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

ITA 442/CHANDI/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5588 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-11-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Depreciation; Transfer pricing; International transaction; Additional depreciation; Services rendered outside India; Proportionate interest; Notional interest; Commercial expediency
• Section: 92; 40(a)(ia); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHB, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.352/CHD/2018 ASSESSMENT YEAR: 2011-12 M/S IDS INFOTECH LTD. VS. THE ASSTT. CIT PLOT NO. 1-8, RGCTP CIRCLE-5(1) CHANDIGARH CHANDIGARH PAN NO. AAACI4364E ITA NO.442/CHD/2018 ASSESSMENT YEAR: 2011-12 THE ASSTT. CIT. VS. M/S IDS INFOTECH LTD. CIRCLE-5(1) PLOT NO. 1-8, RGCTP CHANDIGARH CHANDIGARH (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. TEJ MOHAN SINGH REVENUE BY : SMT. CHANDRAKANTA DATE OF HEARING : 05/12/2018 DATE OF PRONOUNCEMENT : 04/02/2019 ORDER PER BENCH THE IMPUGNED CROSS APPEALS FILED BY THE ASSESSEE AN D THE REVENUE RESPECTIVELY ARE AGAINST THE ORDER OF THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) -2, CHANDIGARH(IN SHORT REFERRED TO AS CI T(A), DT. 24/01/2018 , PASSED U/S 250(6) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS ACT). WE SHALL FIRST BE TAKING UP THE REVENUES APPEAL IN ITA NO. 442/CHD/2018. 2. GROUND NO. I) TO IV) RAISED BY THE REVENUE, IT W AS STATED BY THE LD. DR, RELATED TO THE SAME ISSUE OF ADJUSTMENT MADE BY DE TERMINING THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION UNDERTAKEN BY TH E ASSESSEE U/S 92 OF THE ACT AND THE SOLE GRIEVANCE OF THE REVENUE IT WAS POINTE D OUT WAS AGAINST ALLOWING THE FOREIGN ENTITY TO BE TREATED AS TESTED PARTY F OR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. ALL THE GROUNDS WERE THEREFORE TAKEN UP TOGETHER FO R HEARING AND THEY READ AS UNDER; (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS 2 NOT ERRED IN DIRECTING TO TAKE FOREIGN ENTITY AS A TESTED PARTY WHEN FOREIGN ENTITY IS COMPLEX ENTITY BASED ON FAR ANALYSIS AND BOTH UN AN D OECD TRANSFER AND PRICING GUIDELINES MANDATE THAT THE TESTED PARTY BE THE LEAST COMPLEX ENTITY. II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A)HAS NOT ERRED IN DIRECTING TO TAKE FOREIGN ENTITY AS A TESTED PARTY WHEN THERE WAS NO INSUFFICIENT DATA AND INFORMATION OF THE COMPARABLE COMPANIES WHEN THE ASSESSEE HAS CHOSEN A FOREIGN ENTITY AS A TESTED PA RTY AND WHEN THE INDIAN AE HAS LOW MARGIN AS COMPARED TO THE COMPARABLE SET AN D COMPARABLE SET HAS SIMILAR FAR (FUNCTIONAL ASSETS AND RISK ANALYSIS) A S THE ASSESSEE. III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)HAS NOT ERRED IN DIRECTING TO TAKE FOREIGN ENTITY AS A TESTED PARTY WHEN THERE IS INSUFFICIENT DATA AND INFORMATION WITH NO RELIAB LE DATA EITHER FOR ITSELF OR COMPARABLES WHICH COULD BE USED WITHOUT SIGNIFIC ANT ADJUSTMENT, AND IT IS DIFFICULT TO RELIABLY ISOLATE ITS FINANCIALS WITH RESPECT TO INTERCOMPANY TRANSACTIONS. IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS NOT ERRED IN DIRECTING TO TAKE FOREIGN ENTITY A S A TESTED PARTY WHEN FOREIGN ENTITY DID NOT MEET ANY OF THE ATTRIBUTES L AID DOWN BY UN MANUAL OR OECD GUIDELINES FOR TRANSFER PRICING I.E. AVAILA BILITY OF RELIABLE AND ACCURATE DATA, LEAST COMPLEX ENTITY AND THAT DATA C OULD BE USED WITH MINIMUM ADJUSTMENTS. 