TaxTMI 
TaxTMI 
TaxTMI 
2014 (6) TMI 707
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....AY.2006-07 has been filed by the assessee against the order of CIT(Appeals), LTU, Chennai dt.12-03-2010. The Revenue has filed cross appeal in ITA No.864/Mds/2010 against the same order of CIT(Appeals). ITA No.1922/Mds/2010 relevant to the AY.2006-07 has been filed by the Revenue assailing the order of CIT(Appeals), LTU, Chennai dt.31-08-2010 passed u/s.154 of the Act. 2. First we will take up the appeals of the Revenue in ITA No.1535 & 1536/Mds/2009 for the AYs.2002-03 & 2003-04 respectively assailing the order of CIT(Appeals) passed u/s.201(1) and 201(1A). The brief facts of the case are: The assessee-company is engaged in the business of software development and export. During the period relevant to the AYs under consideration, the assessee made remittances to M/s.Sprint USA for hiring International Private Leased Circuits [IPLC]. The aforesaid remittances made to non-resident company were without deduction of tax at source. M/s.Sprint USA is providing IPLC Bandwidth service to the assessee for internet access, business, data exchange, video conferencing and other telecommunication facilities to enable dedicated high speed connectivity. The details of the services provided by M....
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....) vide his order u/s.201(1) and 201(1A) held that the payments made to the nonresidents company constitutes 'Royalty' for use of telecommunication equipment and other services under the provisions of Income Tax Act. On the contrary, the stand of the assessee is that the remittances made by the assessee constitute payments for usage charges, recurring charges installation charges and also non usage charges which include service fee, access fee and equipment. The ld.Counsel for the assessee in order to support his contentions furnished customer service agreement with M/s.Sprint USA, copies of invoice raised by M/s.Sprint USA and copy of M/s.Videsh Sanchar Nigam Limited [VSNL]. 2.1 Aggrieved against the said order, the assessee preferred an appeal before the CIT(Appeals). The CIT(Appeals) held that the payments made by the assessee were for international telecommunication services which is a standard facility or service providing to all those willing to pay. The assessee does not get any right to use any goods/equipment provided in such transmission. Therefore, the payments made to the overseas company is not in the nature of 'Royalty' for the use of equipment. The CIT(Appeals) furth....
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....e India in providing international half circuit. The gateway/landing station in India used in transmitting the traffic within India belong to VSNL and was used by VSNL for providing Indian end services in accordance with the contract with its customers. The Assessing Officer came to the conclusion that the payment received by the non-resident company in providing international private leased circuit was taxable as a 'Royalty' for use or right to use commercial and scientific equipment u/s.9(1)(vi) of the Act read with explanation-2 and Article 12(3) of the Doubt Taxation Avoidance Agreement between India and Singapore. In first appeal, the order of the assessee was upheld by the CIT(Appeals). On further appeal, the Tribunal held that even if the payments were treated as non-relating to the use of equipment, they should be considered as payment for the use of the process provided by the assessee, whereby through the assured bandwidth, the customer is guaranteed the transmission of data and the voice. The fact that the bandwidth is shared with others, however, has to be seen in the light of the technology governing the operation of the process and this by itself does not take the as....
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....own by the Hyderabad Bench of the Tribunal in the case of Patni Telecom P. Ltd., Vs. ITO (supra), we dismiss this ground of appeal of the Revenue. 3.3 In Ground No.4, the Revenue has assailed the findings of CIT(Appeals) for deleting the dis-allowance u/s.40(a)(i) in respect of payments made to M/s.Sprint USA towards lease line charges. The CIT(Appeals) deleted the dis-allowance u/s.40a(ia) for nondeduction of tax at source on payments made to M/s.Sprint USA for the reasons that, the CIT(Appeals)-XI, Chennai vide order dt.06-07-2009 passed u/s.201(1) and 201(1A) for the relevant AY has held that the assessee was under no obligation to deduct tax u/s.195 while making such payments as M/s.Sprint USA had no PE in India. Since, the said order of the CIT(Appeals)-XI, Chennai has been set aside by us, in the appeal of the Revenue in ITA No.1535/Mds/2009, this ground of appeal of the Revenue has to be allowed. 3.4 Ground No.5 raised in appeal by the Revenue is with regard to levy of interest u/s.234D. The ld.Counsel for the assessee has submitted that the provisions regarding the levy of interest u/s.234D were inserted by the Finance Act, 2003 w.e.f. 01-06- 2003, therefore they cannot b....
