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TMI Blog2020 (12) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ws: 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income tax (Appeals)- 22 ['CIT-(A)'] has erred in upholding the disallowance made by the learned Assessing Officer under section 40(a)(i) of the Income tax Act, 1961 ('the Act') for non-deduction of taxes from payment made to Facebook Ireland Limited. 3. To adjudicate on this appeal, in our humble understanding, only a few material facts need to be taken note of. The assessee before us is, what is termed as, internet advertising agency. During the relevant previous year, the assessee appellant has made certain payments to Facebook Ireland Limited towards the cost of advertisements, carried by facebook, for its clients. In the course of the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",- (a) in the case of any assessee- (i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,- (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid 8[on or before the due date specified in sub-section (1) of section 139 6. A plain reading of the above statutory provision shows that se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter, beyond placing his reliance on the stand of the authorities below and beyond submitting that this aspect of the matter is not discernable, one way or the other, from the proceedings before the authorities below and the material on our records. 8. Learned senior counsel's plea is indeed well taken. Unless a claim for deduction in respect of payments made to Facebook Ireland Limited is made in the computation of business income, there cannot be any occasion for invoking section 40(a)(i) for its disallowance in computation of business income. As we have analyzed earlier also in this order, section 40(a)(i) acts as a restriction on the deductibility of expenses under section 30 to 38, and, as a corollary to this legal position, when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the penalty for non-deduction at source. Irrespective of whether or not the disallowance under section 40(a)(i) is eventually sustained or not, these courses of action are open to the revenue authorities in accordance with the law. 10. In view of the above discussions and directions as set out above, we see no need to address the broader issue of whether or not tax is deductible from the payments made by the assessee to Facebook Ireland Limited for the advertisements placed on Facebook, and whether or not income embedded in such payments in taxable in India. Learned Departmental Representative informs us that the Facebook Ireland Limited is being assessed to tax in Hyderabad, and, at this stage and in the present context, we must ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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