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2024 (6) TMI 1122 - AT - Income TaxIssues Involved: 1. Disallowance under Section 40(a)(ia) for year-end provision made. 2. Claim of deduction under Section 10AA in respect of interest income. 3. Disallowance of expenses incurred on payment of subscription fees under Section 40(a)(i). 4. Disallowance of foreign tax credit in respect of income pertaining to Section 10A/10AA eligible units. 5. Addition of "Provision for Diminution in value of Investment" for computing profit under Section 115JB. 6. Rate of Dividend Distribution Tax on dividend paid to overseas shareholders. 7. Deduction under Section 10AA on commercial profits instead of income from business and profession. 8. Disallowance of taxes paid in overseas countries. 9. Disallowance of expenditure on imported software on account of non-deduction of TDS. 10. Disallowance under Section 14A of the Act. 11. Disallowance of advertisement expenses (Brand building expenses). 12. Disallowance of payment towards Tata Brand Equity subscription. 13. Disallowance of expenditure of commission to non-resident under Section 40(a)(i). 14. Foreign tax credit in respect of income pertaining to Section 10A/10AA eligible units. Detailed Analysis: 1. Disallowance under Section 40(a)(ia) for year-end provision made: The assessee made year-end provisions without deducting tax, which the AO disallowed under Section 40(a)(ia). The CIT(A) upheld this disallowance. The ITAT, referring to its earlier decision in the assessee's case, allowed the appeal, stating that provisions created for expenses without identifying specific payees do not attract TDS provisions. 2. Claim of deduction under Section 10AA in respect of interest income: The AO disallowed the deduction under Section 10AA for interest income claimed during assessment, citing the Supreme Court's decision in Goetze (I) Ltd. The CIT(A) upheld this. The ITAT, referring to its previous ruling, allowed the appeal, noting that the interest income should be included in the business profits for computing the deduction under Section 10AA. 3. Disallowance of expenses incurred on payment of subscription fees under Section 40(a)(i): The AO disallowed subscription fees paid to non-residents without TDS, treating them as royalty. The CIT(A) upheld the AO's decision. The ITAT, referencing the Bombay High Court's decision in Dun & Bradstreet Information Services India Pvt. Ltd., allowed the appeal, stating that such subscription fees do not constitute royalty and are not subject to TDS. 4. Disallowance of foreign tax credit in respect of income pertaining to Section 10A/10AA eligible units: The AO denied foreign tax credit for income eligible under Section 10A/10AA. The CIT(A) partially allowed the appeal, directing the AO to allow credit for taxes paid in DTAA countries. The ITAT, following its earlier decision, directed the AO to allow the foreign tax credit as per the respective DTAA provisions. 5. Addition of "Provision for Diminution in value of Investment" for computing profit under Section 115JB: The AO added the provision for diminution in value of investment to book profit under Section 115JB. The CIT(A) upheld this. The ITAT, referencing its decision in Reliance Welfare Association, allowed the appeal, stating that the provision was an actual charge and not a set-aside provision, thus not requiring addition to book profit. 6. Rate of Dividend Distribution Tax on dividend paid to overseas shareholders: This ground was not pressed by the assessee and was dismissed. 7. Deduction under Section 10AA on commercial profits instead of income from business and profession: The ITAT remanded the issue to the AO for de novo consideration, following its earlier decision in the assessee's case, directing the AO to consider the Supreme Court's ruling in Vijay Industries Ltd. 8. Disallowance of taxes paid in overseas countries: The AO disallowed state taxes paid in the USA. The CIT(A) allowed the appeal, following the ITAT's decision in the assessee's case. The ITAT upheld the CIT(A)'s decision, directing the AO to verify and allow the deduction if the taxes were not eligible for relief under Section 90. 9. Disallowance of expenditure on imported software on account of non-deduction of TDS: The AO disallowed software expenses treating them as royalty. The CIT(A) allowed the appeal, following the ITAT's decision in the assessee's case. The ITAT upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in Engineering Analysis Centre of Excellence (P) Ltd. 10. Disallowance under Section 14A of the Act: The AO disallowed expenses under Section 14A. The CIT(A) deleted the addition, stating the AO did not provide cogent reasons. The ITAT upheld the CIT(A)'s decision, following its earlier ruling in the assessee's case. 11. Disallowance of advertisement expenses (Brand building expenses): The AO treated advertisement expenses as capital expenditure. The CIT(A) allowed the appeal, following the ITAT's decision in the assessee's case. The ITAT upheld the CIT(A)'s decision, stating the expenses were for promoting the assessee's business and not brand building. 12. Disallowance of payment towards Tata Brand Equity subscription: The AO treated the subscription fees as capital expenditure. The CIT(A) allowed the appeal. The ITAT upheld the CIT(A)'s decision, following its earlier ruling in the assessee's case, stating the fees were for promotional activities and not capital in nature. 13. Disallowance of expenditure of commission to non-resident under Section 40(a)(i): The AO disallowed commission paid to non-residents without TDS. The CIT(A) allowed the appeal, stating the non-residents did not have business connections or PE in India. The ITAT upheld the CIT(A)'s decision, following its earlier ruling in the assessee's case. 14. Foreign tax credit in respect of income pertaining to Section 10A/10AA eligible units: This issue was adjudicated similarly to ground no. 4 in the assessee's appeal, and the ITAT dismissed the revenue's appeal, directing the AO to allow the foreign tax credit as per the respective DTAA provisions. Conclusion: The appeal of the assessee is partly allowed, and the appeal of the revenue is dismissed. The ITAT provided detailed reasoning for each issue, often referencing previous decisions in the assessee's case or similar cases, ensuring consistency and adherence to legal precedents.
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