ACIT, C-5(1), Chandigarh V. M/s IDS Infotech Ltd., Chandigarh

ITA 435/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5755 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH GUPTA
• Keywords: Capital asset; Recovery proceedings; Depreciation; Transfer pricing; Double taxation relief; Additional depreciation; Deemed to accrue or arise in india; Proportionate interest; Additional evidence; Permanent establishment; Commercial expediency; TDS
• Section: 40(a)(ia); 37(1); 10B; 195; 90

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH , ! . .., # $, %& BEFORE: SH. SANJAY GARG, JUDICIAL MEMEMBER & DR. B. R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 353/CHD/ 2018 ASSESSMENT YEAR : 2012-13 M/S IDS INFOTECH LTD. PLOT NO. 1-8, RGCTP CHANDIGARH THE ASSTT. CIT CIRCLE-5(1), CHANDIGARH PAN NO: AAACI4364E APPELLANT RESPONDENT ITA NO. 435/CHD/ 2018 ASSESSMENT YEAR : 2012-13 THE ASSTT. CIT CIRCLE-5(1), CHANDIGARH M/S IDS INFOTECH LTD. PLOT NO. 1-8, RGCTP CHANDIGARH PAN NO: AAACI4364E APPELLANT RESPONDENT !' ASSESSEE BY : SHRI TEJ MOHAN SINGH, ADVOCATE #!' REVENUE BY : SHRI ASHISH GUPTA, CIT(DR) $ %! & DATE OF HEARING : 13/02/2019 '()*! & DATE OF PRONOUNCEMENT : 09/05/2019 %'/ ORDER PER DR. B.R.R. KUMAR, A.M THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A ND CROSS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. C IT(A)-2, CHANDIGARH DT. 24/01/2018. 2. ASSESSEE HAS RAISED THE FOLLOWING AMENDED GROUND S OF APPEAL: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ADDITION OF RS. 12,03,535/-- MADE BY THE ASSESSING OFFICER APPLYING THE PROVISIONS OF SECTION 37(1) OF THE ACT TREATING THE RENTAL PAYMENTS FOR OFFICE SPACE AND SOFTWARE MADE TO NON-RESIDENT TO BE NOT FOR THE PUR POSE OF BUSINESS WHICH PROVISIONS ARE NOT ATTRACTED AND AS SUCH THE ADDITION UPHELD IS AR BITRARY AND UNJUSTIFIED. 2. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) IS ERRONEOUS, ARBITRARY, OPPOSED TO LAW AND FACTS OF THE CASE AND IS, THUS, UNTENABLE. 2 2.1 THE ONLY ISSUE RAISED BY THE ASSESSEE PERTAINS TO THE DISALLOWANCE OF RS. 12,03,535/- MADE BY THE ASSESSEE TOWARDS THE PAYMEN T OF THE RENT WHICH HAS BEEN TREATED TO BE FOR NON BUSINESS PURPOSE BY THE ASSES SING OFFICER OWING TO THE ABSENCE OF ANY AGREEMENTS FILED BEFORE HIM. 2.2 BEFORE US, THE ASSESSEE HAS FILED ADDITIONAL EV IDENCES UNDER RULE 29 CONSISTING OF RENT AGREEMENTS INVOICES ISSUED BY THE COMPANY. WE FIND THAT THE ADDITIONAL EVIDENCES ARE REQUIRED FOR ADJUDICATION OF THE MATT ER AT HAND AND GOES TO THE ROOT OF THE ADDITION MADE BY THE ASSESSING OFFICER AND AS U PHELD BY THE LD. CIT(A). 2.3 SINCE, THE REVENUE DID NOT GET THE OPPORTUNITY TO GO THROUGH THE EVIDENCES FILED FOR THE FIRST TIME BEFORE US, IN THE FITNESS OF THI NGS WE DEEM IT PROPER TO REFER THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO ADJUDI CATE AND PASS AN ORDER ON THIS ISSUE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX AC T,1961 AFTER TAKING DUE CONSIDERATION OF THE ADDITIONAL EVIDENCES FILED AND ON GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO MAKE ANY OTHER SUBMISSION ON THIS ISSUE . 2.4 AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 3. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPE AL IN ITA NO. 435/CHD/2018: (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS NOT ERRED IN LAW AS WELL AS ON THE FACTS IN DELETING THE ADDITION OF RS. 17,12,967/- MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 36(I)(III) OF TH E ACT IN VIEW OF JUDGMENT OF ABHISHEK INDUSTRIES LTD. (2006) 286 ITR 1(P&H) WITHOUT APPRE CIATING THE FACT THAT COMMERCIAL EXPEDIENCY AS ENVISAGED BY THE HONBLE SUPREME COUR T IN THE CASE OF M/S HERO CYCLES PVT. LTD. VS CIT 379 ITR 347 (SC) HAS NOT BEEN PROV ED BY THE ASSESSEE? (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS NOT ERRED IN LAW AS WELL AS ON THE FACTS IN DELETIN G THE ADDITION OF RS.4,84,84,358/- WHICH WAS MADE BY INVOKING THE PRO VISIONS OF SECTION 40(A)(IA) AS THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCES U/S 195 OF THE ACT ON THE PAYMENTS MADE TO NON RESIDENTS WITHO UT APPRECIATING THE FACT THAT INCOME ACCRUED IN INDIA AS PER PROVISIONS OF SECTION 9(L)(VII) OF THE I.T.ACT,1961 ? (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACTS IN DELETING TH E ADDITION OF RS. 14,91,858/- MADE BY THE AO ON ACCOUNT OF ADDITIONAL DEPRECIATION ON COMPUTERS BY IGNORING THE FACT THAT THE COMPUTERS A RE A PART OF THE PLANT & MACHINERY IN THE ASSESSEE'S BUSINESS. 3.1 GROUND OF APPEAL NO. 1 IS AGAINST DISALLOWING T HE INTEREST PAID U/S 36(1)(III) OF RS. 17,12,967/-. 3.2 BRIEF FACTS AS TAKEN FROM THE RECORDS OF THE LD . CIT(A) ARE THAT THE ASSESSEE HAS CLAIMED FINANCIAL CHARGES OF RS. 1,26,70,000/- AND ALSO SHOWN BORROWINGS OF RS. 11,05,97,000/- IN THE BALANCE SHEET. THE ASSESSEE H AS ADVANCED LOANS AMOUNTING TO RS. 1,05,89,000/- TO RELATED PARTIES AND INVESTMENT AMO UNTING TO RS. 1,59,90,000/- IN IDS, AMERICA. THE ASSESSEE WAS SPECIFICALLY ASKED TO PRO VIDE THE BUSINESS PURPOSE OF THE INVESTMENTS MADE AND WHY THE PROPORTIONATE INTEREST U/S 36(1)(III) OF THE ACT SHOULD NOT BE DISALLOWED. HOWEVER NO BUSINESS PURPOSE AND PROO F OF THE SAME WAS PROVIDED BY 3 THE ASSESSEE. NO COMMERCIAL EXPEDIENCY COULD BE EST ABLISHED BY THE ASSESSEE FOR MAKING THESE INVESTMENTS ABROAD. THE ASSESSEE COULD NOT FULFILL THE CONDITIONS LAID DOWN U/S 36(1)(III) OF THE ACT AND MERELY STATED TH AT INVESTMENTS MADE IN ITS SUBSIDIARIES WERE USED BY THEM FOR SOME BUSINESS PURPOSES. AS A RESULT, THE ASSESSING OFFICER DISALLOWED THE INTEREST PAID U/S 36 (1)(III) OF THE ACT AND ADDED RS. 17,12,967/- TO THE RETURNED INCOME OF THE ASSESSEE. 