WAPCOS Ltd., New Delhi V. Addl. CIT, SPECIAL RANGE- 9, New Delhi

ITA 3653/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2428 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 25-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.3653/DEL/2019 Assessment Year 2014-15 WAPCOS Ltd., New Delhi v. Addl. CIT, Special Range-9, New Delhi. TAN/PAN: AAACW0764A (Appellant) (Respondent) Appellant by: Shri R.S. Singhvi CA Shri Satyajit Goel CA Respondent by: Shri Anil Kumar Sharma, Sr. DR Date of hearing: 24 08 2022 Date of pronouncement: 27 09 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: Th e cap tio n ed ap peal h as b een fil ed b y th e Assessee ag ain st th e o rd er o f th e Co mmis sio n er o f In co me Tax (App eals)-XVI, New Delh i [‘CIT(A)’ in sh o rt] d a ted 2 7 .0 2 .2 01 9 arisin g fro m th e assess men t o rd er d ated 2 7 .1 2 .20 16 p assed by th e Assessin g Officer (AO) u n d er Sect io n 1 4 3(3 ) of th e In co me Tax Act, 1 9 6 1 (th e Act) co n cern in g AY 20 1 4-1 5 . 2 . As p er its g ro u nd s o f ap p eal, th e ass essee h as ch a llen g ed th e d isal lo wan ce to th e ex t en t o f R s.4 8 ,5 1 ,8 7 1 /- u nder Sect io n 4 0 (a)(ia) to ward s ex p en d itu re b y way o f so ftware p urch ases. I.T.A. No.3653/Del/2019 2 3 . Th e assessee is a Go v ern men t o f In d ia u n d ertak ing an d a min i ratn a co mp an y en g ag ed in th e b u si n ess o f p ro v id in g te ch n ica l co n su ltan cy serv ice o n tu rn k ey b asis in th e field of h y d ro p ower in In d ia an d ab ro ad . In th e co u rse o f th e ass ess ment fra med u n d er Sect io n 1 4 3 (3 ), th e Assess in g Office r in ter a lia o b serv ed th at th e assesse e-co mp an y h as in cu rred a to tal so ftware p u rch ase of Rs.1 ,4 7 ,1 0 ,6 5 0 /-. It was n o ted by th e Assessin g Officer th a t p u rch ase o f so ftware en tai ls d ed u ctio n o f TDS in lin e with p ro v isio n o f Sect i o n 9 (1 )(iv ) r.w.s. 1 9 5 o f th e Act an d 1 9 4 J for p u rch ase o f so ftw are fro m In d ian an d fo reig n ju risdictio n . Th e Assessin g Officer acco rd in g ly in vo k ed p rov isio n s o f Sect io n 4 0 (a)(ia) an d d isallo wed th e cla i m a mo u n tin g to Rs.1 , 2 2 ,3 8 ,19 7 /- o win g to n o n d eductio n o f TDS o n p u rch ase o f so ftware. 3 . Ag g riev ed , th e ass essee p re ferred ap p eal b e fo re th e CIT(A). Befo re th e CIT(A), th e assess ee su b mi t ted th a t th e as sessee h as d u ly d ed u cted TDS o n p ay men ts ma d e o u tsid e In d ia a nd it is o n ly th e p ay men ts mad e fo r p u rch ases o f so ftware in In d ia o n wh ich TDS h as n o t b een d edu cted . Th u s, th e o b serv atio n o f th e Assessin g Offi cer ag ain st th e asses s ee is fa ctu a lly in c o rrect. He fu rth er su b mi tt ed t h at th e Assess in g Officer h as n ot d i sp u ted th e g en u in en ess an d co rrectn ess o f cl a im o f ex p en ses p er se b u t in v o k ed Sectio n 40 (a)(ia) fo r d isallo wan ce o n ly o n th e g rou nd o f n o n d ed u ctio n o f TDS on few pay men ts mad e to d o mesti c su p p lier. It was fu rth er co n ten d ed b efo re th e CIT(A) th at th e assesse e h as o n ly p u rch ased so ftware as a p ro d u ct an d as su ch , th e p ay men t fo r acq u i sit io n o f p ro du ct can n o t b e termed as ro y alty an d n o t su scep tib l e to TDS p ro v isio n