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....g the issue in favour of the assessee. Both the issues in the present appeal are thus allowed. The Assessing Officer is directed to include foreign currency expenditure as well as telecommunication expenditure as part of the export turnover. 4.1 In Ground Nos. 8 to 13, the assessee has assailed the findings of CIT(Appeals) with respect to set off of current year's losses of eligible units against the profits of other units eligible for deduction u/s.10A. The ld.Counsel for the assessee in support of his submissions relied on the judgment of the Hon'ble Karnataka High Court in the case of CIT & Anr. Vs. Yokogawa India Ltd. and Others, reported as 246 CTR (Kar) 226 and the decision of the co-ordinate bench in assessee's own case in ITA No.114/Mds/2011 for the AY.2005-06 (supra). The relevant extract of the findings of the Tribunal are reproduced here under: "In the present case the Assessing Officer adjusted the brought forward losses of the assessment year 2004-05 of the eligible units against the current year's profits of the eligible units before computing the deduction under section 10A. The very same issue was considered by the Income-tax Appellate Tribunal, B-Bench, Chennai, ....
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....s.40(a)(i) in respect of professional/technical fee paid to Taras Consulting LLC and Epicor Software Pty. Ltd., both nonresident entities towards travel and other expenditure. The assessee's contention before Assessing Officer for not deducting tax on such payment u/s.195 was based on CBDT Circular No.786 dt.07-02-2000. However, the said circular has been withdrawn vide subsequent Circular No.7 of 2009. Even before CIT(Appeals), the assessee was unable to produce any details in support of its claim. Before us also, the ld.Counsel for the assessee has not been able to substantiate the claim of the assessee. Accordingly, this ground of appeal of the assessee is dismissed. 4.4 In view of our above findings, the appeal of the assessee is partly allowed. 5. ITA No.864/Mds/2010 (AY.2006-07): The Revenue has raised six grounds in its appeal. Ground Nos.1 to 6 are general in nature and therefore they are not taken up for adjudication. Ground Nos.2 to 4 relate to exclusion of foreign currency expenditure and telecommunication expenditure from both export turnover and total turnover for the purpose of computing deduction u/s.10A. Both these issues are squarely covered in favour of the ass....
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....see is making a provision for such expenditure already incurred during the relevant previous year. In the course of the next previous year the assessee is making the payment and the differential amount, if any, is adjusted in its profit and loss account. This is a consistent practice followed by the assessee. The provision for unpaid expenses is not in the nature of contingent expenditure. It is a provision made against actual expenditure. Therefore, the decision of the Hon'ble supreme Court rendered in the case of Bharat Earth Movers vs. CIT, 245 ITR 428, squarely applies here. The ground of the Revenue is dismissed". Accordingly, this ground of appeal of the Revenue is dismissed for similar reasons. 5.2 In the result, the appeal of the Revenue is dismissed. 6. ITA No.1922/Mds/2010 (AY.2006-07): In this appeal, the Revenue has assailed the order of CIT(Appeals), LTU Chennai dt. 31-08-2010 passed u/s.154 of the Act. The assessee had filed Miscellaneous Petition for rectification of the order dt.12-03-2010 passed by the CIT(Appeals), LTU, Chennai in ITA No.35/09-10/LTU(A) for the AY.2006-07. The CIT(Appeals) vide impugned order held that the issue raised in ground No.13 of the a....