3.3 BEFORE THE LD. CIT(A), THE ASSESSEE FILED WRITT EN SUBMISSION, THE EXTRACT OF ITAT ORDER IN THE CASE OF ASSESSEE FOR A.Y 2009-10 ON TH E SAID MATTER. THE RELEVANT PORTION OF THE SUBMISSION IS REPRODUCED AS UNDER:- AGGRIEVED BY THIS, THE ASSESSEE HAS COME UP IN APPE AL BEFORE US AND REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT (APPEALS). IT WAS STATED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EXPORT OF INF ORMATION TECHNOLOGY SERVICES AND SOFTWARE DEVELOPMENT. THE WHOLLY OWNED SUBSIDIARIES OF THE ASSESSEE TO WHOM THE MONEY HAS BEEN ADVANCED ARE PROVIDING MARKET SUPPORT TO T HE ASSESSEE. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES (P) LTD. VS. CIT 379 ITR 347 (SC) AND THAT OF HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. VS. CIT [2016] 381 ITR 107 AN D CIT VS. KAPSONS ASSOCIATES (2016) 381 ITR 204 (P&H). 6. THE LEARNED D. R. WHILE ARGUING BEFORE US STATED TH AT SINCE THE INTEREST BEARING FUNDS HAVE BEEN ADVANCED TO THE WHOLLY OWNED SUBSIDIARIES ABROAD AND INTEREST EXPENDITURE ON ACCOUNT OF SUCH FUNDS, WHICH HAS BEEN RAISED FRO M THE BANK, HAS BEEN CLAIMED BY THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT. UNDER THESE CIRCUMSTANCES, A DUTY IS CAST ON THE ASSESSEE TO ESTABLISH THAT SUCH INTEREST BEARING FU NDS ADVANCED TO THE WHOLLY OWNED SUBSIDIARIES IS FOR THE PURPOSE OF BUSINESS AS PROV IDED UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSEE HAD FAILED TO ESTABLISH ANY NEXUS BETWEEN THE BORROWED FUNDS TO THE APPLICATION OF THESE FUNDS THAT THE SAME ARE FOR THE PURPOSE OF BUSINESS. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F HERO CYCLES (P) LTD. (SUPRA) FOR THE PROPOSITION THAT THE ASSESSEE HAS TO DEMONSTRATE WI TH THE FACTS AND FIGURES THAT THE LOANS ADVANCED FULFILL THE CRITERIA OF COMMERCIAL EXPEDIE NCY. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH T HE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL A VAILABLE ON RECORD. WE ARE IN TOTAL AGREEMENT WITH THE SUBMISSIONS MADE BY THE LEARNED DR. THAT THE ASSESSEE HAS TO DEMONSTRATE THAT THE LOAN ADVANCES FULFILLS THE CRI TERIA OF COMMERCIAL EXPEDIENCY. IT IS ALSO THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME CO URT IN THE CASE OF HERO CYCLES (P) LTD. (SUPRA). HOWEVER, WE ARE ALSO INCLINED TO ACCEPT TH E SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ENTITIES TO WHOM THE MONEY HAS BEEN GIVEN ARE WHOLLY OWNED SUBSIDIARIES OF THE ASSESSEE COMPANY. THEREFO RE, THE FINANCIAL HEALTH OF THESE CONCERNS MATTER TO THE FINANCIAL HEALTH OF THE ASSE SSEE COMPANY ALSO. IN OUR VIEW, IT CAN BE SAID THAT THE AMOUNT GIVEN TO THE WHOLLY OWNED S UBSIDIARY COMPANIES ARE FOR COMMERCIAL EXPEDIENCY. IN THIS VIEW, WE WOULD LIKE TO REFER CERTAIN OBSERVATIONS MADE BY THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILD ERS LIMITED VS. CIT (2007) 288 ITR 1 (SC). IN THIS CASE, WHILE INTERPRETING THE MEANING OF THE WORD 'COMMERCIAL EXPEDIENCY', THE HON'BLE APEX COURT HELD AS UNDER: '32. WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OP INION THAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE ADV ANCES IT TO A SISTER-CONCERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPE CTIVE CASE. FOR INSTANCE, IF THE DIRECTORS OF THE SISTER-CONCERN UTILIZE THE AMOUNT ADVANCED TO IT BY THE ASSESSEE FOR THEIR PERSONAL BENEFIT, OBVIOUSLY IT CANNOT BE SAID THAT SUCH MONEY WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY. HOWEVER, MONEY CA N BE SAID TO BE ADVANCED TO A SISTER-CONCERN FOR COMMERCIAL EXPEDIENCY IN MANY OT HER CIRCUMSTANCES (WHICH NEED NOT BE ENUMERATED HERE). HOWEVER, WHERE IT IS OBVIOUS T HAT A HOLDING COMPANY HAS A DEEP INTEREST IN ITS SUBSIDIARY, AND HENCE IF THE HOLDIN G COMPANY ADVANCES BORROWED MONEY TO A SUBSIDIARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINESS PURPOSES, THE ASSESSEE WOULD, IN OUR OPINION, ORDINARILY BE ENTIT LED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS.' 8. IN VIEW OF THE ABOVE, WE OBSERVE THAT EVEN THE H ON'BLE SUPREME COURT HAS ENDORSED THE VIEW THAT SINCE A HOLDING COMPANY HAS A DEEP IN TEREST IN ITS SUBSIDIARY AND IF THE HOLDING COMPANY ADVANCES BORROWED MONEY TO A SUBSID IARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINESS PURPOSES, THE ASSESSEE IS ENTITLED TO DEDUCTION OF INTEREST ON 4 THE BORROWED FUNDS. IN THE PRESENT CASE, THERE IS N O DISPUTE ABOUT THE FACT THAT THE AMOUNTS HAVE BEEN ADVANCED TO THE WHOLLY OWNED SUBS IDIARIES OF THE ASSESSEE COMPANY AND THERE IS NO FACT BROUGHT ON RECORD BY ANY OF TH E LOWER AUTHORITIES THAT THE AMOUNTS HAVE BEEN USED BY THESE SUBSIDIARY COMPANIES FOR AN Y PURPOSE OTHER THAN THEIR BUSINESS PURPOSES. IN VIEW OF THIS, WE ARE INCLINED TO HOLD THAT THE AMOUNTS GIVEN TO SUBSIDIARY COMPANIES WERE ON ACCOUNT OF COMMERCIAL EXPEDIENCY. THEREFORE, NO DISALLOWANCE INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF TH E ACT CAN BE MADE IN THIS CASE. THE GROUND NO. 1 RAISED BY THE ASSESSEE IS ALLOWED 3.4 BASED ON THE ABOVE SUBMISSION, THE LD. CIT(A) D ELETED THE ADDITION RELYING ON THE DECISION OF HON'BLE ITAT IN THE CASE OF ASSESS EE FOR A.Y 2009-10 AND A Y 2010-11. SIMILAR ISSUE WAS RAISED IN APPEAL IN A.Y 2009-10 A ND 2010-11 WHICH WERE CONFIRMED BY THE THEN CIT(A)-2, CHANDIGARH. IN THOSE CASES, THE ASSESSEE WENT IN APPEAL BEFORE ITAT AGAINST THE ORDERS OF CIT(A)-2, CHANDIGARH, WHEREIN IT WAS DECIDED IN THE FAVOUR OF THE ASSESSEE VIDE ORDER NO. 52/CHD/2016 DATED 24.05.201 6 AND 130/CHD/2016 DATED 14.12.2016. SINCE THE DECISIONS OF THE LD. CIT(A) W AS IN TUNE WITH THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, IN THE A BSENCE OF ANY CHANGE IN THE MATERIAL FACTS, THE ADDITION OF RS. 17,75,263/- IS HEREBY DE LETED. 4. GROUND OF APPEAL NO. 2 IS AGAINST THE DISALLOWANCE OF RS. 4,84,84,358/- U/ S 40(A)(IA) ON ACCOUNT OF COMMISSION, LEGAL AND PROFE SSIONAL CHARGES, MARKETING AND SELLING EXPENSES AND OUTSTANDING AND BUSINESS DEVEL OPMENT EXPENSES. 4.