9911796707
TMI Blog2017 (8) TMI 1535X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to Honda Asia Thailand - As assessee contended that no PE has been held by the DRP in the case of non-resident company in assessment year 2010-11 and this fact was not controverted by the Ld. CIT-(DR), thus, following the decision of the Tribunal in assessment year 2009-10 [ 2016 (9) TMI 439 - ITAT DELHI] , we hold no disallowance could be made under section 40(a)(i) of the Act for payment made to Honda Asia Thailand without deduction of tax at source. Addition made towards royalty and lump sum fee - capital expenditure or revenue expenditure as claimed by the assessee - HELD THAT:- Judgement of the Hon ble Supreme Court in assessee s own case for assessment year 1999-2000 to 2005-06 [ 2017 (6) TMI 524 - SUPREME COURT] would not be applicable in the assessment year under consideration, since the assessee was already engaged in the manufacturing of cars and spare parts and the payments towards royalty/technical knowhow paid in pursuant to agreement dated 01/04/2005 were not toward setting up of manufacturing facility, hence we hold that royalty/technical knowhow payment made by the assessee during the year under consideration were revenue in nature and the Ld. CIT-A has cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 238 - DELHI HIGH COURT] held that no disallowance under section 14A of the Act could be made where no exempt income has been earned by the assessee. Revenue appeal dismissed. - ITA No. 4491/Del/2014 And ITA No. 5483/Del/2014 - - - Dated:- 18-8-2017 - SH. I.C. SUDHIR, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER For the Appellant : S/sh. Deepak Chopra Amit Srivastava, Advocates For the Respondent : Sh. Anuj Arora, CIT-DR ORDER PER O.P. KANT, A.M.: These cross appeals by the assessee and the Revenue are directed against order dated 21/07/2014 of the Commissioner of Income tax (Appeals) - LTU, Delhi [in short the CIT(A) ] for assessment year 2010-11. Since both the appeals have emanated from the impugned order of the Ld. CIT(A), same were heard together and disposed off by this consolidated order for convenience. 2. The concise grounds of appeal filed by the assessee on 19/05/2015 in ITA No. 4491/Del/2014 are reproduced as under: 1. That the order passed by the Commissioner of Income Tax (appeals) [CIT(A)] to the extent prejudicial to the appellant, is bad in law and against the settled pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have been made in view of CBDT circular no. 02/2014. The above grounds of appeal are without prejudice to each other. The Appellant reserves the right to add, alter, amend and or vary the grounds of appeal at the time or before the hearing of the appeal. 3. The grounds of appeal raised by the Revenue in ITA No. 5483/Del/2014 are reproduced as under: 1. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of ₹ 1,59,74,53,889/- made by AO treating the amount of royalty and lump sum fee paid by assessee as capital, instead of revenue claimed by assessee. 2. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of ₹ 2,85,14,345/- made by AO treating the amount of expenditure on airfare booked under technical guidance fee as capital, instead of revenue claimed by assessee. 3. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of ₹ 6,80,73,802/- made on account of disallowance of sales tax, which was claimed as a deduction u/s 43B. 4. On the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,50,000 5. Aggrieved, the assessee filed appeal before the Ld. CIT-A, who allowed part relief to the assessee. Aggrieved, both the assessee and the Revenue are in appeal before the Tribunal raising the grounds as reproduced above. ITA No. 4491/Del/2014 6. First we take up the appeal of the assessee in ITA No. 4491/Del/2014. All the grounds of the appeal raised by the assessee are related to the sole issue of disallowance of ₹ 1259,88,03,232/- sustained by the learned CIT(A) in terms of section 40(a)(i) of the Act for non-deduction of tax at source on payments made for purchase of raw materials, components etc. from non-residents entities. The facts relevant to the issue in dispute are that in the course of assessment proceedings, the Assessing Officer noticed that the assessee company had made certain payments to non-resident entities without deducting tax at source under section 195 of the Act. The Assessing Officer has given list of all such transactions on page 15 to 17 of the assessment order. The list is extracted below for ready reference: S. No Payment made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90,47,457 11. Honda Malaysia Sdn Bhd. Malaysia Purchase of raw materials 53,223 12. Honda Trading (South China) Co. Ltd Purchase of raw materials 21,68,55,944 13 Honda Autoparts Manufacturing (M) Sdn. Bhd Purchase of raw materials 3 1,162 Total 1290,26,14,576/- 14. Honda Motor Co. Ltd. Japan Purchase of Cars (CRV) 44,33,42,920 Total 44,33,42,920/- 15. Honda Motor Co. Ltd. Japan Purchase of fixed assets 21,82,996 