s. It was co n ten d ed th at in case o f o u trig h t p u rch ase o f so ftware, th ere is n o req uire men t to d ed u ct TDS u n d er Sect io n 1 9 4 J o f th e Act . It was p oin t ed o u t th a t I.T.A. No.3653/Del/2019 3 referen ce mad e to CBDT n o tifi ca tio n d ated 13 .0 6 .2 012 mad e by th e Assessin g Officer is wro n g ly ap p lied in th e co ntex t o f th e fac tu al ma trix . Su ch n o tifica tio n can n o t tak e p reced en ce o v er th e leg al p rin c ip le p ro p o un d ed in th e ju dici al p reced ents . A certi fica te fro m th e su p p li er M/s . Nip p o n Data Sy stems L td . was p laced in wh ich it is st atu to ry clarified th a t co n d itio n s p rescrib ed in CBDT n o tifica tio n d ated 1 3 .0 6 .20 1 2 are satis fied an d th us th e d ed u cto r assesse e was n o t u n d er o b lig atio n t o d ed u ct TDS in resp ect o f p ay men ts mad e to M/s. Nip p o n Data Sy stems L td . T h e CIT(A) an aly zed th e su b missio n s mad e o n b eh al f o f th e ass es see in th e lig h t o f th e d ecis io n p laced b efo re h im an d h eld that th e Assessin g Officer is d irec te d to ex amin e an d ascerta in th e correctn ess o f cla i m o f th e asse ss ee to ward s an amo u n t o f Rs.7 3 ,8 6,3 2 6 /- p aid by th e asse ssee to ES RI In d ia Tech n o lo g ies an d Ro l ta In d ia L td . as refl ec ted in th eir retu rn s an d d u e tax p aid on o ath. Th e CIT(A) h o wev er con firme d th e b alan ce d is allo wan ce o f Rs .4 8,5 1 ,8 71 /- to ward s all eg ed d efau l t o n ac co u n t o f n o n d ed u ctio n o f TDS. 4 . Fu rth er ag griev ed , th e assessee p referred ap p eal b efo re th e Trib u n al. 5 . We h av e co n sid ered th e riv a l su b miss io n s mad e b y th e resp ect iv e sid es. T h e d isal lo wan ce o f Rs.4 8 ,5 1 ,8 7 1 /- by in v o k in g o f Sec tio n 4 0 (a)(ia) o n th e g ro un d s o f n o n d ed u ction o f TDS o n p u rch ase o f so ftwa re fro m d o mes t ic c o mp an ies is su bjec t mat ter o f co n tro v ersy . 6 . Th e p arty -wise b reak u p o f th e d isal lo wan ce o f Rs.4 8 ,5 1 ,8 71 is tab u la ted h ereu n d er fo r b et ter u n d erstan d in g o f fac tu a l ma trix : I.T.A. No.3653/Del/2019 4 S . N o . N a m e o f p e r s o n / p a r t y f r o m w h i c h p u r c h a s e d D i s a l l o w a n c u / s . 4 0 ( a ) ( i a ) m a d e b y A s s e s s i n g O f f i c e r R e l i e f a l l o w e d b y C I T ( A ) Q u a n t u m d i s p u t e d b e f o r e H o n ’ b l e I T A T 1 . N i p p o n D a t a S y s t e m s L t d . 3 2 , 8 1 , 0 3 4 / - N i l 3 2 , 8 1 , 0 3 4 / - 2 E S R I I n d i a 7 9 , 8 0 , 4 8 0 / - 6 8 , 0 0 , 0 0 0 / - 1 1 , 8 0 , 4 8 0 / - 3 R o l t a I n d i a L t d . 5 , 2 4 , 8 9 8 / - 5 , 2 4 , 8 9 8 / - N A 4 O t h e r M i s c . 4 , 5 1 , 7 8 5 / - N i l 4 , 5 1 , 7 8 5 / - T o t a l 4 8 , 5 1 , 8 7 1 / - 7 . To clai m d ed u ctio n in resp ect o f p arty , n ame ly , Nip p o n Data Sy stems Ltd ., th e asse ssee h as e x ten siv ely re li ed up o n th e No tifica tio n No . 2 1 /2 0 12 [F.No .1 4 2 /1 0 /2 01 2 -SO(TPL)] S.O. 1 3 23 (E) issu ed by CBDT d ated 1 3 .0 6 .2 01 2 wh ich is rep ro du ced h ereu n d er: [ T O B E P U B L I S H E D I N T H E G A ZE T T E O F I N D I A , E X T R A OR D I N A R Y , P A R T - I I , S E C T I O N 3 , S U B - S E C T I ON ( 1 1 ) ] G O V E R N M E N T O F I N D I A M I N I S T R Y O F F I N A N C E ( D E P A R T M E N T O F R E V E N U E ) ( C E N T R A L B O A R D O F D I R E C T T A X E S ) N O T I F I C A T I O N N O . 