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS RECEIVING SOFTWARE RELATED SERVICES AND MAKING PAYMENTS ON ACCOUNT OF PROFESSIONAL SERVICES AND MAKING HUGE PAYMENTS ON ACCOUNT OF PROFESSIONAL SERVICES, TECHNICAL SERVICES, MARKETING AND SELLING EXPENSES, CONSULTING SERVICES, SOFTWARE USA GE EXPENSES TO VARIOUS COMPANIES IN ABROAD WHICH ARE ITS ASSOCIATED ENTERPRISES. AO NOT ED THAT THE ASSESSEE HAS MADE PAYMENTS AMOUNTING TO RS. 4,84,84,358/- TO VARIOUS COMPANIES OUTSIDE INDIA WITHOUT DEDUCTING TDS.AS THE ASSESSEE COMPANY HAS FAILED TO DEDUCT TDS ON THE SAID PAYMENTS, AS A RESULT, THE ASSESSING OFFICER DISALL OWED THE EXPENDITURE OF RS. 4,84,84,358/- U/S 40(A)(IA) ON ACCOUNT OF COMMISSIO N, LEGAL AND PROFESSIONAL CHARGES, MARKETING AND SELLING EXPENSES AND OUTSTANDING AND BUSINESS DEVELOPMENT EXPENSES. 4.2 BEFORE THE LD. CIT(A), THE ASSESSEE FILED WRITT EN SUBMISSION, THE EXTRACT OF ITAT ORDER IN THE CASE OF ASSESSEE FOR A.Y 2009-10 ON TH E SAID MATTER. THE RELEVANT PORTION OF THE SUBMISSION IS REPRODUCED AS UNDER:- 'THE BASIC ISSUE IS WHETHER THE TAX IS TO BE DEDUCT ED WHILE MAKING THESE IMPUGNED PAYMENTS. THE ASSESSING OFFICER HAS INVOKED THE PRO VISIONS OF SECTION 40(A)(1) OF THE ACT IN THIS REGARD. THE PROVISIONS OF SECTION 40(A)(1) OF THE ACT TO THE EXTENT RELEVANT IN THE PRESENT CASE READS AS UNDER: ' 40(A)(1) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN [SECTIONS 30 TO 38], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION': (A) IN THE CASE OF ANY ASSESSEE-- 5 [(I) ANY INTEREST (NOT BEING INTEREST ON A LOAN ISS UED FOR PUBLIC SUBSCRIPTION BEFORE THE 1ST DAY OF APRIL, 1938), ROYALTY, FEES FOR TECHNICAL SE RVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYABLE,- (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDEN T, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAI D [DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESC RIBED UNDER SUB-SECTION (1) OF SECTION 200]: [PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TA X HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIO US YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID] EXPLANATION : FOR THE PURPO SES OF THIS SUB-CLAUSE,- (A) 'ROYALTY' SHALL HAVE THE SAME MEANING AS IN EXPLANA TION 2 TO CLAUSE (VI) OF SUBSECTION (1) OF SECTION 9; (B) 'FEES FOR TECHNICAL SERVICES' SHALL HAVE THE SAME M EANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9; 26. THE MOST IMPORTANT TERMS IN THE PROVISIONS OF T HIS SECTION ARE 'ON WHICH TAX IS DEDUCTIBLE AT SOURCE' UNDER CHAPTER-XVII, MEANING THEREBY THAT ONLY THOSE PAYMENTS MADE TO NON- RESIDENTS ON WHICH TAX IS REQUIRED TO BE DEDUCTED A S PROVIDED UNDER THE RELEVANT CHAPTER, THE PROVISIONS OF THIS SECTION CAN BE INVOKED. CHAP TER- XVII DEALS WITH COLLECTION AND RECOVERY OF TAXES WHILE PART-B OF THIS CHAPTER DEAL S WITH TAX DEDUCTION AT SOURCE, THE PROVISIONS RELATING TO TAX TO BE DEDUCTED OUT OF PA YMENT MADE TO A NON-RESIDENT ARE PROVIDED IN SECTION 195 OF THE ACT, WHICH READ AS U NDER: '195(1) ANY PERSON RESPONSIBLE FOR PAYING TO A NON- RESIDENT, NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTEREST (NOT BEING INTEREST O N SECURITIES) OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT (NOT BE ING INCOME CHARGEABLE UNDER THE HEAD' SALARIES' ]) SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE IS SUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME- TAX THER EON AT THE RATES IN FORCE: ' 27. THE MOST IMPORTANT TERMS IN THIS SECTION ARE 'C HARGEABLE UNDER THE PROVISIONS OF THIS ACT'. FROM THIS, IT IS VERY CLEAR THAT ONLY IF AN AMOUNT IS CHARGEABLE UNDER THE INCOME TAX ACT, THE LIABILITY TO DEDUCT TAX ON THE PAYMENT OF SUCH AMOUNT ARISES. CHARGE OF INCOME TAX IS PROVIDED UNDER SECTION 4 OF THE ACT, WHILE SCOPE OF TOTAL INCOME IS PROVIDED IN SECTION 5 OF THE ACT. THE PROVISIONS OF SECTION 5 OF THE ACT RELATING TO SCOPE OF TOTAL INCOME IN RESPECT OF A NON-RESIDENT ARE PROVIDED IN SUB- SECTION (2) OF SAID SECTION, WHICH READ AS UNDER: '5(2) SUBJECT TO THE PROVISIONS OF THIS ACT, THE TO TAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A NON- RESIDENT INCLUDES ALL INCOME FROM WHA TEVER SOURCE DERIVED WHICH- (A) IS RECEIVED OR IS DEEMED TO BE RECEIVED IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON; OR (B) ACCRUES OR ARISES OR IS DEEMED TO ACCRUE OR ARISE T O HIM IN INDIA DURING SUCH YEAR. EXPLANATION 1-LNCOME ACCRUING OR ARISING OUTSIDE IN DIA SHALL NOT BE DEEMED TO BE RECEIVED IN INDIA WITHIN THE MEANING OF THIS SECTIO N BY REASON ONLY OF THE FACT THAT IT IS TAKEN INTO ACCOUNT IN A BALANCE SHEET PREPARED IN I NDIA. EXPLANATION 2 - FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT INCOME WHICH HAS BEEN INCLUDED IN THE TOTAL INCOME OF A PERSON ON TH E BASIS THAT IT HAS ACCRUED OR ARISEN OR IS DEEMED TO HAVE ACCRUED OR ARISEN TO HIM SHALL NO T AGAIN BE SO INCLUDED ON THE BASIS THAT IT IS RECEIVED OR DEEMED TO BE RECEIVED BY HIM IN INDIA.' 28. FROM THE BARE PERUSAL OF THE PROVISIONS OF THE ABOV E SECTION, IT IS QUITE CLEAR THAT A NON-RESIDENT IS CHARGEABLE TO TAX IF IT RECEIVES OR DEEMED TO RECEIVE ANY AMOUNT IN INDIA. THE PROVISIONS EMERGING FROM THE ANALYSIS ARE VERY CLEAR THAT, WHEN INCOME ACCRUES, ARISES OR RECEIVED IN INDIA, THE SAME IS TAXABLE. INCOME W HICH IS DEEMED TO ACCRUE OR ARISE IN INDIA IS TAXABLE IN INDIA, EVEN IF THE SAME IS NOT ACTUALLY ACCRUES, ARISES OR RECEIVES IN INDIA. 