208 received during the year ending 31.03.2003 was not offered for tax and was carried forward to next year. The assessee explained as under. "For revenue relating to development of e-learning software. The invoices are raised on the basis of payment milestones where as revenue are recogn....
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....from - LL 2 Miscellaneous others 4 Total 1394 35. The CIT(A) has deleted the addition for the reasons given in paragraph 4.3 of his order. He has, interalia, observed that the revenue earned by the assessee from software and consultancy services was recognized on delivery of goods / services, that as per the existing scheme, M/s. Satyam Education Services Limited was assigned the responsibility to 'sign off' on completion of the project in the case of all customers, that the assessee-company was following the AS 9 prescribed by the Institute which was in conformity with the provisions of section 145(2) of the Act. The assessee was regularly following the 'project completion method, which is a recognized method. The completion of each project is determined by 'sign off'. There is nothing on record to show that there was any inconsistency in this regard. The CIT(A) found that the deferred income amounting to Rs.39,68,208 was carried forward and was duly taken into account in the next assessment year. In the circumstances, therefore, we see no reason to interfere with the conclusions reached by the CIT(A). The ....
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....ered into agreements with certain non-resident companies. The assessee therefore made certain remittances in foreign currency towards connectivity charges and bandwidth charges which are called telecommunication charges without deduction of tax at source. The Assessing Officer examined the matter and found that the equipments used by the appellant company through which connectivity was provided are used by the assessee. Therefore, it treated the payment as royalty for the use of the equipments. Consequently, the Assessing Officer held that the appellant committed default u/s 195 in so far as it had not deducted tax at source. He therefore, worked out short deduction of tax u/s. 201(1) at Rs.3,45,99,751/- and Rs.3,33,39,659/- for A.Ys. 2002- 03and 2003-04 respectively. The Assessing Officer also charged interest u/s. 201(1A) amounting to Rs.1,99,6S,927/- and Rs.1,52,71,474/- for A.Ys. 2002-03 and 2003-04 respectively. The Assessing Officer has, therefore, taken the following arguments for raising the impugned demands. (1) The service provided by the Telecommunication service Provider in the case is different from that p....
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....ich requires deduction of tax at source. Bandwidth is bought and sold to consumers and it acts as a conduit only. In the appellant's case there are no equipments installed in its premises and the contract entered with the foreign parties is only for the services. Mere use of equipment in providing bandwidth services would not amount to transfer of right to use. As a matter of fact there are no goods involved in the transaction and the payments are made only for the use of services. The word "royalty" and its meaning was introduced vide Finance Act, 1976 and was defined under explanation 2 to sec. 9(1)(i) which was further expanded to include 'the right to use any industrial commercial or scientific equipment but not including the amounts referred to in sec,. 44B. The amendment was made by Finance Act, 2001 by incorporating c1ause (iv a) w.e.f. 01-04-2002 i.e., applicable for A.Y. 2002-03. In simple words, therefore, royalty means the payment of any kind received as a consideration for the use of' or the right to use, any copy right of literary artistic or scientific work but, does not include the words 'use' or right to use, industrial, commercial or scientific equipment. In the ap....
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....res to be followed by us. Our view finds support from the decision of the Hon'ble Bombay High Court in CIT Vs. Godavari Devi Saraf [Smt] [1978] 113 ITR 589 [Bom] We, therefore, confirm the order of the ld. CIT(A) and dismiss the grounds of appeals of the Revenue. 8. In the result, both the appeals of the Revenue are dismissed." After going through the operative portion above said, there is no iota of doubt that the payments in question made by the assessee cannot be subjected to the applicability of TDS provisions contained in the "Act". Therefore, in view of the same and in order to maintain consistency, we rely on the above said order of the ITAT and decide the grounds against the Revenue." A perusal of the above findings makes it clear that the applicability of section 9 of the "Act" vis-à-vis the concept of royalty was duly considered and decided against the Revenue. In the course of hearing, the Revenue though has disputed the facts of the case, but merely on the basis of bald assertions, we are unable to accept the same. Hence, we see no reasons to interfere with the well reasoned order of the CIT(A). I.T.A.....