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TMI Blog2020 (12) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure claimed by the assessee. Accordingly, we restore this claim of the assessee to the file of AO for examining it properly. Payment made towards subscription charges in respect of business carried on by the assessee in USA - as submitted that the above said payment is not liable for deduction of tax at source in view of section 9(1)(vi)(b) - HELD THAT:- We notice that the exception provided under sec.9(1)(vi)(b) would apply only if the royalty is paid by a resident assessee for the purposes of business or profession carried on by such person outside India. We notice that the assessee has, for the first time, made the claim before Ld CIT(A) that its USA branch is carrying on business separately and subscription services are exclusively used by it. As noticed earlier that the Ld CIT(A) has rejected the said claim for the reason that the assessee has failed to substantiate its claim; that the assessee has failed to show that the impugned services were used by its foreign branch only and that certain bills have been found at the Indian address of the assessee. A.R prayed that the assessee may be provided with one more opportunity to prove all its claims. Hence, in the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52,26,325/- only are in the nature of subscriptions, which are in the nature of royalty. It was contended that the above said payments were made in respect of business carried on by the assessee outside India and hence the same is covered by exception provided u/s 9(1)(vi)(b) of the Act, in which case above said payment is not liable for taxation in the hands of the recipient. In that view of the matter, the said payment is not liable for deduction of tax at source u/s 195 of the Act. Accordingly, it was contended that no disallowance is called for u/s 40(a)(i) of the Act. 4. The Ld. CIT(A) observed that the assessee has not brought anything on record to show that the expenditure was restricted to earning income outside India and it was also not shown that the business carried on by the assessee in India did not benefit from the same. Accordingly, he took the view that there is nothing on record to suggest that the entire expenditure was for earning income outside India. The Ld. CIT(A) also referred to an invoice issued by M/s. Discover ORG and observed that the sale is made to the assessee in India and not to the branch in USA. The Ld. CIT(A) also extracted the copy of invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purpose of disallowance u/s 40(a)(i) of the Act. The Ld A.R invited our attention to page no.51 of the paper book, which contains break-up details of miscellaneous income. 8. We notice from the details of miscellaneous income that a sum of ₹ 32,93,513/- has been shown as reversal of the amount payable to M/s Gartner. If the said reversal was made out of the expenditure of ₹ 68,05,703/- originally booked by the assessee during the year under consideration, then there is merit in the claim of the assessee, i.e., what is payable to M/s Gartner for the year under consideration would be the net amount. However, as submitted by Ld D.R, it is not clear as to whether the above said reversal was related to the expenditure originally booked or it related to any other liability. Accordingly, we are of the view the above said claim of assessee requires examination with reference to the books of accounts and profit loss account of the assessee. If the reversal pertains an expenditure booked/included in ₹ 68,05,703/-, the disallowance requires to be restricted to the net amount of expenditure claimed by the assessee. Accordingly, we restore this claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-ordinate bench in the case of M/s Wipro Ltd (IT(TP)A No.99/Bang/2014 others dated 05-10-2020). The issue as to source of income was also examined in the above said case. For the sake of convenience, we extract below the relevant observations made by the co-ordinate bench in the above said case:- 32. ISSUE NO.30 relates to disallowance of payment made to M/s. Gartner Group u/s 40(a)(ia) of the Act for non-deduction of tax at source. This issue arises in assessment years 2010-11 to 2014-15in the appeal filed by the assessee. 32.1 The facts relating to this issue are that M/s. Gartner Group maintains a data base and the same is allowed to be used by others on payment of license fee. The assessee has obtained license from M/s. Gartner Group for using the data base. The assessee did not deduct tax at source from the licence fee paid to the above said group. The AO, however, took the view that the payment so made is in the nature of royalty and hence the provisions of sec.9(1)(vi) are attracted. Hence the AO took the view that the assessee should have deducted tax at source from the above said payment and accordingly proposed to disallow the payment by invoking provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ras High Court in the case of AktiengesellschaftKuhnle Koop and Kausch (262 ITR 513). In the above said case, the assessee before the Madras High Court paid royalty outside India out of its export sales. The Hon ble High Court held that the source for royalty is from the source generated outside India and hence the same is not taxable within the meaning of section 9(1)(vi) of the Act. 32.3 The Ld. A.R., however, fairly conceded that the Hon ble Delhi High Court has examined the issue of source of income in the case of CIT Vs. Havells India Ltd. (ITA No.55/2012 amp; ITA No.57/2012 dated 21.5.2012) and the decision rendered by Hon ble Madras High Court in the case of AktiengesellschaftKuhnle Koop and Kausch (supra) was also cited before Hon ble Delhi High Court. However the Hon ble Delhi High Court noticed that the Hon ble Madras High Court, in the above said case, did not consider another decision rendered by it earlier in the case of Anglo-French Textile Ltd. 199 ITR 785, wherein it was held that the source of income is the place where the right to receive the income by the assessee arose. Accordingly, the Delhi High Court held that if the export contracts are concluded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee s products are sent outside India under such contracts. The manufacturing activity is located in India. The source of income is created at the moment when the export contracts are concluded in India. Thereafter the goods are exported in pursuance of the contract and the export proceeds are sent by the importer and are received in India. The importer of the assessee s products is no doubt situated outside India, but he cannot be regarded as a source of income. The receipt of the sale proceeds emanate from him from outside India. He is, therefore, only the source of the monies received. The income component of the monies or the export receipts is located or situated only in India. We are making a distinction between the source of the income and the source of the receipt of the monies. In order to fall within the second exception provided in Section 9(1)(vii)(b) of the Act, the source of the income, and not the receipt, should be situated outside India. That condition is not satisfied in the present case. The Tribunal, with respect, does not appear to have examined the case from this aspect. Its conclusion that the technical services were not utilised for the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actical man would regard as a real source of income. This observation was adopted by Malik, J. in his separate but concurring judgment in the case of Rani Amrit Kaur v. CIT, (1946) 14 ITR 561, a decision of the Full Bench of the Allahabad High Court. A source of income was described by R. S. Pathak, J. (as he then was) in the following words in Seth Shiv Prasad v. CIT, (1972) 84 ITR 15 (All.) at page 18: - A source of income, therefore, may be described as the spring or fount from which a clearly defined channel of income flows. It is that which by its nature and incidents constitutes a distinct and separate origin of income, capable of consideration as such in isolation from other sources of income, and which by the manner of dealing adopted by the assessee can be treated so. The observations of the Judicial Committee (supra) as to what is a source of income have been approved by the Supreme Court in CIT v. Lady Kanchanbai, (1970) 77 ITR 123. The location or situs of a source of income is another aspect. The third aspect is the accrual of the income. Though it is true, as held by Kania, C.J., speaking for a Constitution Bench of the Supreme Court in CIT v. AhmedbhaiUma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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