2020 (1) TMI 1182

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....and licensing of software products and rendering consultancy services. While completing assessment for AY 2011-12, the AO made an addition of Rs. 6,39,20,948 consequent to disallowance of payments made to M/s. Eka Software Solutions Inc. [EKA, USA] as "business service-marketing charges" on the ground that assessee failed to deduct tax at source on the aforesaid payment made to a non-resident as was required u/s. 195 of the Income-tax Act, 1961 [the Act]. The AO invoked the provisions of section 40(a)(i) of the Act and made the disallowance. 3. Aggrieved by the aforesaid addition made by the AO, the assessee preferred appeal before the CIT(Appeals) challenging the disallowance u/s.40(a)(i) of the Act and raising an alternate argument tha....

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....nce u/s.40(a)(i) of the Act but gave alternate relief in respect of ground No.3 raised by the assessee before him. The following were the relevant observations of the CIT(Appeals):- "Ground No.2:- The Hon'ble ITAT vide its order dated 30.01.2015 in appellant's own case for AY: 2010-11 had stated that to apply matching principle in terms of expenditure and revenue, the facts are to be verified and accordingly directed the AO for de novo consideration of the issue with respect to the genuineness and reasonableness of the expenditure claimed by the appellant. The AO vide his remand report dated 12.04.2018 submitted that the appellant furnished invoices only on sample basis and all the invoices were not produced before him and ....

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....e for AY 2010-11." 5. Aggrieved by the order of CIT(Appeals) in not deleting the disallowance/addition u/s.40(a)(i) of the Act, the assessee has preferred the present appeal before the Tribunal. 6. We have heard the rival submissions. It is noticed from the order of CIT(Appeals) that in assessee's own case for AY 2010-11, the Tribunal has held that disallowance of business service-marketing charges will go to increase the profits of the business which is eligible for deduction u/s. 10AA of the Act and that deduction u/s. 10AA of the Act should be allowed on such enhanced profit consequent to disallowance u/s. 40(a)(i) of the Act. In this regard, we find that two High Courts viz., Hon'ble Bombay High Court in the case of CIT v. Gem Plu....