TaxTMI 
TaxTMI 
2021 (1) TMI 478
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....inafter also called `the Act'); another unit within the area of Special Economic Zone (SEZ) entitled to deduction u/s.10AA of the Act; and still another unit in Domestic Tariff Area (DTA) in Mumbai. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee paid a sum of Rs. 2,41,82,749/- as leased line charges to various vendors in India, which were claimed as deduction. On being called upon to explain as to why no deduction of tax at source was made in terms of section 194J of the Act, it was submitted that the amount paid was not in the nature of fees for Professional or technical services or royalty etc. in the hands of recipient warranting any deduction of tax at source. The AO found that the assessee was engaged in software development and production of software products. Internet with high bandwidth was required for such work. A dedicated lease line for internet service was taken from supplier. The payment was held by the AO to be in the nature of fees for technical services requiring deduction of tax at source u/s 194J of the Act. Having not done so, the AO invoked section 40(a)(ia) of the Act. He noticed that out of such sum of Rs....
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....Act. 5. The Finance Act, 2012 has inserted Explanations 4, 5 and 6 to section 9(1)(vi) w.r.e.f. 01-06-1976 defining "income by way of Royalty". Explanation 6 states that the expression `Process' includes and shall be deemed to have always included "transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret". Thus, with the insertion of Explanation 6 clarifying the scope of the expression "Process" as used in Explanation 2 to section 9(1)(vi), it becomes palpable that if any charge is paid for transmission by cable, optic fibre or by any other similar technology, it will get covered within the definition of "income by way of Royalty". Expression 5 further clarifies that the possession or control of the property with the payer is no more relevant. 6. Leased line is a dedicated communication channel that easily interconnects two or more sites ensuring uninterrupted data flow from one point to another. It is a dedicated, fixed-bandwidth data connection, which allows users to have a reliable, highquality internet connection. As per the assessee'....
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....ax at source by the payer is little different. TDS contemplates making deduction before making the payment. Once an amount is paid as per the law prevailing at the relevant time not requiring any deduction of tax at source, any later retrospective amendment covering the amount under a specific taxing provision cannot bring the hands of clock back so as to require the payer to deduct tax at source. Liability to deduct tax at source can be fastened only under the law prevailing at the time of payment. If no liability exists at the time of payment, any subsequent retrospective amendment cannot be enforced against the payer. Once there is no liability to deduct tax at source at the material time, the fortiori is that there can be no question of disallowance u/s 40(a)(ia) of the Act. 10. Reverting back to the factual panorama, it is obvious that the Finance Bill, 2012 became the Finance Act, 2012 somewhere after the close of the F.Y. 2011-12. As opposed to that, the Financial year corresponding to the A.Y. under consideration came to an end before that. Ergo, it is overt that when the payment of leased line charges was made, no existing provision at that time made the assessee clearly....
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....ideration. Once the amount of expenditure, debited to the Profit and loss account, gets specifically credited to the Profit and loss account with a certain mark-up, there can be no question of disallowing the expenditure so charged while continuing to treat the amount credited as income. Notwithstanding that, the ld. AR has placed on record a copy of the order passed by the Tribunal in the case of Amdocs Development Centre India Pvt. Ltd. Vs. JCIT (ITA No.69/PUN/2018) dealing with the similar issue. Vide order dated 27-11-2018, the Tribunal has held that RSA tokens are in the nature of revenue expenditure and hence deductible. We, therefore, order to delete the disallowance of Rs. 22.07 lakh sustained in the first appeal. 15. Having found that first ground of Revenue's appeal has become infructuous because of our decision on Ground No.1 of the assessee's appeal, the only other issue which survives in the Revenue's appeal is against the inclusion of Infosys Technologies Ltd. in the determination of the Arm's Length Price of the international transaction. 16. Briefly stated, the facts of the case are that the assessee declared an international transaction of "Provision of software....