2012 (9) TMI 1065

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....t of TDS on the payments made to VISA and MASTER Card will be allowed as a deduction in the hands of the assessee without appreciating that the TDS was the taxability of the VISA and MASTER CARD and not of the assessee. 2.(b). On the facts and in the circumstances of the case and in law the ld.CIT(A) erred in holding that the amount of Rs. 21,61,004/- being the amount of TDS on the payments made to VISA and MASTER Card will be allowed as a deduction in the hands of the assessee without appreciating that the TDS being part of the advance tax cannot be allowed as a deduction under the I.T. Act. 3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that the AO....

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....out by it. As a result, addition amounting to Rs. 21,61,004/- was made to the income of the assessee company. 2.1. Assessee-company preferred an appeal before the First Appellate Authority (FAA). After considering the Assessment Order and the submissions made by the assessee-company, he held that it was not correct to say that the agreement between the VISA, Master Card International and the appellant was not produced before the AO, that as per the said agreement, the assessee had to bear the expenses on account of taxed in shape of TDS, service charges paid to VISA/Master Card were grossed up with tax and paid to the VISA/Master Card that the payment made was not in nature of TDS, same was contractual liability, that said expenditure wa....

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....ment of TDS was made in pursuance of the agreement entered in to between the assesee-company and the VISA/Master card International. In our opinion payment made as a result of a contractual liability is an allowable expenditure. FAA has rightly placed reliance on the case of Standard Polygraph Machines P. Ltd (supra) in this regard. Secondly, we find that the same issue has been decided in favour of the assessee by the orders of the Tribunal delivered for earlier AYs. 'I' Bench of the ITAT, Mumbai has decided the issue as under : "13. The fourth ground relates to deletion of the disallowance of Rs. 36,37,533/- being amount deducted as TDS on payments in respect of charges for services provided by Visa/Master card International. ....