16. Honda Trading Corp. Purchase of fixed assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,96,88,760/- Grand Total 1525,83,26.392/- 6.1 In the opinion of the Assessing Officer, the non-resident companies and the parent company had a business connection and permanent establishment in India through the assessee and therefore income of such nonresidents from sale of raw materials, spare parts etc was chargeable to tax in India and consequently, the assessee was liable to deduct tax at source under section 195 of the Act. The Assessing Officer issued a show cause notice requiring the assessee to explain as why the disallowance under section 40(a)(i) of the Act might not be made. The assessee submitted that neither the parent company nor the other nonresident company referred to have a PE in India. Without prejudice, it was submitted by the assessee that nondiscrimination clause in the Double Taxation Avoidance Agreements (DTAA) would apply hence, disallowance under section 40(a)(i) of the Act cannot be made. The Assessing Officer rejected those contentions of the assessee and disallowed the sum of ₹ 1525,83,26,392/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. 2. The assessee was not entitled for benefit of Nondiscrimination clause in the Article 24(3) of Indo Japan DTAA in respect of payment made to Honda motor Japan , in view of the decision of the Pune Bench of Tribunal in the case of Automated Securities Clearance Inc Vs Income tax officer (2008) 118 TTJ 619 (Pune). 3. Regarding the payments made to Asia Honda Thailand, there was no such nondiscrimination clause existing in India-Thailand DTAA. 4. The entire amount of payment was disallowable as against the claim of the assessee to disallow only the appropriate income part embedded in such payments. 5. The disallowance cannot be restricted to only amounts payable as on 31st March and it was to be applied to the amounts paid during the year also. 6.4 In view of above reasons the Ld. CIT-(A) sustained the disallowance for non-deduction of tax on payment to Honda motor Japan for purchase of raw material, spare parts, purchase of car and purchase of capital goods amount amounting to ₹ 630,85,67,113/- and payment to Asian Honda Thailand for purchase of raw material/spare parts amounting to ₹ 629,02,36,119/-. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were carried out, and still the TPO, after considering the FAR analysis (i.e. function carried, assets employed risk taken) in respect of the transaction, had found them to be at arm s length. 9. On the other hand, Ld. CIT(DR) argued that on the facts and circumstances of the case, the disallowance under section 40(a)(i) of the Act is correct in law. His arguments are summarized as under: (a)that provisions of article 9(1) of DTAA apply to the facts of this case, which is one of the exceptions mentioned in article 24(3) of the DTAA, thus, the assessee cannot invoke article 24(3) of the DTAA between Indian Japan. (b)that in the case of Herbalife International India private limited (supra) the Hon ble High Court at para-34 has recorded that it is not the case of the Revenue that article 9(1) or article 11(7) applies in that case and hence the case is distinguishable (c)that regarding the contention of the assessee the TPO has found all the transaction to be at arm s length and hence the conditions laid down in article 9(1) are not satisfied, the Ld. DR submitted that the TPO s order was constrained by the disclosure made before him by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and all the non-resident companies were at arm s length. He submitted that a plain reading of article 9 of the DTAA reveals that what is required under the said article is that the transaction between the associated enterprises should be conducted on arm s length basis and uninfluenced by the close relationship. He submitted that said test has been met in the present case when the TPO has found all the transaction between the assessee and its AEs on arm s length basis. Thus, he submitted that the effort of the Revenue to distinguish the jurisdictional High Court in the case of Herbalife (supra), was without any merit. 11. He further submitted that the reliance placed by the Revenue on amendment in section 40(a)(i) of the Act w.e.f. 01/04/2005 by insertion of sub-clause(ia) would also not come to the rescue of the Revenue. He submitted that amendment was brought to the attention of the Hon ble High Court in the case of Herbalife (supra). He submitted that even after the amendment and imposition of the obligation on resident assessees to deduct tax at source, would still not remove the discrimination as envisaged under article 24(3) of the DTAA for the simple rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the facts and circumstances of the case and perusal of the papers on record and the orders of the authorities below, as well as the case law cited, we hold as follows. The sole issue for our consideration is whether the disallowance made u/s 40(a)(i) of