29. IN THE PRESENT CASE, THIS IS NOT IN DISPUTE THAT TH E AMOUNT IS NOT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA. THE SECOND SITUATION UNDER WH ICH THE RECEIPT OF NONRESIDENT IS TAXABLE IS IF THE INCOME ACCRUES OR ARISES OR IS DE EMED TO ACCRUE OR ARISE IN INDIA. UNDOUBTEDLY, IN THE PRESENT CASE NO INCOME HAS ACCR UED TO THE NON- RESIDENT PERSON IN INDIA. THE DISPUTE MAY BE ONLY WITH REGARD TO THE I MPUGNED AMOUNT BEING INCOME 'DEEMED TO ACCRUE OR ARISE IN INDIA'. VARIOUS INSTA NCES OF INCOME CONSIDERED TO BE DEEMED TO ACCRUE OR ARISE IN INDIA TO A NON-RESIDEN T ARE PROVIDED IN SECTION 9 OF THE 6 INCOME TAX ACT. FOR THE PURPOSE OF ADJUDICATING THE ISSUES ARISING IN THE PRESENT APPEAL, THE RELEVANT PROVISIONS ARE THAT OF SECTION 9(1 )(I ) OF THE ACT, WHICH READ AS UNDER: '9 (1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACC RUE OR ARISE IN INDIA- (I) ALL INCOME ACCRUING OR ARISING, WHETHER DIRECTL Y OR INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUGH OR FROM AN Y PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA, 135[***] OR THROUGH THE TRANSFER OF A CAPITAL ASSET SITUATE IN INDIA; [EXPLANATION 1]: FOR THE PURPOSES OF THIS CLAUSE-FA ) IN THE CASE OF A BUSINESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ONLY SU CH PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN INDIA ; (B) IN THE CASE OF A NON-RESIDENT, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO HIM THROUGH OR FROM OPERATIONS WHICH ARE CONFINED T O THE PURCHASE OF GOODS IN INDIA FOR THE PURPOSE OF EXPORT: [****] [(C) IN THE CASE OF A NON-RESIDENT, BEING A PERSON ENGAGED IN THE BUSINESS OF RUNNING A NEWS AGENCY OR OF PUBLISHING NEWSPAPERS, MAGAZINES OR JOURNALS, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO HIM THROUGH OR FROM ACTIVITIES WHICH ARE CONFINED TO THE COLLECTION OF NEWS AND VIEWS IN IND IA FOR TRANSMISSION OUT OF INDIA;] [(D) IN THE CASE OF A NON-RESIDENT, BEING- (1) AN INDIVIDUAL WHO IS NOT A CITIZEN OF INDIA; OR (2) A FIRM WHICH DOES NOT HAVE ANY PARTNER WHO IS A CITIZEN OF INDIA OR WHO IS RESIDENT IN IND IA; OR (3) A COMPANY WHICH DOES NOT HAVE ANY SHAREHOLDER WHO IS A CITIZEN OF INDIA OR WHO IS RESIDENT IN INDIA, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO SUCH INDIVIDU AL, FIRM OR COMPANY THROUGH OR FROM OPERATIONS WHICH ARE CONFINED TO THE SHOOTING OF AN Y CINEMATOGRAPH FILM IN INDIA;] [EXPLANATION 2 : FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT 'BUSINESS CONNECTION' SHALL INCLUDE ANY BUSINESS ACTIVITY CARRIED OUT THR OUGH A PERSON WHO, ACTING ON BEHALF OF THE NON-RESIDENT, (A) HAS AND HABITUALLY EXERCISES IN INDIA, AN AUTHORITY TO CONCLUDE CONTRACTS ON BEHALF OF THE NON-RESIDENT UNLESS HIS ACTIVITIES AR E LIMITED TO THE PURCHASE OF GOODS OR MERCHANDISE FOR THE NON-RESIDENT; OR (B) HAS NO SUCH AUTHORITY, BUT HABITUALLY MAINTAINS IN INDIA A STOCK OF GOODS OR MERCHANDISE FROM WHICH HE REGULARLY DELIVERS GOODS OR MERCHANDISE ON BEHALF OF THE NON- RESIDENT; OR (C) HABITUALLY SECURES ORDERS IN INDIA, MAINLY OR WHOLL Y FOR THE NON-RESIDENT OR FOR THAT NON-RESIDENT AND OTHER NON-RESIDENTS CONTROLLING, C ONTROLLED BY, OR SUBJECT TO THE SAME COMMON CONTROL, AS THAT NON-RESIDENT: PROVIDED THAT SUCH BUSINESS CONNECTION SHALL NOT IN CLUDE ANY BUSINESS ACTIVITY CARRIED OUT THROUGH A BROKER, GENERAL COMMISSION AGENT OR ANY O THER AGENT HAVING AN INDEPENDENT STATUS, IF SUCH BROKER GENERAL COMMISSION AGENT OR ANY OTHER AGENT HAVING AN INDEPENDENT STATUS IS ACTING IN THE ORDINARY COURSE OF HIS BUSINESS : PROVIDED FURTHER THAT WHERE SUCH BROKER, GENERAL CO MMISSION AGENT OR ANY OTHER AGENT WORKS MAINLY OR WHOLLY ON BEHALF OF A NON-RESIDENT (HEREINAFTER IN THIS PROVISO REFERRED TO AS TO THE PRINCIPAL NON-RESIDENT) OR ON BEHALF OF SUCH NON-RESIDENT AND OTHER NON-RESIDENTS WHICH ARE CONTROLLED BY THE PRINCIPAL NON- RESIDENT OR HAVE A CONTROLLING INTEREST IN THE PRINCIPAL NON- RESIDENT OR ARE SUBJECT TO THE SAME COMMON CONTROL AS THE PRINCIPAL NON- RESIDENT, HE SHALL NOT BE DEEMED TO BE A BROKER, GE NERAL COMMISSION AGENT OR AN AGENT OF AN INDEPENDENT STATUS.]' 30. WE ARE TO JUDGE FROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHETHER THE IMPUGNED PAYMENTS ARE DEEMED TO ACCRUE OR ARISE IN INDIA TO THE RESPECTIVE RECIPIENTS, AS WE HAVE ALREADY MENTIONED THAT ONLY THOSE PAYMENTS WHICH ARE OF THE NATURE OF SUM CHARGEABLE UNDER THE PROVISIONS OF TH E ACT ARE EXIGIBLE FOR PROVISION OF TAX DEDUCTION AT SOURCE. HERE WE ARE INCLINED TO REFER TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF G.E. INDIA TECHNOLOGY CENTRE PVT. LTD. VS. CIT (2010) 327 ITE 456 (SC), WHEREBY IT HAS BEEN HELD THAT SECTION 195 (1) OF THE ACT USES THE EXPRESSION 'SUM' CHARGEABLE UNDER THE PROVISION OF THE ACT AND WEIGH TAGE IS NEEDED TO BE GIVEN TO THESE WORDS. FURTHER, SECTION 195 USES THE WORD 'PAYER' A ND NOT THE WORD 'ASSESSEES'. THE PAYER IS NOT ASSESSEE THE PAYER BECOMES AN ASSESSEE IN DEFAU LT ONLY WHEN HE FAILS TO FULFILL STATUTORY OBLIGATION UNDER SECTION 195(1) OF THE ACT. IF THE PAYMENT DOES NOT HAVE THE ELEMENT OF THE INCOME, THE PAYER CANNOT BE MADE LIABLE. THE HO N'BLE SUPREME COURT THUS REJECTED THE CONTENTION OF THE DEPARTMENT BY HOLDING THAT IF THE SUM PAID IS NOT CHARGEABLE TO TAX, THEN NO TAX IS REQUIRED TO BE DEDUCTED 31. FROM THE READING OF THE A.O. 'S ORDER, WE DO NOT UN DERSTAND HIS CASE. NOWHERE IN THE ENTIRE ORDER HE HAS GIVEN ANY FINDING AS TO WHE THER THE NATURE OF INCOME IN THE HANDS OF THE NON RESIDENT IS THAT OF 'INCOME ACCRUED IN I NDIA' OR 'INCOME DEEMED TO HAVE ACCRUED' IN INDIA. HE JUST KEPT ON HARPING THE FACT THAT THE ULTIMATE BENEFICIARY OF THE SERVICES IS THE ASSESSEE IN INDIA. EVEN THE CIT(A) WHILE ADJUDICATING THE ISSUE COULD NOT GIVE 7 ANY APPROPRIATE FINDING IN THIS REGARD. THE RELEVAN T PORTION OF THE CIT(A)'S FINDINGS ARE RECORDED AT PAGE 12 PARA 10.3, IN LATER PART OF THI S PARAGRAPH, HE STATES AS UNDER: 'THE PAYMENT ARE MADE BY THE APPELLANT COMPANY AND THESE ARE IN THE NATURE OF MARKETING SUPPORT SERVICES AND SELLING EXPENDITURE FOR GETTING MORE AND MORE BUSINESS ABROAD. THE SERVICES PROVIDED BY THE NONRESIDENT EN TITIES FOR PROMOTING SALES AND LEGAL/PROFESSION SERVICES ARE AS PER THE TERMS OF C ONTRACT WHICH IS ENTERED