TaxTMI 
TaxTMI 
2012 (11) TMI 1151
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.... It is submitted that the relied upon order has not become final and appeal before the Hon'ble ITAT has already been preferred. 2.3. Having regard to the Hon'ble Kerala High Court decision in the case of CIT Vs Southern Cables & Engineering Works (289 ITR 167), the learned CIT(A) ought to have upheld the action of the Assessing Officer. 3.1 The learned CIT(A) erred in deleting the addition made u/s 40(a)(i) of Rs. 27,43,79,000/- by holding that the payments to nonresidents would neither be royalty nor would it be fees for technical services, relying , inter alia on the order of CIT(A) in the assessee's own case in ITA Tr.No.4/09-10/LTU(A) dated 11/12/2009 for A.Y. 2003-04. 3.2 It is submitted that the order for the A.Y. 2003-04 in the assessee's own case, relied upon, has not become final and appeal against the same has been preferred before the Hon'ble Chennai Tribunal. 3.3. The CIT(A) ought to have followed the decision of the Special Bench of the Delhi ITAT in the case of New Skies Satellite NV Vs Asst. Director of Income tax, International Taxation Circle 2(1), New Delhi (2009) (121 ITD 1) (Del)(SB) wherein it was held that the payments received from cus....
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....48 of the "Act" on the assessee on 18.03.2009. In furtherance to the reopening notice, the assessee did not chose to file a fresh return. The Assessing Officer took cognizance of an amount of Rs. 15.06 crores as unearned income which had been disclosed by the assessee in schedule 10 of the balance sheet and not offered to tax. When asked, the assessee stated that the above said income received had been deferred in view of section 145(2). The Assessing Officer was not convinced with the assessee's explanation and held that since in the assessment order dated 31.03.2007 for the assessment year 2005-06 in assessee's own case, the Assessing Officer concerned had held that the assessee had claimed corresponding expenditure incurred in earning 'unearned income' in its profit and loss account of the current year and the corresponding income stood postponed to the subsequent year, so, section 145 had to be invoked. In the light thereof, he added an amount of Rs. 15.06 crores in the assessee's total income vide assessment order dated 20.12.2009. 4. Aggrieved, the assessee preferred appeal, wherein the CIT(A) has deleted the addition by observing as under: "4. The first issue pertains to ....
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....hat 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 recognized on the basis of the modules developed and delivered. Though the payments has been received on the basis of invoices, if the products are not delivered sify e-learning needs to refund the amount in full to the customer." 32. The AO rejected the explanation and added Rs. 39,68,208 for the reasons given in his order as under: "4. The system of accounting followed by the assessee was mercantile. In such method of accounting the receipt on sale needs to be re recognized once an sales invoice wa....
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....e 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 ground no. 4 is, accordingly rejected. 36. In the result, the appeal filed by the department is dismissed." Taking cue from the same and more particularly, in view of the fact that there is no difference pointed out by the Revenue, we are of the opinion that the CIT(A) has rightly deleted the addition under the head "unearned income". The mere submission on the part of Revenue that the same has not attained finality is no ground in itself for not placing reliance upon the same. Accordingly, the findings of the CIT(A) are upheld and the ground is decided against the Revenue. Ground No. 3.1 to 3.4 8. Facts pertaining to this ground are that during the reassessment proceedings, the Assessing Officer took cognizance of the expenditure incurred by the assessee in foreign currency towards bandwidth charges paid to a non-resident of Rs. 27,43,79,000/....
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....f the "Act" which the assessee is disputing. We notice that the Coordinate Bench in I.T.A. No. 1277 and 1283/Mds/2008 (supra) decided on 02.02.2012 [in which one of us N.S. Saini, A.M. Member of the Bench) has held as under: 4. We have heard the rival submissions and perused the orders of the lower authorities as well as the cited decisions. We find that the Ld. CIT(A) has decided this issue by observing as under: "6. I have carefully considered the facts of the case and the rival submissions and also examined the issues carefully with reference to applicability of sec. 195, which has been denied by the appellant. The appellant company is engaged in the business of providing networking and e-commerce services by way of internet. In order to carry out its business of providing broadband internet connectivity the appellant company has entered 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....
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....pment mainly arises if there is physical equipment and since the equipments used by the appellant are not under its control. Therefore, the payments made do not have the character of royalty. 6.3 On the above facts and in the circumstances of the case, only one question arises for decision whether the remittances made by the appellant company to the foreign parties would fall within the purview of sec. 195(1) which 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,. ....
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.... A.Ys. 2002-03 and - 2003-04 is cancelled." 6. On a query from the Bench from the ld. D.R. as to whether there is any contrary decision of any other High Court, the ld. D.R. replied that the Hon'ble Delhi High Court decision is a lone decision on the issue. 7. On the above facts, when there is only one decision of the High Court, then the same requires 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. Ground No. 4.1 to 4.4 14. Facts of these grounds are that during assessment proceeding, the assessee had claimed depreciation @ 100% ....