the Act read with section 195 of the Act, of payments made to non-resident companies is correct in law. 13.1. There is no dispute of the fact that out of 18 non-resident associate companies to whom payments have been made, it was held that 16 associated enterprises do not have a P.E. in India. The D.R.P. in the case of Asia Honda Thailand for the A.Y. 2009-10 has held that the Non-resident company had no P.E. in India. Revenue has not filed an appeal on this finding of the D.R.P. Hence we have to reverse the finding of the Ld.CIT(A) that Asia Honda Thailand has a P.E. in India in this A.Y. Thus we have to hold that, except in the case of Honda Motors Japan, payments made to all other 17 nonresident associate companies do not attract the provisions of S.195 and consequently 40(a)(i) of the Act, as no portion of the income of these companies arising from the supply of parts etc. was liable for tax in India. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Article 26 (3), it connotes something other than 'interest and royalties'. If the intention was that 'other disbursements' should also be in the nature of interest and royalties then the word 'other' should have been followed by 'such' or 'such like'. There is no warrant, therefore, to proceed on the basis that the expression 'other disbursements' should take the colour of 'interest and royalties'. 41. The expression 'other disbursements' occurring in Article 26 (3) of the DTAA is wide enough to encompass the administrative fee paid by the Assessee to HIAI which the Revenue has chosen to characterize as FTS within the meaning of Explanation 2 to Section 9 (1) (vii) of the Act. 42. At one stage of the proceedings, the Assessee sought to contend that the payment was FIS covered under Article 12 (4) of the DTAA. The ITAT did not address this issue. It addressed the question whether, even assuming it was FIS, Section 40 (a) (i) of the Act cannot be applied and consequently, no disallowance can be made. Before this Court no question has been framed at the instance of the Assessee that the payment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. It does not include an amount paid towards purchases. Correspondingly, there is no requirement of TDS having to be deducted while making such payment. 49. However, the element of discrimination arises not only because of the above requirement of having to deduct TDS. The OECD Expert Group which brought out a document titled ‗Application and Interpretation of Article 24(Non- Discrimination), Public discussion Draft, May 2007 did envisage deduction of tax while making payments to non-residents. It is viewed only as additional compliance of verification requirement which would not attract the non- discrimination rule. The OECD Expert Group noted that ―the non-discrimination obligation under tax conventions is restricted in scope when compared with equal treatment or non discrimination clauses in an investment agreement. Specifically, in relation to withholding taxes, the Expert Group in the note by its chairman titled ―Non- Discrimination in Bilateral Tax Conventions noted as follows: ― ITA Nos.2056 3229/Del/2014 A.Y. 2009-10 Honda Cars India Ltd. 6. The more limited non-discrimination obligations in tax conventions reflect the practi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rring to Article 14 of the Constitution of India and contended that the line of enquiry envisaged examining whether (a) the classification was based on an intelligible differentia and (b) whether the classification had a rational nexus with the object of the statute. 52. Section 40 (a) (i), in providing for disallowance of a payment made to a non- resident if TDS is not deducted, is no doubt meant to be a deterrent ITA No. 7/2007 Page 29 of 35 in order to compel the resident payer to deduct TDS while making the payment. However, that does not answer the requirement of Article 26 (3) of the DTAA that the payment to both residents and non-residents should be under the 'same conditions' not only as regards deduction of TDS but even as regards the allowability of such payment as deduction. It has to be seen that in those 'same conditions' whether the consequences are different for the failure to deduct TDS. 53. It is argued by the Revenue that since in the present case no condition of deduction of TDS was attracted, in terms of Section 40 (a) (i) of the Act as it then stood, to payments made to a resident, but only to payments made to non-residents, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The expression 'under the same conditions' in Article 26 (3) of the DTAA clarifies the nature of the receipt and conditions of its deductibility. It is relatable not merely to the compliance requirement of deduction of TDS. The lack of parity in the allowing of the payment as deduction is what brings about the discrimination. The tested party is another resident Indian who transacts with a resident making payment and does not deduct TDS and therefore in whose case there would be no disallowance