TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 165
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....oration (RPC), USA made by AO treating the same as capital in nature not allowable u/s 37(i) of the I.T Act. Your Appellant submits that professional fee paid to RPC is for the purpose of its business activity and same shall be allowed as deductible business expenditure. 2. The CIT(A) erred in confirming the disallowance of architect fees of Rs. 45,000/- on the ground that the expenditure incurred is capital in nature. Your Appellant submits that the architect fee is incurred in the normal course of carrying on the business activity and same shall be allowed as business expenditure. 3 (i) The CIT(A) erred in confirming the disallowance of software expenses of Rs. 97,968/- by holding that the Appellant has not deducted tax u/s. 194J of the Act on software expenses and hence covered by sec 40(a)(ia) of the I.T.Act. Your appellant submits that on the fact and circumstances of the case, no TDS is deductible on the software expenses and the AO ought to have allowed the same as deductible expenditure. (ii) In the alternative and without prejudice to the above, the CIT(A) erred in not allowing depreciation on the computer software expenses of Rs. 97,968/- as the TDS has not been ded....
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....e that the services would not be provided in India. He, therefore, held that the income of M/s. Rich Products Corporation was taxable in India as "fees for technical services" "made available" in India. Referring to the Explanation inserted below sec. 9(2) by Finance Act 2007 with retrospective effect from 1.6.1976, the Ld CIT(A) held that the fee for technical services would be deemed to accrue or arise in India in the hands of Non-residents, whether or not the nonresident had a residence or place of business or business connection in India. The Ld CIT(A) further held that since the technical services were utilised / made available to the assessee in India, the income of M/s. Rich Products Corporation (M/s RPC) was taxable in India. Accordingly he held that the assessee should have deducted tax at source and since the assessee had failed to deduct the tax at source, he confirmed the disallowance made u/s 40(a)(i) of the Act. 4. We have heard the representatives of the parties and have also gone through the record. Both the tax authorities have taken the view that (a) the above said expenditure was capital expenditure, since it was having enduring benefit and (b) the income of the....
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....the said payment is in the nature of fee for technical services and the same is taxable in the hands of M/s RPC, even if it does not have Permanent Establishment in India. 7. Before us, the Ld A.R has submitted that the said decision in the case of "Samsung Electronics Ltd" (supra), has since been reversed by Hon'ble Supreme Court in the case of GE India Technology Centre P Ltd Vs. CIT (327 ITR 456)(SC). He has further contended that the said payment had been made for marketing and sales support and hence it will not fall in the category of "Fee for technical services". He has submitted that the consideration paid for rendering of any managerial, technical or consultancy services only fall in the category of "Fee for Technical services" as defined u/s 9(1)(vii) of the Act. In this regard, he has placed reliance on the decision rendered by Delhi bench of Tribunal in the case of Adidas Sourcing Ltd. Vs. Asst. DIT (2013)(55 SOT 245). He has invited our attention to paragraph 3.7 and 3.8 of the said decision and submitted that the Tribunal has considered the expressions "managerial", "technical" and "consultancy" services used in sec. 9(1)(vii) of the Act and has finally held that the....
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....to M/s RPC. Since the tax authorities have failed to show that the payment received by M/s RPC was liable to tax in India either in terms of Indian Income tax Act or in terms of Indo-US DTAA, in our view, the assessee was not liable to deduct TDS on such payments made to a foreign resident, as per the ratio of the decision rendered by Hon'ble Supreme Court in the case of GE India Technology Centre P Ltd (supra), wherein the Hon'ble Apex Court has held that the "sum chargeable to tax in India" would be hit by the provisions of sec. 195 of the Act. 9. The Ld A.R has also taken an alternative contention in respect of this issue. He has submitted that the Explanation below sec. 9(2) of the Act, providing that there is no requirement of having permanent establishment, which was referred by Ld CIT(A), was first inserted by Finance Act, 2007 w.r.e. from 1.6.1976 and later amended by Finance Act, 2010. He has submitted that, by the time the amendment was brought into the Act, the asessee had already paid the amount to M/s RPC. Accordingly he has submitted that the disallowance cannot be made u/s 40(a)(ia) of the Act on the basis of subsequent amendment brought into the Act with retrospect....
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....the assessee has claimed a sum of Rs. 2,24,202/- as Software Charges. The AO held that the purchase of Software would fall in the category of "Royalty". Since the assessee did not deduct tax at source, he disallowed the above said claim by invoking the provisions of sec. 40(a)(ia) of the Act. 14. The Ld CIT(A) noticed that the above said claim included a sum of Rs. 1,26,234/- pertaining to net working charges, internet charges, repairs etc. Accordingly, the Ld CIT(A) deleted the above said sum of Rs. 1,26,234/-. With regard to the balance amount of Rs. 97,968/-, the Ld CIT(A) held that the Software was an intangible asset falling in the category of "Know how, patents, copyrights, licences, franchises etc." Accordingly he held that the 'Software' was only a license/right given to the assessee to use the said software to the exclusion of others and it amounted to acquisition of intangible assets. Having held so, the Ld CIT(A) however has concurred with the view of the AO that the said payment made for use of a license was "royalty" and not 'purchase and sale of goods.' Since the assessee did not deduct tax at source from the software purchases, the Ld CIT(A) confirmed the disallowan....
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.... in the definition of "royalty" under Explanation 4 to sec. 9(1)(vi) of the Act. Further the provisions of sec. 194J also brings "royalty" under its purview. However, during the course of hearing, the DR was fair enough to agree with the contention of the learned AR that the transactions/payments made by the assessee before the insertion of clause (ba) in sec. 194J, which has been inserted with effect from 13.7.2006, will not be hit by the provisions of sec. 194J of the Act. Accordingly, it is held that section 194J will not be attracted to the payments made by the assessee for purchase of software before 13.07.2006. 17. The Ld A.R has also pointed out that the dispute with regard to the nature of payment made for purchase of software was settled at rest only by Finance Act, 2012 through which the Explanation 4 to sec. 9(1)(vi) was included and the said explanation now clarifies that the payments made for getting right to use software shall fall in the category of "royalty". The said amendment was given retrospective effect from 1.6.1976, Accordingly he submitted that the disallowance cannot be made u/s 40(a)(ia) of the Act on the basis of subsequent amendment brought into the Act....
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....notice that the assessee has submitted a letter dated 27.11.2009 before the AO and the same is available in page 23 of the paper book. As per this letter, the assessee is following inclusive method of valuation for finished goods. Accordingly, we notice that the Ld CIT(A) has deleted the addition pertaining to the finished goods. However, in respect of Raw material and packing material, the assessee is following "Exclusive method" of valuation, i.e., the assessee is accounting the taxes paid on raw materials & packing materials under separate head. In the assessment order, the AO is making reference to "Work in Progress" also and there should not be any dispute that the work in progress is an intermediary product during the manufacture of finished goods and the WIP would include mainly the cost of Raw material consumed therein. Hence, the adjustment made to the purchase value of raw materials should automatically take care of Work in progress also. The contention of the assessee before AO was that the valuation of raw materials, packing materials and closing stock, even if it is adjusted in terms of sec. 145A, would have NIL impact on the profit of the assessee. In the alternative,....