2022 (5) TMI 846 - AT - Income Tax

TDS u/s 195 - license fee in respect of the use of software - HELD THAT - The said issue is no more res integra by the decision of Hon ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd. 2021 (3) TMI 138 - SUPREME COURT - It is not the case of revenue that there is a transfer of right to use in respect of these software is owned by Brand Union worldwide Ltd. It is also not disputed by the revenue that, these software are developed by the parent company. Instead we note that Brand Union worldwide Ltd., has been procured these software and has allotted to the group companies, against which, cost have been allocated. Such an allocation cannot be held to be royalty in order to be subjected to TDS provisions. As Brand Worldwide Ltd., procures these software from somewhere else and is shared to the assessee along with other group companies against a proportionate cost, without any markup, the reimbursement of such expenses by assessee cannot be held liable for TDS. Accordingly this ground raised by assessee stands allowed. TDS u/s 194C or 194I - Disallowance under section 40(a)(ia) of the Act, in respect of car rent expenses incurred by assessee - disallowance is on account of hiring of vehicles by assessee with individuals - HELD THAT - The revenue is not alleging that the payment made to person are contractors. It is a submission of the Ld.AR that there is no principal agent relationship and therefore provisions of section 194C are not applicable. In the present facts of the case the conditions do not satisfy to be covered under section 194C of the Act. We note that, the assessee has deducted TDS u/s. 194I in respect of one of the lessor, from whom vehicle was taken on lease and that, the payment exceeded the threshold limit of ₹ 1,80,000/-. There is no malafide intention of assessee to evade tax. In respect of the remaining payments, the threshold limit did not exceed and therefore TDS need not have been deducted. We therefore direct the Ld.AO to delete the disallowance made in respect of the same. TDS credit not granted to assessee - HELD THAT - The submissions of the Ld.AR is that, in the event part of the corresponding income to the tax deducted at source of ₹ 8,45,868/-has been offered as income in the previous year, assessee must be granted credit of tax deducted at source for the year under consideration in accordance with form 26AS. Assessee is directed to file all relevant details in support of the scheme. The Ld.AO shall verify the evidence is filed by assessee and consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee. Short deduction at source - DCIT filed the report dated 24/02/2020 mentioning the availability of credit as per e-TDS database - HELD THAT - We direct Ld.AO to grant the TDS available to the assessee as per the remand report dated 24/02/2020.

Summary

Issues:
1. Disallowance of reimbursement of expenses under section 40(a)(i) of the Act.
2. Disallowance of car rent expenses under section 40(a)(ia) of the Act.
3. TDS credit not granted to the assessee.
4. Short deduction at source.

Analysis:

Issue 1: Disallowance of Reimbursement of Expenses
The assessee claimed reimbursement of expenses to associated enterprises, which the AO disallowed under section 40(a)(ia) for non-deduction of TDS. The Tribunal allowed this ground, stating that the expenses were for software usage without any transfer of rights, hence not liable for TDS.

Issue 2: Disallowance of Car Rent Expenses
The AO disallowed car rent expenses under section 40(a)(ia) for not deducting TDS under section 194C. The Tribunal found that the payments did not exceed the threshold limit for TDS under section 194I, and directed the AO to delete the disallowance.

Issue 3: TDS Credit Not Granted
The assessee sought TDS credit for expenses where tax was deducted at source. The Tribunal directed the AO to verify and grant the TDS credit based on the evidence provided by the assessee, ensuring proper opportunity for the assessee to be heard.

Issue 4: Short Deduction at Source
The assessee raised a concern about short deduction at source. The Tribunal directed the AO to grant the TDS available to the assessee as per the remand report, thereby allowing this ground raised by the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee for statistical purposes, addressing each issue raised in the appeal and providing detailed reasoning for the decisions made. The judgment was pronounced on 04th April, 2022, with the Tribunal granting relief to the assessee on various grounds based on the facts and submissions presented during the proceedings.