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TMI Blog2021 (1) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... came to be expanded after the close of the financial year when the assessee had already paid lease line charges, we hold that the same could not have triggered deduction of tax at source so as to warrant any disallowance u/s.40(a)(ia) of the Act. Thus, ground No.1 by the assessee is allowed. Deduction u/s 10AA unit - Having held that the payment of leased line charges not as royalty oo question of making any separate disallowance in respect of 10AA unit. The finding rendered by the ld. CIT(A) in sustaining the disallowance and simultaneously allowing deduction u/s 10AA at the resultant enhanced income has, thus, become academic. Disallowance of expenditure on purchase of RSA tokens - AO did not allow the deduction despite the assessee s contention that the RSA tokens were used in rendering services to its Associated Enterprise and were charged at a mark up at 15% along with other costs incurred by it in rendering services - HELD THAT:- As assessee was getting remunerated by its AE at cost plus 15%. The assessee specifically stated before the AO that the cost of RSA tokens was repaid by its AE with 15% mark up and such amount was considered as part of income of the year u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed line charges to various vendors in India, which were claimed as deduction. On being called upon to explain as to why no deduction of tax at source was made in terms of section 194J of the Act, it was submitted that the amount paid was not in the nature of fees for Professional or technical services or royalty etc. in the hands of recipient warranting any deduction of tax at source. The AO found that the assessee was engaged in software development and production of software products. Internet with high bandwidth was required for such work. A dedicated lease line for internet service was taken from supplier. The payment was held by the AO to be in the nature of fees for technical services requiring deduction of tax at source u/s 194J of the Act. Having not done so, the AO invoked section 40(a)(ia) of the Act. He noticed that out of such sum of ₹ 2.41 crore, an amount of ₹ 55,46,411/- was incurred against SEZ unit. The AO opined that the enhanced claim of deduction u/s.10AA due to disallowance u/s 40(a)(ia) on this count will not be available to the assessee despite the judgment of Hon ble Bombay High Court in the case of CIT Vs. Gem Plus Jewellery India Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret . Thus, with the insertion of Explanation 6 clarifying the scope of the expression Process as used in Explanation 2 to section 9(1)(vi), it becomes palpable that if any charge is paid for transmission by cable, optic fibre or by any other similar technology, it will get covered within the definition of income by way of Royalty . Expression 5 further clarifies that the possession or control of the property with the payer is no more relevant. 6. Leased line is a dedicated communication channel that easily interconnects two or more sites ensuring uninterrupted data flow from one point to another. It is a dedicated, fixed-bandwidth data connection, which allows users to have a reliable, highquality internet connection. As per the assessee s submission before the ld. CIT(A), as captured on page 9 of the impugned order, it: `entered into an arrangement with third party vendors for providing Digital Subscriber Line facility i.e. broadband communication technology used for connecting to the internet, Ethernet leased line .. Thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific taxing provision cannot bring the hands of clock back so as to require the payer to deduct tax at source. Liability to deduct tax at source can be fastened only under the law prevailing at the time of payment. If no liability exists at the time of payment, any subsequent retrospective amendment cannot be enforced against the payer. Once there is no liability to deduct tax at source at the material time, the fortiori is that there can be no question of disallowance u/s 40(a)(ia) of the Act. 10. Reverting back to the factual panorama, it is obvious that the Finance Bill, 2012 became the Finance Act, 2012 somewhere after the close of the F.Y. 2011-12. As opposed to that, the Financial year corresponding to the A.Y. under consideration came to an end before that. Ergo, it is overt that when the payment of leased line charges was made, no existing provision at that time made the assessee clearly liable to deduct tax at source. Since the leased line charges got the final dressing up as `Royalty u/s 9(1)(vi) of the Act after the close of the relevant Financial year, we have no hesitation in holding that - even though the amount became chargeable to tax as royalty in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reat the amount credited as income. Notwithstanding that, the ld. AR has placed on record a copy of the order passed by the Tribunal in the case of Amdocs Development Centre India Pvt. Ltd. Vs. JCIT (ITA No.69/PUN/2018) dealing with the similar issue. Vide order dated 27-11-2018, the Tribunal has held that RSA tokens are in the nature of revenue expenditure and hence deductible. We, therefore, order to delete the disallowance of ₹ 22.07 lakh sustained in the first appeal. 15. Having found that first ground of Revenue s appeal has become infructuous because of our decision on Ground No.1 of the assessee s appeal, the only other issue which survives in the Revenue s appeal is against the inclusion of Infosys Technologies Ltd. in the determination of the Arm s Length Price of the international transaction. 16. Briefly stated, the facts of the case are that the assessee declared an international transaction of Provision of software services to Barclays Bank Plc. with transacted value of ₹ 580.43 crore. It benchmarked the international transaction under the Transactional Net Margin Method (TNMM). Certain companies were chosen as comparable to demonstrate that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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