4. BRIEF FACTS RELATING TO THE ISSUE AS POINTED OUT FROM THE ORDER OF THE CIT(A) ARE THAT THE ASSESSEE COMPANY HAD ENTERED INTO INTE RNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISE. THE CASE WAS REFERRED TO TPO U/S 92CA(1) OF THE I.T. ACT. THE TPO PASSED ORDER U/S 92CA AND MADE ADJUSTM ENT OF RS. 1,18,52,149/- ON ACCOUNT OF THE FOLLOWING TRANSACTIONS: A) PROVISION OF IT/IT ENABLED SERVICES RS.1,13,54,000/- B) INTEREST ON RECEIVABLES RS2,39,149/- C) EXCESS CHARGE OUT OF MARK-UP TO IDS-A RS.2,59,000/- TOTAL RS.1,18,52,149/- 5. DURING ASSESSMENT PROCEEDINGS THE ASSESSEE WAS A SKED TO SHOW CAUSE AS TO WHY TRANSFER PRICING ADJUSTMENT OF RS. 1,18,52,149/ -MADE BY THE TPO SHOULD NOT BE APPLIED IN ITS CASE. THE ASSESEE COULD NOT PRESE NT ANY FORCEFUL SUBMISSION TO REBUT THE TPOS CALCULATIONS. HENCE, ASSESSING OFFI CER RELYING ON TRANSFER PRICING ADJUSTMENT OF RS. 1,18,52,149/-, MADE ON ADDITION O F RS. 1,18,52,149/- TO THE RETURNED INCOME OF THE ASSESSEE. 6. BEFORE THE LD.CIT(A) THE ASSESSEE DID NOT PRESS THE ADJUSTMENT MADE ON ACCOUNT OF INTEREST RECEIVABLES WHILE THE REST IT W AS POINTED OUT HAD BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE IN A. Y 2010-11,WHEREIN IDENTICAL ADJUSTMENT HAD BEEN MADE. LD. CIT(A) ACCORDINGLY D ELETED THE ADJUSTMENT 3 MADE ON ACCOUNT OF PROVISION OF IT/IT ENABLED SERV ICES AND EXCESS CHARGE OUT OF MARK UP TO IDS-A ON FINDING THAT IDENTICAL ISSU E HAD ARISEN IN THE CASE OF THE ASSESSEE FOR A.Y. 2010-11 ALSO AND HAD TRAVELLED U P TO THE ITAT WHEREIN THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE VIDE O RDER IN ITA NO. 130/CHD/2016 DT. 09/03/2017. 7. BEFORE US THE LD. DR FAIRLY CONCEDED THAT THE FA CT AND THE ISSUE INVOLVED IN THE PRESENT CASE WERE IDENTICAL TO THAT IN A.Y. 2010-11 ALSO IN THE CASE OF THE ASSESSEE WHICH HAD BEEN DECIDED IN FAVOUR OF THE AS SESSEE BY THE ITAT. OUR ATTENTION WAS DRAWN TO THE FINDINGS OF THE ITAT IN THE SAID CASE REPRODUCED AT PARA 6.2 OF THE CIT(A)S ORDER ,WHEREIN IT HAD UPHE LD THE ACT OF THE ASSESSEE IN TREATING THE FOREIGN ENTITY AS THE TESTED PARTY FOR DETERMINING THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION UNDERTAKEN. THE LD. DR THOUGH RELIED ON THE ORDER OF THE AO/ TPO. 8. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND R ELIED ON THE ORDER OF THE LD. CIT(A) POINTING OUT THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE ITAT IN THE CASE OF THE ASSESSEE ITSELF FOR A.Y . 2010-11. 