of the payment as deduction because TDS was not deducted. Therefore, the consequence of non-deduction of TDS when the payment is to a nonresident has an adverse consequence to the payer. Since it is mandatory in ITA No. 7/2007 Page 31 of 35 terms of Section 40 (a) (i) for the payer to deduct TDS from the payment to the non-resident, the latter receives the payment net of TDS. The object of Article 26 (3) DTAA was to ensure non-discrimination in the condition of deductibility of the payment in the hands of the payer where the payee is either a resident or a non-resident. That object would get defeated as a result of the discrimination brought about qua non-resident by requiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plementation of the terms of the DTAs which would automatically override the provisions of the Income tax Act in the matter of ascertainment of chargeability to income tax and ascertainment of total income, to the extent of inconsistency with the terms of the DTAC. 59. Consequently, the Court negatives the plea of the Revenue that unless there are provisions similar to Section 40 (a) (i) of the Act in the DTAA, a comparison cannot be made as to which is more beneficial provision. 60. The reliance by the Revenue on the decision of this Court in Hyosung Corporation v. AAR (2016) 382 ITR 371 (Del) is misplaced. There the Court negatived a challenge to the constitutionality of Section 245R (2)(i) of the Act on the ground that it was violative of Article 14 of the Constitution as well as Article 25 of the DTAA between India and South Korea. Section 245R (2) of the Act barred a non-resident applicant from approaching the Authority for Advance Ruling (AAR) where the matter was pending before any income tax authority. The matter, therefore, only pertained to the procedure of filing a petition before the AAR and not as regards any substantive right. The decision of the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pricing officer has given a finding that the transactions between the assessee and the AE are at arm's length. The ld. DR, without specifically pointing out as to what is the difference between the arm's length price and the price at which the transactions have taken place between the assessee and the AE and without quantifying the excess/shortage in the price, seeks to invoke Article 9(1). In our view, such an argument is devoid of merit and hence we dismiss the same. 19. The ld. DR relies on the judgment of the jurisdictional Delhi High Court in the case of Jansampark Advertising Marketing (P) Ltd. (supra) and pleads that the Tribunal should set aside the matter to the AO/TPO to re-adjudicate the issue ITA Nos.2056 3229/Del/2014 A.Y. 2009-10 Honda Cars India Ltd. as to whether the transactions between the A.E. and the assessee are at arm's length or not. We do not think that the facts and circumstances of the case warrants such an action by the Tribunal. The Transfer Pricing Officer passed his order on 29th January, 2013, whereas the surveys were carried out on 24.2.2010 and 19th December, 2012. No specific defects are pointed out, either in the TP rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Thailand without deduction of tax at source. 16. Thus, ground No. 1 to 6 of the appeal are accordingly allowed. The other grounds raised in respect of the issue in dispute were not argued specifically and therefore we are not adjudicating upon those issues. 17. In the result, appeal of the assessee is allowed. ITA No. 5483/Del/2014. 18. Now, we take up the appeal of the Revenue in ITA No. 5483/Del/2014. 19. In ground No. 1, the Revenue has challenged deletion of the addition of ₹ 159,74,53,889/-made towards royalty and lump sum fee as capital expenditure instead of revenue expenditure claimed by the assessee. The Assessing Officer made additions on the basis that payment made by the assessee had resulted into a benefit of enduring nature and thus the expenditure was capital in nature. The Ld. CIT-(A), following the order of the Tribunal for assessment year 2003-04 in ITA No. 3173/Del/2007 deleted the addition holding as under: 4.7 I have carefully considered the submissions of the appellant and perused the order of the AO and have also considered the facts and the evidences placed on record which show that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure or capital expenditure. 23. He then referred to the relevant clauses of the TCA dated 21.5.1996 (as also noted by the Apex Court in its decision dated 9.6.2017) which read as under- 14.1 In consideration of the right and licence granted to licensee under Article 2 hereof and of the furnishing of the Technical Information under Article 4.2 hereof licensee shall pay to LICENSOR the following fees: 1. Lumpsum fee: The amount of lump-sum fee payable by the licensee to the LICENSOR shall be USS 30.5 million. This fee shall be payable in 5 continuous equal annual installments, the amount of each of which instalments shall be six million one hundred thousand US dollars (USS 6,100,000), beginning from the 3rd year after the commencement of Commercial Production. The lump sum fees shall be payable by licensee in currency of US dollars by bank transfer remittance to the bank account designated by LICENSOR, based on final government approval. 