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TMI Blog2014 (11) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) as per the legal position prevalent at the relevant time and the assessee therefore was not liable to deduct tax at source from the said amount paid to M/s. SSA and there was no question of disallowing the said amount by invoking the provisions of sec.40(a)(i) - when the royalty for transfer of right to use of computer software does not fall under Explanation 2 to sec. 9(1)(vi), but the same falls under Explanation 4 to sec. 9(1)(vi), then in view of the Explanation to sec. 40(a)(i), the amount cannot be disallowed under the provisions of sec. 40(a)(i) of the Act – Decided against revenue. - IT Appeal No. 1382 (Mum.) of 2014 - - - Dated:- 9-7-2014 - R.C. SHARMA and VIJAY PAL RAO, JJ. Assessee by : Shri Porus Kaka Department by : Shri Santosh Kumar ORDER This appeal by the Revenue and the Cross Objection by the Assessee are directed against the order giving effect to the directions dated 31.12.2013 of DRP-II, Mumbai passed u/s.144C(1) of the Income tax Act for the assessment year 2009-10. Revenue has raised the following grounds in this appeal:- 1. On the facts and circumstances of the case and in law, the ld. DRP was not justified in deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the decision of the co-ordinate Bench of the Tribunal in the case of M/s. Channel Guide India Limited vs. ACIT in ITA No.1221/M/2006 dated 29/08/2012 (Assessment Year 2004-05) as well as the decision of Hon ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal (2013) 260 CTR (Cal)73. The ld. Sr. Counsel has further submitted that even as per the provisions of section 40 the definition of royalty has to be taken as defined under Explanation-2 of Section 9(1)(vi). Since there is no corresponding amendment in the provisions of section 40, therefore, the definition of royalty for the purpose of section-40 can not be imported from the Explanation-6 of section-9(1)(vi). In support of his contention he has relied upon the decision of co-ordinate Bench of this Tribunal in the case of SKOL Breweries Ltd. vs. ACIT in ITA No.6175/Mum/2011 dated 18/01/2013 (for AY -20007-08); (2013) 29 taxmann.com 111(Mumbai-Trib.). 5. We have considered the rival submissions as well as relevant material on record. AO has disallowed payment made by the Assessee to the cable T.V. operator/DTH provider for placing its channel in a particular frequency to get better viewership on account of good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it was held by the Tribunal that it was impossible for the assessee to deduct tax in the financial year 2003-04 when as per the relevant legal position prevalent in the financial year 2003-04, the obligation to deduct tax was not on the assessee. The Tribunal based its decision on a legal Maxim lex non cogit ad impossiblia meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform and relied on the decision of Hon ble Supreme Court in the case of Krishna Swamy S. PD and Another vs. Union of India and others 281 ITR 305 wherein the said legal Maxim was accepted by the Hon ble apex court. 26. In view of the above discussion, we are of the view that the amount in question paid by the assessee to SSA was not taxable in India in the hands of SSA either u/s.9(1)(vi) or 9(1)(vii) as per the legal position prevalent at the relevant time and the assessee therefore was not liable to deduct tax at source from the said amount paid to M/s. SSA and there was no question of disallowing the said amount by invoking the provisions of sec.40(a)(i). In that view of the matter, we delete the disallowance made by the AO u/s.40(a)(i) and confirmed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of section 40 is taken only under Explanation-2 to section 9(1)(c). An identical issue was considered and decided by this Tribunal in case of SKOL Breweries Ltd. vs. ACIT (supra), in para 19.1 to 19.4 as under :- 19.1 We confined ourselves to the definition and meaning of the term royalty because the Assessing Officer has treated the payment as in the nature of royalty as per provisions of sec. 9(1)(vi) and not for fee for technical services. As it is clear from the Clause A of Explanation to sec. 40(a)(i), the meaning of the royalty for the purpose of sec. 40 has to be taken as given in the Explanation 2 to sec 9(1)(vi). We quote Explanation 2 to sec. 9(1)(vi) as under: [Explanation 2.- For the removal of doubts, it is hereby declared that business connection shall include any business activity carried out through a person who, acting on behalf of the non-resident, - (a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or (b) has no such authority, but habitually maintains in India a stock of goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid by the date. The learned Counsel placed on record the details of the outstanding amount as under: Details of amount paid and payable as on 31/03/2008 for purchase of software in respect of the amounts disallowed under section 40(a)(ia) of the I.T. Act 1961: S.N. Name of the party Total amount disallowed (excl, of local taxes) Paid before 31.03.2008 (excl. local taxes) Payable as on 31.03.2008 (excl. local taxes) 1 Oracle India Pvt. Ltd 1,114,471,630 768,167,218 346,304,412 2 BEA systems India Private 108,922,200 93,631,520 15,290,680 3 IBM India Private Limited 436,492,087 428,949,124 7,542,963 4 Ingram Micro India Pvt. Ltd 176,188,548 149,500,880 26,687,668 5 Redington India Ltd 60,107,319 60,10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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