M/s. Altair Engineering India (Private) Limited, Bangalore V. The Deputy Commissioner Of Income Tax, Circle- 1(1)(1), Bangalore

ITA 1307/BANG/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1514 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-12-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.1307/BANG/2019 ASSESSMENT YEARS : 2009-10 ALTAIR ENGINEERING INDIA (P) LTD., PRESTIGE TRADE TOWER, MUNICIPAL NO.46, FIRST FLOOR, PALACE ROAD, MUNICIPAL WARD NO.77, SAMPANGIRAMNAGAR, BENGALURU-560 001. PAN AABCA 1860 A VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1)(1), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI PRADEEP KUMAR, CIT (DR) DATE OF HEARING : 09.12.2019 DATE OF PRONOUNCEMENT : .12.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 15-05-2019 PASSED BY LD CIT(A)-1, BENGALURU A ND IT RELATES TO THE ASSESSMENT YEAR 2009-10. THE ASSESSEE IS AG GRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ORDER OF TH E ASSESSING OFFICER IN HOLDING THAT THERE IS NO MISTAKE APPARENT FROM R ECORD. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE, EV EN THOUGH THE NOTICE SENT BY REGISTERED POST HAS BEEN DULY SERVED UPON THE ITA NO.1307 /BANG/2019 PAGE 2 OF 5 ASSESSEE. HENCE WE PROCEED TO DISPOSE OF THE APPEA L EX-PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. 3. WE HEARD LD D.R AND PERUSED THE RECORD. THE ASSESSEE HAD CLAIMED SOFTWARE EXPENSES AS REVENUE EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT. THE AO DISALLOWED THE SAME U/S 40(A) (I) OF THE ACT, BY HOLDING THAT THE ASSESSEE HAS NOT DEDUCTED AT SOURC E FROM THE PAYMENTS MADE TOWARDS SOFTWARE PURCHASES. IN THE A LTERNATIVE, THE AO HELD THAT THE SOFTWARE PURCHASES ARE CAPITAL IN NATURE AND IF THE DISALLOWANCE MADE U/S 40(A)(I) IS DELETED IN APPELL ATE FORUM, THEN THE SAME IS DISALLOWABLE AS CAPITAL EXPENDITURE, BU T DEPRECIATION SHALL BE ALLOWABLE ON IT. 4. BEFORE ITAT, THE ASSESSEE SUBMITTED THAT THE TAX HAS BEEN DEDUCTED AT SOURCE FROM THE SOFTWARE PURCHASES. AC CORDINGLY, THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE. THE AO, AFTER EXAMINATION O F DOCUMENTS, WAS SATISFIED THAT THE ASSESSEE HAS DEDUCTED AT SOU RCE FROM THE PAYMENTS MADE TOWARDS SOFTWARE PURCHASES AND ACCORD INGLY HE DELETED THE DISALLOWANCE MADE U/S 40(A)(I) OF THE A CT. ACCORDINGLY, BY FOLLOWING HIS ALTERNATIVE OBSERVATIONS, THE AO T REATED THE SOFTWARE PURCHASES AS CAPITAL IN NATURE AND DISALLO WED THE SAME AFTER ALLOWING DEPRECIATION @ 60%. IN EFFECT, 40% O F THE SOFTWARE PURCHASES AMOUNT CAME TO BE DISALLOWED. 5. THE ASSESSEE FILED A RECTIFICATION PETITION B EFORE THE AO U/S 154 OF THE ACT CONTENDING THEREIN THAT THE AO WAS NOT J USTIFIED, SINCE THE TRIBUNAL HAD RESTORED THE BACK THE ISSUE FOR TH E LIMITED PURPOSE ITA NO.1307 /BANG/2019 PAGE 3 OF 5 OF EXAMINING THE DETAILS OF TDS DEDUCTION VIS-A-VIS SEC. 40(A)(I) OF THE ACT. ACCORDINGLY IT WAS SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANCE AGAIN TREATING THE SOFTWARE PURCHASES AS CAPITAL IN NATURE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE IS A TRADER IN SOFTWARE AND HENCE THE PURCHASE OF SOFTWA RE CONSTITUTES REVENUE EXPENDITURE IN ITS HAND. THE AO, HOWEVER, R EJECTED THE SAME BY HOLDING THAT THERE IS NO MISTAKE APPARENT F ROM RECORD. 6. THE LD CIT(A) NOTICED THAT THE ASSESSEE HAS NOT CONTESTED THE ALTERNATIVE OBSERVATIONS OF THE AO IN THE APPEAL FI LED BEFORE THE TRIBUNAL. HENCE THERE WAS NO OCCASION FOR THE TRIB UNAL TO CONSIDER THE ALTERNATIVE OBSERVATIONS OF THE AO AND HENCE TH ERE WAS NO DIRECTION FROM ITAT ON IT. ACCORDINGLY HE HELD THA T THE ASSESSEE COULD NOT RAISE NEW PLEAS IN THE RECTIFICATION PROC EEDING. ACCORDINGLY HE CONFIRMED THE REJECTION OF RECTIFICA TION PETITION FILED BY THE ASSESSEE. 7. THE LD D.R SUBMITTED THAT THE TRIBUNAL HAS RESTORED THE ISSUE WITH REGARD TO THE DISALLOWANCE MADE U/S 40(A )(I) OF THE ACT. HE SUBMITTED THAT THE ASSESSEE HAS NOT CONTESTED TH E ALTERNATIVE OBSERVATION OF THE AO AND HENCE THE SAME HAS ATTAIN ED FINALITY. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE CANNOT R AISE THE SAID ISSUE IN THE SET ASIDE PROCEEDINGS BEFORE THE AO. ACCORDINGLY HE SUBMITTED THAT THE ORDER PASSED BY LD CIT(A) DOES N OT CALL FOR ANY INTERFERENCE. 8. HAVING HEARD THE LD D.R AND PERUSED THE RECOR D, WE ARE OF THE VIEW THAT THE SUBMISSIONS MADE BY LD D.R ARE LEGALL Y CORRECT. ITA NO.1307 /BANG/2019 PAGE 4 OF 5 ACCORDING TO LD D.R, THE MATTER RESTORED TO THE AO BY THE TRIBUNAL RELATED TO THE ISSUE OF DISALLOWANCE MADE U/S 40(A) (I) OF THE ACT ONLY AND NOT ALTERNATIVE OBSERVATIONS MADE BY THE AO IN THE ORIGINAL ASSESSMENT ORDER. WHEN THE ALTERNATIVE OBSERVATION S MADE BY THE AO IN THE ORIGINAL ASSESSMENT ORDER WAS NOT CONTEST ED BY THE ASSESSEE, THE SAME WOULD AUTOMATICALLY REVIVE, WHEN THE ADDITION MADE U/S 40(A)(I) OF THE ACT GETS DELETED. SINCE T HE ALTERNATIVE OBSERVATIONS OF THE AO HAVE ATTAINED FINALITY, THE ASSESSEE COULD NOT HAVE CONTESTED THE SAME BY FILING RECTIFICATION PET ITION. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD CIT(A). 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DECEMBER, 2019. SD/- (PAVAN KUMAR GADALE) JUDICIAL MEMBER SD/- (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH DECEMBER , 2019. /VMS/ COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE ITA NO.1307 /BANG/2019 PAGE 5 OF 5 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED