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TMI Blog2015 (11) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of software outside India. In the given circumstances, we do not find any merit in ground raised by the Revenue. - Decided in favour of assessee. Exclusion of reimbursement of certain expenses from both export turnover and total turnover for the purpose of computing deduction under section 10A - Held that:- Whatever is excluded from the export turnover has also to be excluded from the total turnover as laid down by the hon'ble High Court of Karnataka in CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - whether the assessee had purchased software which is in nature of a licence paid for usage of the software and the consideration for such licences would fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the Commissioner of Income- tax (Appeals)-III, Bangalore relating to the assessment year 2009-10. 2. Ground No. 2 reads as follows : 2. On the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) erred in law in holding that 10 per cent. of the total telecommunications expenses are to be allowed as telecommunication expenses for delivery of software out side India instead of 50 per cent., without appreciating that the Assessing Officer had given a substantial finding on this issue and the facts were same for the assessment year 2008-09. 3. The assessee is a company engaged in the business of rendering computer software development services. The assessee is registered with the Software T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ware outside India incurred by the assessee. In this regard, the Commissioner of Income-tax (Appeals) has verified all the documents filed by the assessee to demonstrate the above position and came to the conclusion that the estimate made by the Assessing Officer was without any basis. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the Revenue is in appeal before the Tribunal. 5. Before us, the learned Departmental representative relied on the order of the Assessing Officer. We find that as per the agreement between the assessee and its customers overseas, communication expenses were to be borne by the customer. In such circumstances, there could be no expenses incurred by the assessee for delivery of computer softwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeals) erred in law in deleting the disallowance under section 40(a)(ia) without appreciating the fact that the assessee had purchased software which is in nature of a licence paid for usage of the software and the consideration for such licences would fall within the definition of the royalty defined in Explanation to section 9(1)(vi) and hence deduction of tax at source under section 194J should have been done by the assessee. 8. The assessee had during the previous year acquired software by way of purchase. The depreciation on such addition of software was a sum of ₹ 32,36,441. The assessee claimed the aforesaid depreciation as an allowable deduction while computing its income from business. The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in it has been held that section 40(a)(ia) would not apply to disallow payments when TDS was not done and subsequently become taxable on account of a retrospective legislation. 11. The Commissioner of Income-tax (Appeals) held as follows : 7.3 In my view there is considerable force in the submissions of the appellant. Even accepting the view of the Assessing Officer that the payment made for obtaining licence for use of software would amount to royalty, it is necessary to note that during the period when the purchase was made, i.e., financial year 2008-09, the assessee did not have the benefit of the clarification brought about by the retro spective amendment that the payment tantamounts to payment for royalty and consequently tax wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (UO) and Sonic Biochem Extractions P. Ltd. v. ITO [2013] 23 ITR (Trib) 447 (Mum). In Sonic Biochem Extractions P. Ltd. (supra), identical issue was considered and decided by the Mumbai Tribunal. Following were the relevant observations (headnote): The assessee purchased software, capitalised the payment to the computers account as the software came along with the hardware of computers and claimed depreciation. On the ground that purchase of software is essentially purchase of copyright which attracts tax deduc tion at source under section 194J, the Assessing Officer invoked the provisions of section 40(a)(ia) and disallowed the depreciation claimed. The Commissioner (Appeals), confirmed the action of the Assessing Officer on the groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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