9. HAVING HEARD THE RIVAL CONTENTION WE FIND NO INF IRMITY IN THE ORDER OF THE LD. CIT(A). ADMITTEDLY IDENTICAL ISSUE HAD ARISEN I N THE CASE OF THE ASSESSEE IN A.Y. 2010-11 WHICH WAS DECIDED IN FAVOUR OF THE ASS ESSEE BY THE ITAT VIDE THEIR ORDER IN ITA NO. 130/CHD/2016 DT. 09/03/2017 CATEGO RICALLY HOLDING THAT THE FOREIGN PARTY COULD BE TREATED AS A TESTED PARTY. L D. DR HAS BEEN UNABLE TO POINT OUT ANY DISTINGUISHING FACT IN THE PRESENT CA SE. SINCE THIS IS THE SOLE GRIEVANCE OF THE REVENUE IN THE GROUNDS RAISED BEFO RE US, WE SEE NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) DELETING T HE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. GROUND OF APPEAL NO. I) TO IV) RAISED BY THE REVEN UE ARE THEREFORE DISMISSED. 10. GROUND NO. V) & VI) RAISED BY THE REVENUE READ AS UNDER: V) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS NOT ERRED IN DELETING THE DISALLOWANCE OF RS.6,04,1 8,007/- MADE ON ACCOUNT OF NON DEDUCTION OF TDS ON COMMISSION , LEGAL AND PROF ESSIONAL CHARGES, MARKETING AND SELLING EXPENSES, OUT SOURCING AND BUSINESS DEV ELOPMENT EXPENSES AND HOLDING THAT TDS WAS NOT REQUIRED TO BE DEDUCTED RE LYING UPON ITAT ORDER WHEREIN THE HONBLE ITAT HAD REFUSED TO ADJUDICATE THAT SERVICES RENDERED WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND RE QUIRED TDS THEREON AND DISALLOWANCE U/S 40(A)(IA) AS SUCH THE ORDER IS PER VERSE AND ARBITRARY VI) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS NOT ERRED IN DELETING THE ADDITION OF RS. 6,04,18,007/- WHICH WAS MADE BY INVOKING THE PROVISIONS OF SECTION 40(A) (IA) AS THE ASSESSEE HA S FAILED TO DEDUCT TAX AT SOURCES U/S 195 OF THE ACT ON THE PAYMENTS MADE TO NON RESI DENTS WITHOUT APPRECIATING 4 THE FACT THAT INCOME ACCRUED IN INDIA AS PER THE PR OVISIONS OF SECTION 9(L)(VI) OF THE IT. ACT, 1961. 11. BRIEF FACT RELEVANT TO THE ISSUE AS EMERGING FR OM THE ORDER OF THE CIT(A), ARE THAT THE ASSESSEE COMPANY WAS RECEIVING SOFTWAR E RELATED SERVICES AND PROFESSIONAL SERVICES AND WAS MAKING PAYMENTS ON AC COUNT OF PROFESSIONAL SERVICES, TECHNICAL SERVICES, MARKETING AND SELLING EXPENSES, CONSULTING SERVICES, SOFTWARE USAGE EXPENSES TO VARIOUS COMPANIES ABROA D WHICH WERE ITS ASSOCIATED ENTERPRISES. THE ASSESSING OFFICER NOTED THAT THE ASSESEE HAD MADE PAYMENTS AMOUNTING TO RS. 6,04,18,007/- TO VARIOUS COMPANIES WITHOUT DEDUCTING TDS. AS THE ASSESSEE COMPANY HAS FAILED T O DEDUCT TDS ON THE SAID PAYMENTS, THE ASSESSING OFFICER DISALLOWED THE EXPE NDITURE OF RS. 6,04,18,007/- UNDER SECTION 40(A)(IA) ON ACCOUNT OF COMMISSION, L EGAL AND PROFESSIONAL CHARGES, MARKETING AND SELLING EXPENSES AND BUSINES S DEVELOPMENT EXPENSES. 12. LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE ON FINDING THAT IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSES SEE FOR A.Y. 2009-10 AND 2010- 11 WHICH HAD TRAVELLED UP TO THE ITAT WHEREIN IT WA S DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER IN ITA NO. 52/CHD/2016 DT. 24/ 05/2016 AND 130/CHD/2016 DT. 14/12/2016 RESPECTIVELY. 13. BEFORE US LD. DR RELIED ON THE ORDER OF THE ASS ESSING OFFICER THOUGH FAIRLY CONCEDED THAT THE ISSUE AND THE FACTS IN THE PRESEN T CASE WERE IDENTICAL TO THAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2009-10 AND 20 10-11 WHICH HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT AND F OLLOWED BY THE LD. CIT(A). 14. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF THE LD. CIT(A) AND DREW OUR ATTENTION TO PARA 9.2 OF THE ORDER WHEREIN THE FINDINGS OF THE ITAT ON THE IMPUGNED ISSUE IN THE CASE OF THE ASSESSEE FOR A.Y 2009-10 WERE REPRODUCED . 15. IN VIEW OF THE ABOVE WE DO NOT SEE ANY REASON T O INTERFERE IN THE ORDER OF THE LD.CIT(A).ADMITTEDLY IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE IN A.Y. 2009-10 & 2010-11, WHICH WAS DECIDED IN FAVOU R OF THE ASSESSEE BY THE ITAT VIDE THEIR ORDER IN ITA NO. 52/CHD/2016 DT.24-05-16 &ITA NO. 130/CHD/2016 DT. 09/03/2017 RESPECTIVELY.. LD. DR HAS BEEN UNABLE TO POINT OUT ANY DISTINGUISHING FACT IN THE PRESENT CASE. WE THEREFORE UPHOLD THE O RDER OF THE LD. CIT(A) DELETING THE ADDITION OF RS.6.04,18,007/- MADE U/S 40(A)(IA) OF THE ACT. GROUND OF APPEAL NO. V) AND VI) RAISED BY THE REVE NUE ARE THEREFORE DISMISSED. 16. GROUND NO. VII) RAISED BY THE REVENUE READS AS UNDER: 5 VII) 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 THE ADDI TION OF RS. 5,22,317/- MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 36(I)( III) OF THE ACT IN VIEW OF JUDGMENT OF ABHISHEK INDUSTRIES LTD. (2006) 286 ITR 1(P&H) WITHOUT APPRECIATING THE FACT THAT COMMERCIAL EXPEDIENCY AS ENVISAGED BY THE HON'BLE SUPREME COURT IN THE CASE OF M/S HERO CYCLES PVT. LTD. VS C IT 379 ITR 347 (SC) HAS NOT BEEN PROVED BY THE ASSESSEE. 17. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE HAD CLAIMED FINANCIAL CHARGES OF RS.78,54,000/- AND ALSO SHOWN LOANS OF RS. 10,24,45,000/- IN THE BALANCE SHEET WHILE AT THE SA ME TIME THE ASSESSEE HAD MADE INVESTMENTS AMOUNTING TO RS. 1,59,90,000/-. TH E AO FURTHER NOTED THAT IN THE A.Y. 2004-05, PROPORTIONATE INTEREST WAS DISAL LOWED AND ADDED TO THE RETURNED INCOME OF THE ASSESSEE AND NO APPEAL AGAIN ST THE ORDER HAS BEEN PREFERRED AND ALSO THAT IN A.Y. 2009-10 & A.Y. 2010 -11 ALSO THE PROPORTIONATE INTEREST ON THE FUNDS DIVERTED FOR THE NON BUSINESS PURPOSE WAS DISALLOWED AND THE ADDITION WAS UPHELD BY THE LD. CIT(A). ALSO, T HE ASSESSEE ITSELF HAD ADDED BACK NOTIONAL INTEREST ON LOAN TO SUBSIDIARY AMOUNT ING TO RS. 4,99,407/- IN ITS COMPUTATION. IN VIEW OF THE SAID FACTS AND CIRCUMS TANCES, INTEREST AMOUNTING TO RS. 10,21,724/- WAS DISALLOWED BY THE AO ON PRO PORTIONATE BASIS U/S 36(1)(III) OF THE ACT. TAKING INTO ACCOUNT THE NOTIONAL INTERE ST ALREADY ADDED TO INCOME BY THE ASSESSEE THE BALANCE AMOUNT OF RS. 5,22,317 /- (RS. 10,21,724- RS.4,99,407) WAS ADDED BACK TO THE RETURNED INCOME OF THE ASSESS EE. 18. LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE ON FINDING THAT IDENCIAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESS EE FOR A.Y. 2009-10 AND 2010-11 WHICH HAD TRAVELLED UP TO ITAT WHEREIN IT WAS DECID ED IN FAVOUR OF THE ASSESSEE VIDE THEIR ORDER IN ITA NO. 52/CHD/2016 DT 24/05/ 2016 AND ITA NO.130/CHD/2016 DT. 14/12/2016 RESPECTIVELY. 19. BEFORE US LD. DR RELIED ON THE ORDER OF THE ASS ESSING OFFICER THOUGH FAIRLY CONCEDED THAT THE ISSUE AND THE FACTS IN THE PRESEN T CASE WERE IDENTICAL TO THAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2009-10 AND 20 10-11 WHICH HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT AND F OLLOWED BY THE LD. CIT(A). 20. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF THE LD. CIT(A) AND DREW OUR ATTENTION TO PARA 8.2 OF THE ORDER WHEREIN THE FINDINGS OF THE ITAT ON THE IMPUGNED ISSUE IN THE CASE OF THE ASSESSEE FOR A.Y 2009-10 WERE REPRODUCED . 21. IN VIEW OF THE ABOVE WE DO NOT SEE ANY REASON T O INTERFERE IN THE ORDER OF THE LD.CIT(A).ADMITTEDLY IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE IN A.Y. 2009-10 & 2010-11, WHICH WAS DECIDED IN FAVOU R OF THE ASSESSEE BY THE ITAT 6 VIDE THEIR ORDER IN ITA NO. 52/CHD/2016 DT.24-05-16 &ITA NO. 130/CHD/2016 DT. 09/03/2017 RESPECTIVELY.. LD. DR HAS BEEN UNABLE TO POINT OUT ANY DISTINGUISHING FACT IN THE PRESENT CASE. WE THEREFORE UPHOLD THE O RDER OF THE LD. CIT(A) DELETING THE ADDITION OF RS.5,22,317/- MADE U/S 36( 1)(III) OF THE ACT. GROUND OF APPEAL NO. VII) RAISED BY THE REVENUE IS THEREFORE DISMISSED. 22. GROUND NO. VIII) RAISED BY THE REVENUE READS A S UNDER: (VIII) WHETHER ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS NOT ERRED IN DELETING THE ADDITION OF RS. 66,92,194 /- WHICH WAS MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(III)/40(A)(IA) AS T HE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCES ON THE SALARY PAYMENTS MADE TO NON R ESIDENTS WITHOUT APPRECIATING THAT INCOME ACCRUED IN INDIA. 23. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE COMPANY HAD MADE PAYMENT OF SALARIES TO PERSONS OUTSIDE INDIA. THE PROVISIONS O F SECTION 40(A)(III) WERE HELD APPLICABLE AS NO TAX AT SOURCE HAD BEEN DEDUCTED ON THE SAME. THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY THESE PAYMENTS SHOULD N OT BE DISALLOWED AND THE ASSESSEE SUBMITTED THAT THESE PAYMENTS HAD BEEN MADE FOR SERVICES RENDERED OUTSIDE INDIA AND TDS WAS NOT APPLICABLE O N THE SAME. THE PLEA TAKEN BY THE ASSESSEE WAS NOT ACCEPTED BY THE AO AN D APPLYING THE PROVISIONS OF SECTION 40(A)(III) THE PAYMENTS MADE OUTSIDE INDIA AND TO A NON RESIDENT AS SALARY AMOUNTING TO RS. 66,92,194/- WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 24. LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE ON FINDING THAT IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSES SEE FOR A.Y. 2009-10 AND 2010- 11 WHICH HAD TRAVELLED UP TO ITAT WHEREIN IT WAS DE CIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER NO. 52/CHD/2016DT 24/05/2016 A ND 130/CHD/2016 DT. 14/12/2016. 25. BEFORE US LD. DR RELIED ON THE ORDER OF THE ASS ESSING OFFICER THOUGH FAIRLY CONCEDED THAT THE ISSUE AND THE FACT IN THE PRESENT CASE WERE IDENTICAL TO THAT IN THE CASE OF THE ASSESSEE FOR A.Y. 2009-10 AND 20 10-11 WHICH HAD BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT AND F OLLOWED BY THE LD. CIT(A). 26. LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF THE LD. CIT(A) AND DREW OUR ATTENTION TO PARA 10.2 OF THE ORDER WHEREIN THE FINDINGS OF THE ITAT ON THE IMPUGNED ISSUE IN THE CASE OF THE ASSESSEE FOR A.Y 2010-11 (INCORRECTLY MENTIONED AS A.Y 2009-10) WERE REPRODUCED . 