BY THESE ENTITIES WITHIN THE APPELLANT COMPANY WITH THE RESPONSIBILIT Y OF THE APPELLANT COMPANY. THEREFORE THE SOURCE OF INCOME FOR THE ENTITIES ABROAD IS THE AGREEMENT WITH THE APPELLANT COMPANY AND BY VIRTUE OF THESE SERVICES THERE IS A DIRECT BENEFIT TO THE APPELLANT COMPANY AND HENCE THE PAYMENT MADE BY THE INDIAN CO MPANY FOR SERVICES UTILIZED IS NOT IN CONNECTION WITH BUSINESS / PROFESSION CARRIED OU T, OUTSIDE OF INDIA. THE BUSINESS OUTSIDE INDIA IS SECURED BY THE INDIAN COMPANY I.E. THE APP ELLANT COMPANY. THE SOURCE OF INCOME FORTHE SERVICES RENDERED BY THE NONRESIDENT ENTITIE S IS IN INDIA AS THE INDIAN COMPANY GIVES DIRECTIONS F OR THE WORK ABROAD. THEREFORE THE INCO ME FOR THE NON - RESIDENT ACCRUES AND ARISE IN INDIA.' HERE ALSO THE CIT(A) IS GETTING CONFUSED BY THE FAC T THAT THE SOURCE OF INCOME IS IN INDIA. THERE IS NO DOUBT THAT THE INDIAN COMPANY HAS MADE THE PAYMENT AND ALSO THE FACT THAT THE PAYMENTS HAVE BEEN MADE IN CONSIDERATION FOR SO ME SERVICES RENDERED BY THE NONRESIDENTS. HOWEVER THE MOOT QUESTION IS WHERE TH E SERVICES, IN RESPECT OF WHICH THE PAYMENTS HAVE BEEN MADE, WERE RENDERED. 32. AS PER THE PROVISIONS OF SECTION 9(1) OF THE AC T, THE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA IF IT IS DIRECTLY OR INDIR ECTLY THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA. FURTHER, THE BUSINESS CONNECTI ON HAS TO BE AN ACTIVITY OF THE NON- RESIDENT IN THE TAXABLE TERRITORY IS INDIA HAVING I NTIMATE AND NEAR RELATION OF A CONTINUOUS NATURE OF THE BUSINESS OF THE NON-RESIDE NT AND ATTRIBUTED TO THE EARNING PROFITS BY THE NON-RESIDENT IN HIS BUSINESS. WE SHOULD UNDE RSTAND THAT ALL COMMERCIAL RELATIONS WILL NOT NECESSARILY CONSTITUTE BUSINESS CONNECTION UNLE SS A COMMERCIAL CONNECTION IS REALLY AND INTIMATELY CONNECTED WITH THE BUSINESS ACTIVITY OF NON- RESIDENT IN INDIA AND IS CONTRIBUTORY TO THE EARNING OF THE PROFITS IN THE S AID ACTIVITY OF THE NON-RESIDENT. SOME ILLUSTRATIVE INSTANCES OF NON-RESIDENTS HAVING BUSI NESS CONNECTION IN INDIA HAVE BEEN QUOTED IN THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF R.D. AGGARWAL (SUPRA, WHICH ARE AS UNDER: I) MAINTAIN A BRANCH OFFICE IN INDIA FOR PURCHASE O R SALE OF GOODS OR TRANSACTING OTHER BUSINESS. II) APPOINTING AN AGENT IN INDIA FOR SYSTEMATIC AND REGULAR PURCHASE OF RAW MATERIAL OR OTHER COMMODITIES, OR FOR SALE OF NON-RESIDENT G OODS OR FOR OTHER BUSINESS PURPOSES. III) ERECTING A FACTORY IN INDIA WHERE RAW PRODUCE PURCHASED LOCALLY IS WORKED INTO A FIRM SUITABLE FOR SENDING ABROAD. IV) FORMING LOCAL COMPANY TO SALE PRODUCTS OF NON -RESIDENT PARENT COMPANY. V) HAVING FINANCIAL ASSOCIATION BETWEEN THE RESIDEN T AND NON-RESIDENT COMPANY THESE ACTIVITIES HAVE BEEN CULLED OUT FROM THE JUDG EMENT BY THE CBDT ITSELF IN ITS CIRCULAR NO. 23[F.NO. 7A/38/69-IT(A-11)], DATED 23.07.1069 33. IN THE PRESENT CASE, NO FINDING HAS BEEN BROUGHT ON RECORD BY ANY OF THE LOWER AUTHORITIES THAT NON- RESIDENT ENTITIES HAVE ANY SU CH CONNECTION WITH INDIA AS ILLUSTRATED ABOVE. ALL ALONG THE ASSESSEE HAS BEEN MAINTAINING THAT THE NON-RESIDENT ENTITIES TO WHOM IT HAS MADE THE PAYMENTS DO NOT HAVE ANY BUSINESS C ONNECTION WITH INDIA. THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS) HAD NO WHERE IN THEIR ORDERS RECORDED ANY SUCH FINDING THOUGH WE MUST ADD THAT THEY HAVE NOT EVEN INTENDED TO MAKE ANY INVESTIGATION IN THIS REGARD. HOWEVER, WE ALSO OBSERVE THAT THIS STANCE HAS BEEN CONSISTENTLY TAKEN BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AS WELL A S BEFORE US AND EVEN THE LEARNED D.R. WHILE ARGUING BEFORE US COULD NOT CONTROVERT THE SA ID SUBMISSION OF THE ASSESSEE. IN THIS MANNER, WE DO NOT HESITATE TO CONCLUDE THAT NO SERV ICES WERE RENDERED BY NON-RESIDENTS IN INDIA. THIS CONCLUSION OF OURS IS ALSO BASED ON THE PROPOSITION AS LAID DOWN BY THE DELHI HIGH COURT IN THE CASE OF CIT VS. EON TECHNOLOGIES PVT. LTD. (2012) 343 ITR 366 (DEL). 34. IN VIEW OF THIS, WE FIND THAT THE PROVISIONS OF TAX DEDUCTION AT SOURCE ARE NOT APPLICABLE TO THE IMPUGNED PAYMENTS AS THE AMOUNTS RECEIVED BY THE RECIPIENTS ARE NOT IN THE NATURE OF INCOME DEEMED TO ACCRUE OR ARISE I N INDIA IN THEIR HANDS. THEREFORE, PROVISIONS OF SECTION 40(A)(1) OF THE ACT CANNOT BE INVOKED. 35. THOUGH THE DEFINITION OF THE INCOMES DEEMED TO ACCR UE OR ARISE IN INDIA IS PROVIDED IN SECTION 9 OF THE ACT, WE SHOULD NOT FORGET THAT THE PROVISIONS OF THE ACT ARE SUBJECT TO THE TREATY ENTERED BY THE CENTRAL GOVERNMENT WITH THE G OVERNMENT OF A COUNTRY OUTSIDE INDIA IN TERMS OF THE PROVISIONS OF SECTION 90 OF THE ACT . THEREFORE, AS IN THE PRESENT CASE PAYMENTS HAVE BEEN MADE TO THE RESIDENTS OF THOSE C OUNTRIES WITH WHOM INDIA HAS ENTERED INTO DTAA, THE PROVISIONS OF SECTIONS 5 AND 9 OF THE ACT SHALL BE SUBJECT TO THE AGREEMENT ENTERED INTO WITH SUCH COUNTRIES. 8 36. WITH REGARD TO THE FACT THAT ALL THESE ENTITIES REL ATE TO THE COUNTRIES WITH WHOM INDIA HAS DTAAS THOUGH IN VIEW OF THE FINDING GIVEN BY US IN THE ABOVE PARAGRAPH THAT THE AMOUNTS ARE NOT IN THE NATURE OF INCOME IN THE HAND S OF THE RECIPIENTS, WE NEED NOT GO INTO THE RESPECTIVE TREATIES, IN VIEW OF THE FACT T HAT THE PROVISIONS WHICH ARE BENEFICIAL TO THE ASSESSEE ARE TO BE TAKEN CARE WHILE FASTENING T AX LIABILITY. 