2 1 / 2 0 1 2 [ F . N o . l 4 2 / 1 0 / 2 0 1 2 - S O ( T P L ) ]S . 0 . 1 3 2 3 ( E ) , D A T E D 1 3 - 6 - 2 0 1 2 I.T.A. No.3653/Del/2019 5 I n e x e r c i s e o f t h e p o w e r s c o n f e r r e d b y s u b - s e c t i o n (l F ) o f s e c t i o n 1 9 7 A o f t h e In c o m e -t a x A c t , 1 9 6 1 ( 4 3 o f 1 9 6 1 ) , t h e C e n t ra l G o v e r n me n t h e r e b y n o t i f i e s t h a t n o d e d u c t i o n o f t a x s h a l l b e ma d e o n t h e f o l l o w i n g s p e c i f i e d p a y me n t u n d e r s e c t i o n 1 9 4 J o f t h e A c t , n am e l y : - P a y me n t b y a p e r s o n ( h e r e a f t e r r e f e r r e d t o a s t h e tr a n s f e r e e ) f o r a c q u i s i t i o n o f s o f t w a r e f r o m a n o t h e r p e r s o n , b e i n g a r e s i d e n t , ( h e r e a f t e r r e f e r r e d t o a s t h e t r a n s f e r o r ) , w h e r e - ( i ) T h e s o f t w a r e i s a c q u i r e d i n a s u b s e q u e n t t r a n s f e r an d t h e t r a n s f e r o r h a s t r a n s f e r r e d t h e s o f t w a r e w i t h o u t a n y m o d i f i c a t i o n ; ( i i ) t a x h a s b e e n d e d u c t e d - ( a ) u n d e r s e c t i o n 1 9 4 J o n p a y m e n t f o r a n y p r e v i o u s t r a n s f e r o f s u c h s o f t w a r e ; o r ( b ) u n d e r s e c t i o n 1 9 5 o n p a y m e n t f o r a n y p r e v i o u s tr a n s f e r o f s u c h s o f t w a r e f r o m a n o n - r e s i d e n t , a n d ( i i i ) t h e t r a n s f e r e e o b t a i n s a d e c l a r a t i o n f r o m t he t r a n s f e r o r t h a t t h e t a x h a s b e e n d e d u c t e d e i t h e r u n d e r s u b -c l a u s e ( a ) or ( b ) o f c l a u s e ( i i ) a l o n g w i t h t h e P e r ma n e n t A c c o u n t N u m b e r o f t h e t r a ns f e r o r . 2 . T h i s n o t i f i c a t i o n s h a l l c o me i n t o f o r c e f r o m t h e Is t d a y o f J u l y , 2 0 1 2 . ( J . S a r a v a n a n ) U n d e r S e c r e t a r y ( T P L - I I I) 7 .1 Th e Ld . co un sel also referred to co n firma t io n dated 0 1 .1 1 .20 1 3 issu ed b y o n e o f th e sup p lier Nip p o n Data Sy stems Ltd . wh erein th e su p p lier h av e clai med th a t i t h as receiv ed a d eclara tio n fro m t h e p arty /su p p lier t h at it h as d edu cted TDS un der Sect io n 1 9 4 J/with h o ld in g tax u nd er Sect io n 1 95 as per In co me Tax Act fo r su p p ly o f so ftware rec eiv ed b y th em. T he su p p lier fu rth er co n firms th at th e so ftware p u rch ased fro m th e ear li er tran sfero r was so ld to th e asses see wi th o u t an y mo difi ca tio n an d it I.T.A. No.3653/Del/2019 6 h o ld s th e statu s o f o rd in ary resid en t o f In d ia. In th e lig h t o f su ch co n firmat io n , th e assesse e co n te n d s th at in th e ligh t o f No tifica tio n No .21 /2 0 1 2 d ated 13 .0 6 .2 01 2 it is ex emp t fro m o b lig atio n ad o p ted u n d er Sectio n s 19 4 J/ 1 9 5 o f th e Act o n th e g ro un d th at th e su p p lier o f th e s o ftware h as acq u ired su ch so ftware in a su b seq u en t tran sfer an d th e tran sferor h as tran s fer th e so ftware w ith o u t an y mo d i fica tio n . 