JUDGMENT :

Vinod Chandran, J.

The appeal raises the question whether the commission paid to a non-resident, in the particular facts arising herein, is taxable under the Income Tax Act, 1961 ['IT Act' for brevity].

2. The appellant, a hundred percent Export Oriented Unit, is a Private Limited Company engaged in development and export of software. For the assessment year 2009-10, the appellant filed a return declaring a total income of Rs.17,204/-, after claiming deduction under Section 10B in respect of profit from export of software. Under Section 143(1) the return was processed and the payments made to Mr.Balaji Bal, a resident of Switzerland, who also was a Director of the Company, was disallowed under Section 40(a)(i) of the Act. The dis-allowance under Section 40(a)(i) was on the ground that the commission paid was fees for technical services on which tax is deductible at source, which the assessee failed to deduct. The amount shown as commission paid to the non-resident was added to the total income of the Company.

3. On appeal, the first appellate authority concurred with the Assessing Officer with respect to the dis-allowance; but, however, allowed deduction under Section 10A. T