37. THE BASIC PRINCIPLE TO BE APPLIED IN SUCH CASES IS THAT ONE HAS TO FIRST LOOK AT THE DOMESTIC LAW TO FIND OUT IF THE NON-RESIDENT ASSESS EE IS TAXABLE THEREUNDER. IF IT IS TAXABLE, ONLY THEN ONE HAS TO GO INTO THE TREATY, IF ANY, BE TWEEN INDIA AND THE COUNTRY TO WHICH THE NONRESIDENT BELONGS, TO, FIND OUT IF THERE IS ANY B ENEFICIAL PROVISION IN THE TREATY TO EXEMPT THE ASSESSEE FROM TAXATION OR REDUCE THE RIGOURS OF THE DOMESTIC LAW. IF THERE IS SUCH A PROVISION IN THE TREATY, THE ASSESSEE IS ENTITLED T O CLAIM THAT IT SHOULD BE GIVEN THE BENEFIT OF THE TREATY PROVISIONS. ON THE OTHER HAND, IF THE AS SESSEE IS NOT TAXABLE UNDER THE DOMESTIC LAW ITSELF, THERE IS NO NEED TO LOOK INTO THE PROVI SIONS OF THE DTAA, EVEN IF ONE EXISTS, TO FIND OUT IF THERE IS ANY PROVISION UNDER WHICH THE NONRE SIDENT CAN BE BROUGHT TO TAX. IN OTHER WORDS, THE TREATY CANNOT BE USED AS A TAXING STATUT E. THE PRINCIPLE IS THAT WHERE THE NON- RESIDENT IS TAXABLE UNDER THE DOMESTIC LAW BUT THER E IS A PROVISION IN THE TREATY TO EXEMPT THE TRANSACTION OR REDUCE THE RIGOR OF TAXATION TO THE BENEFIT OF THE NON-RESIDENT, THE PROVISIONS OF THE TREATY OVERRIDE THE PROVISIONS OF THE DOMESTIC LAW. THESE FUNDAMENTAL PRINCIPLES ARE WELL-SETTLED BY THE JUDGMENTS OF THE SUPREME COURT IN P.V.A.L. KULANDAGANCHETTIAR (2008) 267 ITR 654 (SC) AND AZAD I BACHAO ANDALON (2003) 263 ITR 706 (SC). 38. ON GOING THROUGH THE RELEVANT ARTICLE PROVIDED IN T HE DTAA, WE OBSERVE THAT INVARIABLY IN ALL THE DTAAS TO WHICH WE ARE CONCERN ED, THE INCOME IS TAXABLE IN INDIA ONLY IF THAT FOREIGN ENTITY CARRIES ON BUSINESS IN INDIA TH ROUGH A PERMANENT ESTABLISHMENT SITUATED IN INDIA. WE AGAIN OBSERVE THAT NO SUCH FINDING WIT H REGARD TO EXISTENCE OF ANY PERMANENT ESTABLISHMENT IN INDIA HAS BEEN BROUGHT ON RECORD B Y ANY OF THE LOWER AUTHORITIES OR EVEN BY THE LEARNED D.R. AT THE TIME OF HEARING BEFORE U S. IN VIEW OF THIS, THE POSITION EMERGES THAT THE PAYMENT TO A PERSON WHO HAPPENS TO BE A RE SIDENT OF COUNTRY WITH WHOM INDIA HAS ENTERED INTO DTAA AND WHERE THE BUSINESS PROFIT S ARE TAXED ONLY IN THE COUNTRY AND DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA, T HE SAID PAYMENTS ARE NOT CHARGEABLE TO TAX IN INDIA. IN VIEW OF THIS ALSO, EVEN AS PER DTAA, THE INCOME BEING NOT EXIGIBLE TO TAX IN INDIA IN THE HANDS OF NONRESIDENT ENTITY, THE AS SESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE. THEREFORE, THE PROVISIONS OF SECTION 40A)(I ) OF THE ACT CANNOT BE INVOKED. 39. NOW COMES THE SECOND QUESTION, THE ASSESSING OFFICE R HAS APPREHENDED IN HIS ORDER THAT THE PAYMENT MADE BY THE ASSESSEE TO IMCS IS NO T IN CONSONANCE WITH THE COMMISSION PAID TO OTHER CONCERN. FROM THE PERUSAL OF THE ORDE R OF THE LEARNED CIT (APPEALS) THOUGH WE OBSERVE THAT HE HAS NOT GIVEN ANY FINDING IN THI S REGARD, EVEN THE ASSESSING OFFICER IN HIS ORDER HAS NOT GIVEN ANY CATEGORICAL FINDING HOW THE PAYMENT MADE TO IMCS IS NOT COMPARABLE TO THE COMMISSION PAYMENT MADE TO STEVEN INTERNATIONAL. HE HAS JUST TRIED TO COMPARE THE SERVICES RENDERED BY THE STEVEN INTERNA TIONAL INVOLVING THE POTENTIAL BUSINESS SEGMENT, ORGANIZING MEETINGS AND LIAISON WORKS WITH PROSPECTIVE CLIENTS, FACILITATION AND REDRESSEL AND SETTLEMENT OF DISPUTES. FURTHER REFER RING TO THE SERVICES RENDERED BY IMCS, HE EXPLAINED THAT THESE ARE CONCERNED WITH THE INTRODU CTION AND ASSISTANCE IN EXECUTION OF AN AGREEMENT AND ASSISTING IN SELLING SERVICES AND FACILITATING RELATIONSHIP WITH AUGUSTA STAFF. IN THIS BACKGROUND, HE STATED THAT THE SERVI CES PROVIDED BY IMCS ARE NOT COMMENSURATE WITH THE COMMISSION. THEREFORE, THE SE RVICES ARE NOT BEING RENDERED FOR THE PURPOSE OF BUSINESS AND PROFESSION THERE IS NO DISP UTE WITH RESPECT TO THE FACT THAT BOTH IMCS AND STEVEN INTERNATIONAL ARE NOT RELATED PARTI ES OF THE ASSESSEE COMPANY. ANALYSIS OF PAYMENT MADE TO AN ENTITY WHICH IS NOT RELATED IN A NY WAY WITH THE ASSESSEE IS NOT AN EXERCISE EXPECTED FROM THE ASSESSING OFFICER. WE DO NOT UNDERSTAND UNDER WHAT PROVISIONS THE ASSESSING OFFICER IS TRYING TO MAKE OUT THE CAS E THAT THE PAYMENT MADE TO IMCS ARE NOT COMMENSURATE WITH THE WORK DONE BY THEM. IT IS THE PREROGATIVE OF THE BUSINESSMAN TO RUN ITS BUSINESS THE WAY HE WANTS. THE ASSESSING OF FICER FOR THE PURPOSE OF INCOME TAX ACT CANNOT QUESTION THE REASONABLENESS OF ANY SUCH PAYM ENT MADE BY THE ASSESSEE. THEREFORE, WE DO NOT FIND THIS ALLEGATION OF THE AS SESSING OFFICER BACKED BY ANY LEGAL PROVISION. INCIDENTALLY, WE WOULD LIKE TO MENTION H ERE THAT EVEN IF THE ASSESSING OFFICER WANTS TO ASSESS THE REASONABLENESS OF ANY PAYMENT M ADE TO ANY SISTER CONCERN OF THE ASSESSEE, THERE IS NO DOUBT TO THE FACT THAT THE AS SESSEE HAS DONE DETAILED TRANSFER PRICING STUDY IN THE RELEVANT ASSESSMENT YEAR, WHICH WAS SU BJECT TO THE REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER AND THE TRANSFER PRICING OFFICER HAS SUGGESTED NO ADJUSTMENT WITH RESPECT TO THE ARM'S L ENGTH PRICE ON THE TRANSACTION BETWEEN THE ASSESSEE AND ITS ASSOCIATE ENTERPRISES. 40. NOW THE QUESTION ARISES WHETHER THE PAYMENT MAD E BY THE ASSESSEE CAN BE HELD TO BE IN THE NATURE OF 'FEE FOR TECHNICAL SERVICES'. T HERE IS NO DISPUTE WITH RESPECT TO THE FACT THAT THE ISSUE OF 'FEES TECHNICAL SERVICES' WAS NEV ER RAISED BY THE ASSESSING OFFICER. IN HIS ORDER RUNNING INTO 22 PAGES HE HAS NOWHERE MENTIONE D AND EVEN NOWHERE SHOWED HIS SUSPICION AS REGARDS THE PAYMENT BEING IN THE NATUR E OF 'FEES FOR TECHNICAL SERVICES' THAT IS THE REASON WHY AT THE ASSESSMENT STAGE, THE ASSESSE E WAS NEVER CONFRONTED BY ANY QUERY WITH RESPECT TO THE PAYMENTS BEING THAT OF THE NATU RE OF 'FEES FOR TECHNICAL SERVICES'. THE 9 CONTENTION OF THE LEARNED DR. BEFORE US WAS THAT TH E LEARNED CIT (APPEALS) HAS HELD THESE PAYMENTS TO BE IN THE NATURE OF 'FEES FOR TEC HNICAL SERVICES'. WE HAVE VERY CAREFULLY PERUSED THE ORDER OF THE LEARNED CIT (APPEALS). ONL Y AT TWO PLACES IN HIS ORDER HE HAS MENTIONED THE TERM 'FEES FOR TECHNICAL SERVICES'. A T PAGE 13 HE HAS STATED AS UNDER: 'THE ISSUE IN HAND IS TO DECIDE WHETHER THE SERVICE RENDERED BY THE NONRESIDENT ENTITIES AND THE PAYMENT MADE BY THE APPELLANT COMPANY ESTAB LISHED BUSINESS CONNECTION IN INDIA AND AS PER THE SOURCE OF THESE PAYMENTS, THES E ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES.' 41. IF WE CAREFULLY ANALYZE THE ABOVE SENTENCE, WE CAN VERY EASILY INFER THAT THE LEARNED CIT (APPEALS) HAS NOT GIVEN ANY FINDING AS TO THE N ATURE OF BEING 'FEES FOR TECHNICAL SERVICES'. THEREFORE, FROM HERE WE CANNOT CONCLUDE THAT THE LEARNED CIT (APPEALS) HAS GIVEN A POSITIVE FINDING THAT THE PAYMENTS IN QUEST ION ARE 'FEES FOR TECHNICAL SERVICES'. 