2. Royalty: The rate of royalty payable by the licensee to the LICENSOR shall be Four (4) percent; both on internal sales and exports, subject to taxes. The royalty shall calculated on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al know-how was obtained merely to improvise the existing product line, then payment for such technical know-how fall in the realm of revenue expenditure and not capital. 26. He submitted that for the assessment year under consideration, which was the 11th year of production of the assessee, a brief perusal of revised Technical Collaboration Agreement between Honda Motor Co. Ltd. and Honda Siel Cars India Pvt. Ltd. dated 01.04.2005 (Page 684 of the Assessee s Paper book -Vol - II) will show that in the instant case the technical know-how was obtained for improving the existing product line being manufactured by the assessee. Article 13 (Page 700 of the Assessee s Paper book -Vol - II) of the said agreement shows that the lump-sum fee paid is a Model Fee and is payable for each New or FMC Model and the running royalty was paid on sales. The said clauses of the TCA dated 1.4.2005 are as under- Article 13. CONSIDERATION 13.1.1 MODEL FEE In consideration of the furnishing of the Technical Information under Article 4 hereof, LICENSEE shall pay to LICENSOR, a Lumpsum Fee, hereinafter referred to as Model Fee as hereunder: a) For e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. On Domestic Sales 5% (Five Percent) net remittable to LICENSOR, after deduction from the Gross rate, the applicable withholding taxes, which shall be additionally borne and deposited by the LICENSEE on behalf of the LICENSOR b. On Export Sales (Eight Percent) net remittable to LICENSOR, after deduction from the Gross rate, the applicable withholding taxes, which shall be additionally borne and deposited by the LICENSEE on behalf of the LICENSOR 27. The term technical information has been defined in Article 1(6) of the said TCS as under- The term Technical Information shall mean any and all secret knowhow and technical information (except for the Intellectual Property Rights), whether in writing or not, including but not limited to drawings, standards, specifications, materials lists, process manuals, direction maps, service materials, test reports and analysis on homologation of products and the domestic parts etc,, which directly relates to the Products or the Licensed Parts themselves or is necessary for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip right was never granted or transferred. The factum that after 10 years and after returning the tangible properties, the respondent assessee could still have continued to use technical knowhow and information would be a trivial and inconsequential factum as in the automobile industry, technology upgradation is constant and rapid. Gone are the days when one or two manufacturers enjoyed monopoly rights and there was a long and indeterminate wait and queue for purchase of out-of-date models. Technical up- gradation and state-of-the-art know-how is injected every year in the automobile industry. Failure to keep up and upgrade would result in product rejection and fall in sales. Persistent upgradation and cutting edge technology is mandate and business requirement in the competitive market of two/three wheelers. 30. It is further submitted, that the Hon ble Delhi High Court in the case of the assessee itself for assessment year 2008-09 has dismissed the appeal of the Revenue on this issue. He also submitted that the Revenue has not preferred an appeal against the said order before the Supreme Court. It was also submitted that coordinate bench of this Tribunal in Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuant to the agreement dated 01/04/2005. At the time of the agreement was executed, the assessee was in existence in operation for more than 10 years. Thus, it cannot be said that the technical knowhow given under the agreement was for setting up of the business of the assessee. It was also brought to our attention that a coordinate Bench of this tribunal in assessee s own case for assessment year 2008-09 2009-10 has held that the said expenditure of payment of royalty and lump sum model fee to be in the nature of revenue expenditure. The said order for assessment year 2008-09 has also been confirmed by the Hon ble Jurisdictional Delhi High Court in ITA No. 34 of 2016 dated 18.01.2016. 