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TMI Blog2016 (12) TMI 1398X X X X Extracts X X X X X X X X Extracts X X X X ..... MAT credit - Held that:- The assessee is in appeal before us and the alternate plea raised by the assessee is that where the tax payable has been computed after including surcharge and education cess, then MAT credit should be allowed on the total amount i.e. tax with surcharge and education cess and should not be restricted only to the tax payable. This issue is decided by the Delhi Bench of Tribunal in the case of Richa Global Exports (P.) Ltd. (2012 (9) TMI 99 - ITAT DELHI ), wherein the Tribunal held that MAT credit payable under section 115JB is only income tax and does not include surcharge or education cess. Therefore, where it is only income tax that is paid under the provisions of section 115JB of the Act, it is natural that tax credit under section 115JAA of the Act will only be of income tax and not of surcharge and education cess. The said proposition was applied by the CIT(A) in denying the claim of assessee. The assessee has failed to controvert the same and in view thereof, we find no merit in the ground of appeal raised by the assessee. - ITA No.619/PN/2014 - - - Dated:- 23-12-2016 - MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM For The Appellant : Shri Nik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.1 to 4 is against the disallowance of ₹ 23,33,278/- paid to Microsoft Corporation, USA. 4. The assessee has not pressed grounds of appeal No.5 to 7 and hence the same are dismissed as not pressed. 5. Briefly, in the facts of the case, the assessee was engaged in the business of software development. For the year under consideration, the assessee had furnished return of income declaring total income of ₹ 5,28,62,230/-. The Assessing Officer noted that the assessee had debited sum of ₹ 35 lakhs as compensation expenses. The assessee was asked to explain and justify the allowability of the said expenditure. In reply, the assessee pointed out that sum of ₹ 35 lakhs was paid to Anand Anand Lawyer Firm as compensation to Microsoft Corporation, USA and others, pursuant to compromise arrived at and recorded by the order of Hon ble Delhi High Court on 31.08.2009. It was further pointed out that the said amount was shared amongst the group companies involved in the settlement. The assessee also explained that the said amount was neither an offence nor penalty but sum paid in settlement of an action initiated in the Hon ble High Court against inadvertent infr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Explanation to section 37(1) of the Act was clearly attracted. Reliance placed on the decision of Hon ble Delhi High Court in CIT Vs. Desiccant Rotors International Pvt. Ltd. (supra) was found to be not applicable where the payment was made for loss of goodwill and damage to the capital and for terminating cases in US Courts. The CIT(A) thus, upheld the order of Assessing Officer. The alternate plea of assessee that compensation charged to the Profit Loss Account was only to ₹ 23,33,278/- out of total compensation of ₹ 35 lakhs paid to Microsoft Corporation and others, was accepted by the CIT(A). The CIT(A) has reproduced the scanned image of relevant portion of Profit Loss Account, under which ₹ 23,33,278/- has been debited and hence, the disallowance was restricted to ₹ 23,33,278/-. 7. The assessee is in appeal against the order of CIT(A). 8. The learned Authorized Representative for the assessee pointed out that the assessee was engaged in the provision of software services and was using pirated version of Microsoft software. A suit was filed against the assessee by Microsoft Corporation and others which was settled by payment of compensatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival contentions and perused the record. The issue which arises in the present appeal is the claim of deduction on account of compensation paid to Microsoft Corporation and others. The assessee was engaged in the business of software development and was carrying on its business on the platform of Microsoft. The said use of Microsoft Windows, etc. was an unauthorized use by the assessee. When the same came to the knowledge of Microsoft Corporation and others, civil suit was filed against the assessee before the Hon ble High Court of Delhi. As per the settlement of the suit, the assessee and others in the group company were directed to pay compensation to the tune of ₹ 35 lakhs. The share of assessee in the said ₹ 35 lakhs worked out to ₹ 23,33,278/-. 11. The question which arises for adjudication before us is whether the said amount paid by the assessee which is claimed to be in accordance with the terms of settlement between Microsoft Corporation others and the assessee its group companies, before the Hon ble High Court of Delhi, is in infraction of law and hence, hit by Explanation under section 37(1) of the Act or the same is allowable expenditure under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation to section 37(1) of the Act does not apply to such understanding between the two private parties. The Kolkata Bench of Tribunal in ITO Vs. M/s. MPR Marketings Pvt. Ltd. (supra) has laid down similar proposition, which has been approved by the Hon ble High Court of Calcutta and we find support from the said ratio. Accordingly, we allow the claim of assessee and the grounds of appeal No.1 to 4 are thus, allowed. 13. The grounds of appeal No.5 and 6 are not pressed and hence, the same are dismissed as not pressed. 14. The issue in ground of appeal No.7 raised by the assessee is against computation of MAT credit. 15. The facts relating to the issue are that for the year under consideration, the assessee had claimed MAT credit under section 115JAA of the Act. While calculating the tax payable, the assessee had computed the same on the returned income and thereafter, after reducing MAT credit of ₹ 79,85,346/- under section 115JAA of the Act , calculated surcharge, income tax and education cess on the balance tax. Whereas the Assessing Officer calculated the surcharge, income tax and education cess on the tax payable before MAT credit of ₹ 78,71,786/-. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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