42. ON LAST PAGE OF HIS ORDER AT THE CONCLUSION OF PARA (II), HE HAS AGAIN MENTIONED THE WORD FEES FOR TECHNICAL SERVICES', WHICH HE EXPRESS ED IN FOLLOWING TERMS: ' THE HON'BLE SUPREME COURT IN THE CASE OF GVK INDU STRIES LTD .(2 0 1 5) 371 ITR HAS HELD THAT THE NATURE OF SERVICE RENDERED BY THE NON-RESI DENT WOULD COME WITHIN THE AMBIT AND SEEP OF EXPRESSION 'CONSULTANCY SERVICE' AND HENCE TAX SHOULD HAVE BEEN DEDUCTED AT SOURCE AS THE AMOUNT PAID AS FEE COULD BE TAXABLE U NDER THE HEAD 'FEES FOR TECHNICAL SERVICES'' 43. FROM BARE PERUSAL OF THE ABOVE SENTENCE ONE CAN VER Y EASILY INFER THAT THE LEARNED CIT (APPEALS) HERE ALSO HAS NOT GIVEN ANY FINDING, IN FACT HERE HE IS ONLY REFERRING TO THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GV K INDUSTRIES LTD. (SUPRA). 44. IN VIEW OF THE ABOVE, WE SEE THAT THE LEARNED CIT ( APPEALS) HAS NOT GIVEN ANY FINDING THAT THE PAYMENTS IN QUESTION ARE 'FEES FOR TECHNIC AL SERVICES' IN NATURE. WE UNDERSTAND THE LAW THAT IN CASE A PAYMENT IS HELD TO BE IN THE NAT URE OF 'FEES FOR TECHNICAL SERVICES', THE PLACE OF RENDERING SERVICES BECOMES IRRELEVANT IN V IEW OF THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. HOWEVER, EVEN IF THE ARGUMENT OF THE LE ARNED DR. IS ACCEPTED THAT THE LEARNED CIT (APPEALS) HAS GIVEN A FINDING THAT THES E PAYMENTS ARE 'FEES FOR TECHNICAL SERVICES', NOWHERE FROM THE ORDER OF THE LEARNED CI T (APPEALS) WE SEE ANY EFFORT BEING MADE BY HIM TO COME TO SUCH A CONCLUSION. IT IS NOT TO BE FORGOTTEN THAT THE LEARNED CIT (APPEALS) ASSUMES COTERMINUS POWERS WITH THAT THE A SSESSING OFFICER IN FACT, HE ENJOYS THE POWERS OF ENHANCEMENT ALSO. THEREFORE, IN CASE HE H AD ANY APPREHENSION AS TO THE REAL NATURE OF THE PAYMENT, WHO STOPPED HIM TO CARRY OUT FURTHER INVESTIGATIONS IN THIS REGARD? IN THE ABSENCE OF ANY FINDING GIVEN BY THE ASSESSIN G OFFICER OR THE CIT (APPEALS) IN THIS REGARD, WE ARE NOT INCLINED TO EXAMINE THE CASE OF THE ASSESSEE WITH A VIEW WHETHER THE PAYMENTS ARE IN THE NATURE OF 'FEES FOR TECHNICAL S ERVICES' OR NOT. IT IS NOT A CASE WHERE CERTAIN QUERIES WERE PUT EITHER BY THE ASSESSING OF FICER OR BY THE LEARNED CIT (APPEALS) TO THE ASSESSEE WITH RESPECT TO THE PAYMENTS BEING 'FE ES FOR TECHNICAL SERVICES', WHICH THE ASSESSEE FAILED TO REPLY. IT IS ALSO NOT A CASE WHE RE THE ASSESSEE HAD NOT CO-OPERATED WITH THE LOWER AUTHORITIES IN ORDER TO FIND OUT THE REAL NATURE OF THE PAYMENTS MADE TO THE NON- RESIDENTS. ALL THE RELEVANT AGREEMENTS AND INVOICES WERE FILED BEFORE THE LOWER AUTHORITIES. IN VIEW OF THIS, THE ASSESSEE CANNOT BE PUNISHED AT THIS STAGE WITHOUT THERE BEING ANY FAULT OF HIS, SPECIALLY IN VIEW OF THE FACT THAT EVEN AT THE TIME OF HEARING BEFORE US, THE LEARNED D.R. COULD NOT BRING ANY MATERIAL OR EVIDENCE IN SU PPORT OF HIS CLAIMED THAT THE IMPUGNED PAYMENTS WERE IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES'. HIS ONLY ARGUMENT IS THAT IN THE ABSENCE OF THE NATURE OF SERVICES BEING RENDERED BY NON- RESIDENTS, COMING OUT FROM THE EVIDENCE FILED BY THE ASSESSEE, THE SAME SHOULD BE PRESUMED TO BE IN THE NATURE OF 'FEES FOR TECHNICAL SERVICES'. NO SUCH PRESUMPTION EXISTS IN THE INCOME TAX ACT. NO SUCH PRESUMPTION CAN BE RAISED WITHOUT ANY BACKING MATER IAL OR EVIDENCE ON RECORD. THE ARGUMENT OF THE LEARNED D.R. THAT EVEN IF THE PROVI SIONS OF DTAA ARE APPLIED, IN THE ABSENCE OF ANY SERVICES COMING OUT FROM THE EVIDENC ES, IT SHOULD BE PRESUMED THAT NON- RESIDENTS HAVE 'MADE AVAILABLE' CERTAIN TECHNICAL S ERVICES TO THE ASSESSEE, IS TOO FARFETCHED. WE ARE NOT INCLINED TO ENTERTAIN SUCH A PLEA AT THIS STAGE. IN VIEW OF THIS ALSO, WE HOLD THAT THE SERVICES RENDERED BY THE NON-RESID ENTS ARE NOT IN THE NATURE OF TECHNICAL SERVICES, NO INCOME DEEMED TO HAVE ACCRUED TO THE N ON-RESIDENT ENTITIES, THERE IS NO LIABILITY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE O N SUCH PAYMENT. THEREFORE, THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT ARE NOT EXIGIBLE IN THE PRESENT CASE. 45. WE MAY CLARIFY THAT WE HAVE NOT DEALT WITH EACH EXPENDITURE SPECIFICALLY, SINCE THE ISSUES INVOLVED IN ALL THESE EXPENSES WERE COMMON A ND WE DID NOT FIND ANY INCLINATION TO DEAL EACH EXPENDITURE SEPARATELY. GROUND NOS. 2, 3 AND 4 ARE ALLOWED. ' 4.3 SINCE THE ORDER OF THE LD. CIT(A) WAS BASED ON THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE, IN THE ABSENCE OF ANY OTHER NE W MATERIAL OR ARGUMENTS TAKEN BY BOTH THE PARTIES WHICH CAN DIFFERENTIATE FROM THE F ACTS AND CIRCUMSTANCES OF EARLIER 10 YEARS, WE REFRAIN TO INTERFERE IN THE ORDER OF THE LD. CIT(A). THE GROUND OF APPEAL NO 5 IS ALLOWED. 5. GROUNDS OF APPEAL NO. 3 IS AGAINST DISALLOWANCE OF ADDITIONAL DEPRECIATION OF RS. 14,91,858/- ON COMPUTERS U/S 32(II)(A) OF THE IT AC T. 5.1 BRIEF FACT OF THE CASE ON THIS ISSUE ARE THAT A SSESSEE COMPANY IS DOING BUSINESS OF EXPORT OF INFORMATION TECHNOLOGY, TECHNOLOGY SERVIC ES AND SOFTWARE DEVELOPMENT, THE ASSESSEE CLAIM ADDITIONAL DEPRECATION ON COMPUTERS WHICH WAS DISALLOWED BY THE A.O ON THE GROUND THAT THE DEFINITION OF BLOCK OF ASSET S IS A GROUP OF ASSETS HAVING THE SAME PERCENTAGE OF PRESCRIBED DEPRECIATION AND A.O NOTED THAT THE ASSESSEE HAVE SHOWN PLANT AND MACHINERY AND COMPUTERS AND SOFTWARE UNDE R TO SEPARATE BLOCKS IN WHICH MACHINERY AND PLANTS ARE UNTITLED TO DEPRECATION AT 15% AND COMPUTERS AND COMPUTER SOFTWARE AT 60%. A.O HELD THAT ADDITIONAL DEPRECIATION IS AVAILABLE TO PLANT AND MACHINERY AND NOT TO COMPUTER AND SOFTWARE AS T HE SAME HAVE NOT BEEN USED IN THE PRODUCTION/MANUFACTURE OF AN ARTICLE/TH INGS. A.O FURTHER HELD THAT COMPUTERS AND MERELY USED IN PROCESSING OF DATE OR PREPARING SOFTWARE WHICH IS NOT MANUFACTURE INTO A NEW ARTICLE/THINGS AND THEREFORE ADDITIONAL DEPRECIATION OF RS. 14,91,858/- WAS DISALLOWED. 