34. Hon ble Supreme Court while deciding the case of royalty/technical knowhow expenditure in the nature of capital held that the expenditure was for the purpose of setting up of manufacturing facility of the assessee and hence the payment was treated as capital in nature. The Hon ble Supreme Court distinguished the judgment of the Delhi High Court in the case of Hero Honda Motors (supra) and observed as under: 25) Coming to the judgment of the Delhi High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Admittedly, there was no existing business and, thus, question of improvising the existing technical know-how by borrowing the technical know-how of the HMCL, Japan did not arise. The assessee was not in existence at all and it was the result of joint venture of HMCL, Japan and M/s. HSCIL, India. The very purpose of Agreement between the two companies was to set up a joint venture company with aim and objective to establish a unit for manufacture of automobiles and part thereof. As a result of this agreement, assessee company was incorporated which entered into TCA in question for technical collaboration. This technical collaboration included not only transfer of technical information, but, complete assistance, actual, factual and on the spot, for establishment of plant, machinery etc. so as to bring in existence manufacturing unit for the products. Thus, a new business was set up with the technical know-how provided by HMCL, Japan and lump sum royalty, though in five Installments, was paid therefor. 37. In view of above discussion, we are of the view that the judgement of the Hon ble Supreme Court in assessee s own case for assessment year 1999-2000 to 2005-06 would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order, whereas the learned counsel of the assessee relied on the finding of the Ld. CIT-A 40. We have heard the rival submission and perused the relevant material on record. Since there is no change in the facts as were existing in assessment year 2008-09 and 2009-10 and the learned CIT-(A) has followed the finding of the Tribunal in those years in the case of the assessee itself, we do not find any infirmity in the order of the Ld. CIT-(A) on the issue in dispute and accordingly, we uphold the same. The ground of the appeal is accordingly dismissed. 41. In ground No. 3, the Revenue has challenged deletion of the addition of ₹ 6,80,73,802/- made on account of disallowance of sales tax, which was claimed as deduction under section 43B of the Act. According to the Assessing Officer, the sale tax liability paid under protest, was not an ascertained tax liability and therefore, it was provisional nature and accordingly not allowable. Before the Ld. CIT-(A), the assessee claimed that said sales tax payment was claimed as deduction under section 43B of the Act and the payment made under protest was immaterial for allowance under section 43B of the Act and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e uphold the same. The ground of the appeal is accordingly dismissed. 45. The ground No. 4 relates to the addition of ₹ 97,32,768/- made by the Assessing Officer treating the software expenses as capital expenditure. 46. Before the learned CIT-(A), the assessee provided detail of the software expenses and submitted that the expenditure was in respect of annual fee of the softwares, software development charges, AMC of software and others like monthly web hosting, web designing, development charges etc having life span of less than one year. With regard to the license fee of LET software and RLC of CATIA V5 RLC ENOVIA, the assessee relied on the decision of the special bench of the Tribunal in the case of M/s Amway 111 ITD 112 (2008) and submitted that i. Appellant is not the owner of the LET software and RLC of CATIA V5 and ENOVIA Software; and ii. No enduring benefit is conferred to appellant upon usage of these softwares; and iii. These softwares do not satisfy the functional test as it helps in facilitating appellant s operations more effectively and efficiently and thus, cannot by any stretch of imagination be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2009- 10, we do not find any error in the order of the Ld. CIT-(A) on the issue in dispute and accordingly we uphold the same. The ground of the appeal is dismissed. 51. In ground No. 5, the Revenue has challenged deletion of the addition of ₹ 31,80,007/- in terms of section 14A of the Act. The Assessing Officer held that the assessee has incurred direct and indirect expenses in the activity of earning tax exempt income and accordingly invoking the rule 8D of the Income Tax rules, 1962 (in short the Rules ) made disallowance of ₹ 18,97,822/- under Rule 8D(2)(ii) and ₹ 12,82,185/- under rule 8D(2)(iii), totalling to ₹ 31,80,007/-. The Ld. CIT-A deleted the addition with following findings: 8.3 I have carefully considered the submissions of the appellant and the evidences placed on record. I find that the appellant has not earned any exempt income and it is claimed that no expenses were incurred for the purpose of making investments. However, the contention that no exempt income was earned does not help the case of the appellant, keeping in view the decision of Hon ble Delhi (SB) in the case of the CIT Vs. Cheminvest Ltd. (I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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