7 27. IN VIEW OF THE ABOVE WE DO NOT SEE ANY REASON T O INTERFERE IN THE ORDER OF THE LD.CIT(A).ADMITTEDLY IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE IN A.Y. 2010-11, WHICH WAS DECIDED IN FAVOUR OF THE AS SESSEE BY THE ITAT VIDE THEIR ORDER IN ITA NO. 130/CHD/2016 DT. 09/03/2017. LD. D R HAS BEEN UNABLE TO POINT OUT ANY DISTINGUISHING FACT IN THE PRESENT CASE. WE THEREFORE UPHOLD THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION OF RS.66,92,19 4/- MADE U/S 40(A)(III) OF THE ACT. GROUND OF APPEAL NO. VIII) RAISED BY THE REVENUE I S THEREFORE DISMISSED. 28. GROUND NO. IX) RAISED BY THE REVENUE READS AS U NDER: (IX) 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 THE ADDI TION OF RS. 19,27,755/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADDITIONAL DEPR ECIATION ON COMPUTERS BY IGNORING THE FACT THAT THE COMPUTERS ARE NOT A PART OF THE PLANT & MACHINERY IN THE ASSESSEES BUSINESS. 29. BRIEF FACT RELEVANT TO THE ISSUE ARE THAT ASSES SEE COMPANY WAS DOING BUSINESS OF EXPORT OF INFORMATION TECHNOLOGY, TECHN OLOGY SERVICES AND SOFTWARE DEVELOPMENT, AND HAD CLAIMED ADDITIONAL DEPRECATIO N ON COMPUTERS WHICH WAS DISALLOWED BY THE A.O ON THE GROUND THAT THE DE FINITION OF BLOCK OF ASSETS WAS A GROUP OF ASSETS HAVING THE SAME PERCENTAGE OF PRESCRIBED DEPRECIATION AND THE A.O NOTED THAT THE ASSESSEE HAD SHOWN PLANT AND MACHINERY AND COMPUTERS AND SOFTWARE UNDER SEPARATE BLOCKS IN WH ICH MACHINERY AND PLANTS WERE ENTITLED TO DEPRECATION @ 15% AND COMPUTERS AN D COMPUTER SOFTWARE @ 60%.THE A.O HELD THAT ADDITIONAL DEPRECIATION WAS A VAILABLE TO PLANT AND MACHINERY AND NOT TO COMPUTER AND SOFTWARE AS THE S AME HAD NOT BEEN USED IN THE PRODUCTION/MANUFACTURE OF AN ARTICLE/THINGS. THE A.O FURTHER HELD THAT COMPUTERS WERE MERELY USED IN PROCESSING OF DATA OR PREPARING SOFTWARE WHICH WAS NOT MANUFACTURING NEW ARTICLE/THINGS AND THEREF ORE ADDITIONAL DEPRECIATION OF RS. 19,27,755/- WAS DISALLOWED. 30. THE LD. CIT(A) ALLOWED THE ASSESSES CLAIM OF AD DITIONAL DEPRECIATION ON COMPUTERS, ON FINDING THAT SIMILAR DISALLOWANCE MAD E IN THE CASE OF THE ASSESSEE FOR A.Y. 2009-10 WAS DELETED IN APPEAL BY THE LD. CIT(A)-2, CHANDIGARH VIDE ORDER NO. 888/ 13-14 DT. 14/12/2015 FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. STATRONIC S & ENTERPRISES PVT. LTD. (2007) 288 ITR. 31. BEFORE US THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. WHILE THE LD. COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A) AND THE 8 DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF STATRONICS & ENTERPRISES PVT. LTD. (SUPRA). OUR ATTENTION WAS DRAWN TO THE F INDINGS OF THE LD.CIT(A) IN A.Y 2009-10 REPRODUCED AT PARA 7.2 OF THE ORDER OF THE CIT(A). 32. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE LD. CIT(A) HAS ALLOWED THE A SSESSEES CLAIM OF ADDITIONAL DEPRECIATION ON COMPUTERS FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THIS REGARD. LD. DR HAS NEITHER BROUGHT TO OUR NOTICE ANY CONTRARY DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OR THE HONBLE APEX COURT ON THE ISSUE, NOR HAS ANY DISTINGUISHING FACT BEEN POI NTED OUT TO US TO SHOW THE INAPPLICABILITY OF THE SAID DECISION TO THE FACTS O F THE PRESENT CASE. WE THEREFORE SEE NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) ALLOWING ASSESSEES CLAIM OF ADDITIONAL DEPRECIATION ON COMPUTERS AMOUNTING T O RS.19,27,755/-. GROUND OF APPEAL NO.VIII) RAISED BY THE REVENUE IS THEREFORE DISMISSED. 33. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. WE SHALL NOW BE TAKING UP ASSESSEES APPEAL IN ITA NO. 352/CHD/2018 34. THE SOLE GROUND RAISED BY THE ASSESSEE READS AS UNDER: 1. THAT THE LD. CIT(APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ADDITION OF RS. 14,34,464/-MADE ON ACCOUNT OF N ON DEDUCTION OF TDS ON RENTAL PAYMENTS APPLYING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT WHICH ARE NOT ATTRACTED AND AS SUCH THE ADDITION UPHELD IS AR BITRARY AND UNJUSTIFIED. 35. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE HAS MADE RENT PAYMENTS AMOUNTING TO RS. 14,34,464/- WITHOUT DEDU CTING ANY TAX AT SOURCE THEREON. THE ASSESSEE, DURING ASSESSMENT PROCEEDING S, WAS ASKED AS TO WHY THE SAID EXPENDITURE SHOULD NOT BE DISALLOWED FOR NON D EDUCTION OF TDS. THE ASSESSEE IN THIS REGARD SUBMITTED THAT RENT WAS APP ORTIONED AMONG THE FAMILY MEMBERS AND THE LIMIT U/S 194 I WAS NOT SURPASSED, SO TDS WAS NOT DEDUCTED. THE REPLY OF THE ASSESSEE WAS REJECTED BY THE AO S TATING THAT THE ASSESSEE HAD NOT PRODUCED ANY PROOF THAT THESE PAYMENTS WERE FUR THER BIFURCATED AND HOLDING THUS THAT THE LIMIT OF RS. 1,80,000/- FOR D EDUCTION OF TAX AT SOURCE HAD BEEN CLEARLY SURPASSED. AN AMOUNT OF RS. 14,34,464/ - WAS AS A CONSEQUENCE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE. 36. BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED TH E IDENTICAL ISSUE HAD ARISEN IN THE CASE OF THE ASSESSEE FOR A.Y. 2009-10 ALSO WHEREIN THE ASSESSEES CLAIM HAD BEEN ALLOWED. THE LD. CIT(A) FOUND THAT W HILE IN THAT CASE THE ASSESSEE HAD PRODUCED PROOF THAT THE PAYMENT OF REN T WAS BIFURCATED AND ON 9 ACCOUNT OF WHICH THEY FELL BELOW THE PRESCRIBED LIM IT FOR THE PURPOSE OF DEDUCT OF TAX AT SOURCE UNDER SECTION 194 I OF THE ACT NO SUCH PROOF THAT THE PAYMENT WERE BIFURCATED WAS PRODUCED IN THE PRESENT CASE. T HE LD. CIT(A) THEREFORE HELD THAT THE DECISION OF THE ITAT IN A.Y. 2009-10 WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE . THE CIT(A) FURTHER NOTED THAT IN A.Y 2009-10 THE LEASE DEEDS WERE BEFORE THE AO AND THEREFORE THE MATTER HAD BEE N RESTORED BACK TO HIM. THE LD. CIT(A) THEREFORE UPHELD THE DISALLOWANCE I N THE ABSENCE OF DETAILS AND EVIDENCE TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE. 37. BEFORE US LD.COUNSEL FOR THE ASSESSEE CONTENDE D THAT THE CIT(A) HAD INADVERTENTLY MENTIONED A.Y 2009-10 AS THE YEAR IN WHICH THE ISSUE WAS DECIDED BY THE ITAT WHILE THE FACT WAS THAT THE SAID ISSUE HAD BEEN DECIDED IN A.Y 2010- 11.OUR ATTENTION WAS DRAWN TO THE COPY OF THE ORDER OF THE ITAT IN A.Y 2010-11 AND MORE SPECIFICALLY TO PARA 38-48 WHEREIN IT WAS DEALT WITH. FURTHER IT WAS CONTENDED THAT THE FACTS IN THE IMPUGNED YEAR WERE IDENTICAL TO THAT IN A.Y 2010-11 WITH THE PAYMENTS HAVING BEEN MADE TO THE S AME PARTIES BY VIRTUE OF THE SAME LEASE DEED AND THEREFORE IN THE IMPUGNED Y EAR ALSO THE DIRECTION OF THE ITAT IN A,Y 2010-11 WOULD APPLY. 