AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (12) TMI 120
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.... noticed that the above said expenses were incurred towards membership and subscription charges paid to leading marketing analysts like Gartner, D&B etc. The A.O. took the view the above said payment is in the nature of royalty. The A.O. noticed that the assessee did not deduct tax at source from the above said payments. Accordingly, the A.O. disallowed the claim of the assessee u/s 40(a)(i) of the Act for non-deduction of tax at source. 3. Before Ld. CIT(A) the assessee submitted that the business promotion expenses claimed by it consisted of expenses incurred in its USA branch to the tune of Rs. 68,05,703/- and in India to the tune of Rs. 26,31,632/-. It was submitted that the payments made in India were subjected to TDS. Accordingly, the Ld. CIT(A) directed the A.O. to verify the compliance of TDS provisions in respect of payment of Rs. 26,31,632/- made in India. In respect of the payments made outside India, it was contended that the payments to the extent of Rs. 52,26,325/- only are in the nature of subscriptions, which are in the nature of royalty. It was contended that the above said payments were made in respect of business carried on by the assessee outside India and henc....
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....sessee is making a new claim before the Tribunal. She further submitted that it is not known as to whether the reversal of expenditure claimed to have been made by the assessee relate to/included in the amount of Rs. 68,05,703/- disallowed by the A.O. 7. We heard the parties on this issue and perused the record. We find merit in the submissions made by Ld. D.R. We notice that the assessee has all along been claiming payment of Rs. 68,05,703/- as payment made towards subscription charges. It is for the first time the assessee is claiming before us that a sum of Rs. 32,93,513/- has been reversed during the year under consideration. The Ld A.R submitted that the above said amount has been shown under the head "miscellaneous income" in the Profit and Loss account, instead of reducing the same from the relevant expenditure. Accordingly, he submitted that the net amount of payment alone is required to be considered for the purpose of disallowance u/s 40(a)(i) of the Act. The Ld A.R invited our attention to page no.51 of the paper book, which contains break-up details of miscellaneous income. 8. We notice from the details of miscellaneous income that a sum of Rs. 32,93,513/- has been s....
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....y it. We have noticed earlier that the Ld CIT(A) has rejected the said claim for the reason that the assessee has failed to substantiate its claim; that the assessee has failed to show that the impugned services were used by its foreign branch only and that certain bills have been found at the Indian address of the assessee. 12. Before us, the Ld A.R prayed that the assessee may be provided with one more opportunity to prove all its claims. Hence, in the interest of natural justice, we are of the view that the assessee may be provided with an opportunity to substantiate its claim. We have noticed that the Ld CIT(A) has raised very valid points on the claim of the assessee, which is also required to be addressed by the assessee. 13. We notice that an identical issue relating to the disallowance of payments made to M/s Gartner Group u/s 40(a)(ia) of the Act was examined by the co-ordinate bench in the case of M/s Wipro Ltd (IT(TP)A No.99/Bang/2014 & others dated 05-10-2020). The issue as to "source of income" was also examined in the above said case. For the sake of convenience, we extract below the relevant observations made by the co-ordinate bench in the above said case:- "32....
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....e from any source outside India, then the royalty income shall not be deemed to accrue or arise in India. He submitted that the SEZ/STPI units have an obligation to make exports and accordingly earned income outside India. Hence, the export profits received by the assessee from outside India constitute a "source outside India" and accordingly, the exception provided u/s 9(1)(vi) of the Act is applicable to the assessee. Accordingly, the Ld A.R submitted that the royalty given to M/s. Gartner Group shall not be deemed to accrue or arise in India in the hands of M/s Gartner Group. In the absence of any income in the hands of above said person, there is no obligation is placed on the shoulders of the assessee to deduct tax at source u/s 195 of the Act from the payment so made. In support of his contentions, the assessee relied on the decision rendered by Hon'ble Madras High Court in the case of AktiengesellschaftKuhnle Koop and Kausch (262 ITR 513). In the above said case, the assessee before the Madras High Court paid royalty outside India out of its export sales. The Hon'ble High Court held that the source for royalty is from the source generated outside India and hence the same i....
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....fect, the alternative contention of the assessee is that the export proceeds received by it should be considered as an income earned from a source located outside India. There is no dispute with regard to the fact the export of services/products have been done from the SEZ/STPI units located in India. The question as to whether the export proceeds can be treated as a source located outside India was examined by Hon'ble Delhi High Court in the case of Havells India Ltd. (supra) and the same was decided against the assessee with the following observations:- "13. Section 9(i)(vii)(b) contemplates a source located outside India. It is difficult to conceptualise the place/ situs of the person who make payment for the export sales as the source located outside India from which assessee earned profits. The export contracts obviously are concluded in India and the assessee's products are sent outside India under such contracts. The manufacturing activity is located in India. The source of income is created at the moment when the export contracts are concluded in India. Thereafter the goods are exported in pursuance of the contract and the export proceeds are sent by the importer and are ....
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....h Court in the case of Anglo French Textiles Ltd. (supra) earlier to the above said decision was not brought to the notice of Hon'ble Madras High Court. Accordingly, the Delhi High Court refused to follow the decision rendered in the case of AktiengesellschaftKuhnle Koop and Kausch(supra) by Hon'ble Madras High Court. We also notice that the Hon'ble Delhi High Court has also referred to various decisions to understand the meaning of the word "source". For the sake of convenience, we extract below the observations made by Hon'ble Delhi High Court in this regard. "12. The question as to what is a source of income has been dealt with in some authoritative pronouncements. The Judicial Committee in Rhodesia Metals Ltd. v. Commissioner of Income Tax, (1941) 9 ITR (Suppl.) 45 observed that a "source" means not a legal concept but one which a practical man would regard as a real source of income. This observation was adopted by Malik, J. in his separate but concurring judgment in the case of Rani Amrit Kaur v. CIT, (1946) 14 ITR 561, a decision of the Full Bench of the Allahabad High Court. A source of income was described by R. S. Pathak, J. (as he then was) in the following words in ....