7 .2 In th e wak e o f su b mi ssio n mad e o n b eh al f o f th e asse ss ee, we are o f th e co n sid ered o p in io n th at th e co n d it io n s of th e n o tifica tio n stan d s fu lfil led in th e i n stan t case an d th erefo re th e o b lig atio n s ad o p te d u n d er Sectio n 1 9 4 J/1 9 5 are read d o wn . In th e ab sen ce o f su ch o b lig at io n to d ed u ctio n TDS, th e asses see can n o t b e treat ed as asses see in d efau l t so as to in v o k e Sectio n 4 0 (a)(ia) fo r carry in g o u t d i sal lo wan ces. We t h u s fin d meri t in t h e p lea o f th e asses see fo r re v ersal o f th e ac tio n o f th e Rev en u e Au th o rities. Th e d isa llo wan ce c arried o u t o n th i s s co re is th u s d el ete d . 8 . As reg ard s ESRI In d ia, we tak e n o te o f th e p lea o f th e assesse e th a t th e a mo u n t o f Rs .1 1 ,8 0,4 8 0 /- rep resents VAT on th e su p p ly o f th e so ft ware. It was co n te n d ed on b eh alf o f th e assess ee th at th e c erti fica te fro m th e su p p lier h as b een o b tain ed un d er 1 s t p ro v iso to sub Sectio n (1 ) o f Sectio n 2 0 1 o f th e Act c ert ify in g th at th e tax h as b een p aid b y th e recip ie n t o n th e p ay men t s fro m th e assesse e o n acco u n t o f su p p ly o f so ftware an d th u s th e ass essee sh o u ld n o t b e trea t ed as a ssesse e in d efau lt u n d er Sectio n 1 9 4 J o f th e Act. Ho wev er, th e cer ti fica te h as b een g iv en o nly fo r th e p rin cip al a mo u n t o f Rs.6 8 lac an d th e remain i n g amou n t rep resen ts GST/ VAT on th e p rin cip al a mo u n t. Th u s, th e d isal lo wan ce u n d er Sect io n 4 0 (a)(ia) o n VAT co mp on en t is n o t I.T.A. No.3653/Del/2019 7 ju sti fied . We ag ree with su ch con ten tio n s o n b ehal f o f th e assesse e th at wh ere p rin cip a l a mo u n t itse l f is c o v ered by p ro v isio n s o f Sect io n 1 9 4 J o f th e Act. It wo u ld b e fa rfet ch ed to carry d isal lo wan ce o f VAT co mp e ten t th ereo n . Th e cla i m o f Assessee is th u s a l lo wed an d th e ac t i o n o f Rev en u e au t h o rities are rev ersed . 9 . Th e remain in g amo u n t o f Rs.4 ,5 1 ,7 8 5 /- represen ts n o n- d ed u ctio n o f TDS o n misce l lan eo u s p ay men ts. Th e assessee h as fa il ed to g iv e p ro p er d eta ils an d ex p lan atio n th ereo n . H o wev er, in th e lig h t o f th e d ecis io n o f th e Co -o rd in ate Ben ch in Mu rad u l Ha qu e vs. ITO, (2 0 2 0 ) 1 1 7 ta xma n n .co m 2 51 (Del ), th e d isal lo wan ce u n der Sect io n 4 0 (a)(ia) o n acco u n t o f d efau l t to ward s n on d ed u ctio n o f TDS h as to b e restricted to 3 0 % o f th e ex p en ses in cu rred as ag ain st 1 0 0 % d isal lo wed b y th e Assessin g Officer . Th e Co -o rd in ate Ben ch th erein o b serv ed th at th e amen d men t carried o u t u n d er Sectio n 4 0 (a)(ia) w.e. f. 0 1 .0 4 .2 015 is cu ra tiv e in n atu r e an d sh all ap p ly r etro sp ect iv ely . In t h e lig h t o f th e d ecis io n o f th e Co -o rd in ate Ben ch , th e d i sal l o wan ce o f Rs.4 ,5 1 ,7 8 5 /- is restric ted to 3 0 % thereo n un d er Sectio n 40 (a)(ia) o f th e Ac t. In th e lig h t o f th e afo re said d iscu ss ion , th e issu e is allo wed in p art. 1 0 . In th e resu l t, th e a p p eal o f th e asses s ee is p art ly a l lo wed . Order pronounced in the open Court on 27/09/2022. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /09/2022 Prabhat