38. LD.DR WAS UNABLE TO CONTROVERT THE FACTUAL CONT ENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE BUT RELIED ON THE ORDER OF THE CIT (A) 39. CONSIDERING THE ABOVE FACT AS POINTED OUT BY TH E LD.COUNSEL FOR THE ASSESSEE WHICH THE LD.DR WAS UNABLE TO CONTROVERT, WE SEE NO REASON WHY THE FINDINGS OF THE ITAT IN A,Y 2010-11 SHOULD NOT APPL Y IN THE IMPUGNED YEAR ALSO. THE ITAT WE FIND HAD HELD IN A.Y 2010-11, AFTER GOI NG THROUGH THE CONTENTS OF THE LEASE AGREEMENT THAT THERE WERE SEVERAL COOWNERS OF THE PROPERTY AND THE RENTAL INCOME THEREFORE BELONGED TO THE SAID COOWNE RS IN THEIR AGREED PROPORTION. THE ITAT HAD THEREAFTER RESTORED THE IS SUE TO THE AO TO DETERMINE THE RENTAL INCOME ATTRIBUTABLE TO EACH COOWNER AND THE REAFTER DETERMINE WHETHER THE ASSESSEE WAS LIABLE TO DEDUCT TAX AS PER THE PR OVISIONS OF SECTION 194I OF THE ACT FAILING WHICH THE PROVISIONS OF SECTION 40(A)(I A) BE APPLIED. THE RELEVANT FINDINGS OF THE ITAT AT PARA 47-48 OF THE ORDER ARE AS UNDER: 47. IT IS EVIDENT FROM THE SAID LEASE DEEDS, WHICH WAS THERE EVEN BEFORE THE ASSESSING OFFICER, THAT THERE ARE SEVERAL CO-OWNERS OF THE PROPERTIES WHICH HAVE BEEN TAKEN ON LEASE BY THE ASSESSEE AND RENT PAID THEREO N. THE INCOME IN SUCH CIRCUMSTANCES CANNOT, THEREFORE, BE SAID TO BE THE INCOME OF THE RECIPIENT OF THE RENT ONLY. WHEN THEY HAVE RECEIVED THE SAME ONLY ON BEHALF OF OTHER CO-OWNERS THE RENT PAID CONSTITUTES THE INCOM E OF 10 ALL THE CO-OWNERS AND THE SAME IS TO BE APPORTIONED AMONG THEM AS PER THE METHOD PRESCRIBED, IF ANY, IN THE LEASE AGREEMENT OR IN PROPORTION OF THEIR CO-OWNERS HIP AND THEREAFTER ONLY IF THE RENTAL INCOME IN THE CAS E OF ANY CO-OWNERS EXCEEDS THE PRESCRIBED LIMIT FOR THE PURPOSE OF DEDUCTION OF TAX U/S 194I OF THE ACT, TH E TAX IS TO BE DEDUCTED AT SOURCE. 48. IN THE LIGHT OF THE ABOVE, WE, THEREFORE, RESTO RE THE MATTER BACK TO THE ASSESSING OFFICER TO APPORTION T HE RENTAL INCOME IN THE HANDS OF THE CO-OWNERS AS PER LEGALLY PERMISSIBLE, DETERMINE THE RENTAL INCOME ATTRIBUTABLE TO EACH CO-OWNER AND THEREAFTER APPLY THE PROVISIONS OF SECTION 194(I) OF THE ACT TO THE SAME AS ALSO THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX, IF FOUND IN ANY CASE. THIS GROUN D OF APPEAL NO.5 OF THE ASSESSEE IS, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. 40. SINCE THE FACTS ADMITTEDLY ARE IDENTICAL IN THE PRESENT CASE, THE DECISION RENDERED IN A.Y 2010-11 WILL SQUARELY APPLY IN THE PRESENT CASE FOLLOWING WHICH WE RESTORE THE ISSUE TO THE AO TO BE DECIDED IN THE LIGHT OF THE DIRECTIONS GIVEN BY THE ITAT IN A.Y 2010-11. THE GROUND RAISED BY TH E ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 41. IN EFFECT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH ) ( ANNAPURNA GUPTA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /DATED: 4 TH FEBRUARY, 2019 AG / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. / CIT 4. ( )/ THE CIT(A) 5. , ! ' , #$%& / DR, ITAT, CHANDIGARH 6. %'() / GUARD FILE / BY ORDER, / ASSISTANT REGISTRAR