5.2 THE EXTRACT OF CIT(A)-2, CHANDIGARH'S ORDER IN THE CASE OF ASSESSEE FOR A.Y 2009- 10 ON THE SAID MATTER. THE RELEVANT PORTION OF THE SUBMISSION IS REPRODUCED AS UNDER: 'THE APPELLANT MADE SUBMISSION THAT THE ASSESSEE CO MPANY IS ENGAGE IN THE BUSINESS OF EXPORT OF I. T SERVICES AND SOFTWARE DEVELOPMENT AN D COMPUTERS AND OTHER I. T EQUIPMENTS ARE THE PLANT AND MACHINERY OF THE COMPANY THE COMP UTES ARE USED FOR PROVIDING SERVICES TOWARDS CLIENTS. IT WAS SUBMITTED THAT APP ELLANT BEING IN THE BUSINESS OF SOFTWARE DEVELOPMENT, THE COMPUTERS ARE THE PLANT AND MACHIN ERY OF THE COMPANY. THE A.R. DRAWN ATTENTION TO SECTION 72A(7) (AA) OF THE ACT W HERE IN INDUSTRIAL UNDER TAKING IS DEFINED AS WHICH IS ENGAGED IN THE ACTIVITIES ENUME RATED THERE IN AND THE MANUFACTURE OF COMPUTER SOFTWARE IS ONE SUCH AS ACTIVITY. THE APPE LLANT ALSO POINTED OUT TO SECTION 10B AND 10BB AS APPLICABLE PRIOR TO ITS AS SUBSTITUTION BY THE FINANCE ACT-2000. WHEREIN EXPLANATION (III) AND(IV) OF THE SECTION DEFINES 'M ANUFACTURE' AS (A) PROCESS OR (B) ASSEMBLING, OR (C) RECORDING OF PROGRAM ON DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICES. (A) THE LD. A.R. HAS PLACED RELIANCE ON THE LEGAL V IEWS ON THE ISSUE TAKEN BYDIFFERENT COURTS AS UNDER: (I) CIT VS. ORACLE SOFTWARE INDIA LTD. (2207), 293 ITR 353. IT WAS HELD BY THE HON'BLE DELHI HIGH COURT THAT THE ASSESSEE ENGAGED IN THE CONVERS ION OF A BLANK DISK TO A LOADED SOFTWARE WAS ENGAGED IN THE MANUFACTURING ACTIVITIE S. (II) SUPREME COURT IN THE CASE OF TATA CONSULTING S ERVICES VS. STATE OF ANDHRA PRADESH 271 ITR 401 STATED THAT A SOFTWARE MAY BE PROPERTY BUT SUCH PERSONAL INTELLECTUAL PROPERTY CONTAINED IN A MEDIUM IS BOUT AND SOLD. IT IS AN AR TICLE OF VALUE. IT IS SOLD IN VARIOUS FORMS LIKE FLOPPIES, DISKS , CD-ROMS, PUNCH CARDS, MAGNETIC TA PES, ETC. (III) CIT VS PEERLESS CONSULTANCY SERVICES (P LTD,. 248 ITR 178. IT WASDECIDE THAT THE COMPANY WHICH WAS PROVIDING CONSULTANCY BASED UPON COMPUTER AND ELECTRONIC DATA PROCESSING WAS AN INDUSTRIAL UNDERTAKING. (IV) CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SHA W WALLACE & CO. LTD.(1193) 201 ITR 17(CAL) DECIDED THAT ' DATA - PROCESSING' MEANS THE CONVERT ING OF LAW DATA TO MACHINE READABLE 11 FORM AND ITS SUBSEQUENT PROCESSING (AS STRONG UPDAT ING, COMBINING . REARRANGING OR PRINTING OUT) BY A COMPUTER. ' COMPUTER MEANS 'ONE THAT COMP UTES ; SPECIFICALLY A PROGRAMMABLE ELECTRONIC DEVICE THAT CAN STORE, RETRIEVE, AND PRO CESS DATA'. THERE CANNOT BE ANY DOUBT THAT RAW DATA CANNOT BE EQUATED WITH THE RESULT DER IVED. IT IS DIFFERENT IN FORM AND SUBSTANCE. WE ARE, THEREFORE, OF THE VIEW THAT THE COMPUTER DIVISION IS AN INDUSTRIAL UNDERTAKING WHICH SATISFIES THE CONDITIONS MENTIONE D IN SECTION 32A(2)(B)(III) OF THE INCOME TAX ACT, 1961. (B) THEREFORE APPELLANT SUBMITTED THAT THE COMPUTER S AND OTHER I. T. EQUIPMENTS ARE THE PLANT AND THE MACHINERY OF THE APPELLANT COMPAN Y AND THE SAME ARE USED IN THE PRODUCT OF THE MANUFACTURE. THE ARTICLE / THINGS IT WAS ALSO SUBMITTED THAT IN THE CASE OF THE APPELLANT COMPANY THE WORTHY CIT(A), PATIALA IN APPEAL NO. ROT/CHD/119/IT/CIT(A)/PTA/08-09 FOR A. Y 2003-04 HA S HELD THE ACTIVITIES OF THE APPELLANT AS MANUFACTURING OR PRODUCING AN ARTICLE OR THINGS. THE ORDER OF THE CIT(A) WAS CONFIRMED BY THE HON'BLE IAT, CHD BENCH, CHANDIGARH. ' 5.3 LD. CIT(A) HAS HELD THAT THE ORDER OF THE AO C ANNOT BE SUSTAINED ON THIS GROUND RELYING ON THE JUDGMENT OF HON'BLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. STATRONICS & ENTERPRISES PVT. LTD. (2007) 288 ITR 455 . 5.4 BEFORE US, THE LD. AR HEAVILY RELIED ON THE ORD ER OF THE LD. CIT(A) AND ON THE JUDGMENT OF THE HONBLE HIGH COURT QUOTED ABOVE WHI LE THE LD. DR ARGUED THAT THE SAID JUDGMENT QUOTED BY THE LD. AR IS NOT APPLICABL E TO THE FACTS OF THE CASE. 5.5 WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES . 5.6 THE GIST OF THE ADDITIONAL DEPRECIATION IS AS U NDER: IN CASE OF ANY NEW MACHINERY OR PLANT (EXCLUDING SH IPS AND AIRCRAFT) ACQUIRED AND INSTALLED AFTER MARCH 31, 2005 BY AN ASSESSEE WHO I S ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING ADDITIONAL DEPRECIATION UNDER INCOME TAX ACT OF 20% OF ACTUAL COST SHALL BE ALLOWED. FROM A.Y. 2013-14 THE SAME IS ALSO ALLOWED TO ASSES SEE ENGAGED IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER, WHERE THE DEPRECIATION IS PROVIDED ON WDV METHOD AS PER APPENDIX I. FROM ASSESSMENT YEAR 2017-18 THE SAME IS ALSO ALLOW ED TO THE ASSESSEE ENGAGED IN THE BUSINESS OF TRANSMISSION OF POWER. WHERE THE ASSET IS USED FOR LESS THAN 180 DAYS THEN 50% DEPRECIATION I.E, 1/2 OF 20% (I.E. 10%) IS AVAILABLE (BALANCE 50% OF ADDITIONAL DEPREC IATION CAN BE CLAIMED IN NEXT YEAR) 5.7 THE COMPUTERS HAVE TO BE TREATED AS PLANT AND M ACHINERY IN THE CASE OF THE ASSESSEE AS IS IN THE BUSINESS OF SOFTWARE DEVELOPM ENT AND EXPORT AS PER THE ORDER OF THE HONBLE HIGH COURT. THE COMPUTERS HAVE BEEN ME NTIONED AT THE ITEM NO. V UNDER THE HEAD NO. III PLANT AND MACHINERY IN THE PART-A OF THE SCHEDULE OF DEPRECIATION FOR TANGIBLE ASSETS. HENCE, THE ASSESS ING OFFICER IS DIRECTED TO ALLOW HIM THE DEPRECIATION AS PER THE RATE ALLOWED ON COMPUTE RS UNDER THE HEAD PLANT AND MACHINERY IN THE SCHEDULE AND FURTHER ALLOW THE BEN EFIT OF ADDITIONAL DEPRECIATION @ 20% AS STIPULATED BY THE PROVISIONS OF THE INCOME T AX ACT,1961. 12 5.8 AS A RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . .., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER AG DATE: 09/05/2019 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE