DCIT,Circle-11(1), Kolkata, Kolkata V. M/s All India Technologies Ltd., Kolkata

ITA 52/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6067 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SINGHI; AVISHHEK TIBREWAL
• Keywords: Capital asset; Business income; Depreciation; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 32

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI, M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. 52 / KOL / 20 17 ASSESSMENT YEAR :2009-10 DCIT, CIRCLE-11(1), P-7 CHOWRINGHEE SQUARE, KOLKATA-69 V/S . M/S ALL INDIA TECHNOLOGIES LTD., 5, LOWER ROWDON STREET, KOLKATA-20 [ PAN NO.AAACI1661 A ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SANJAY MUKHERJEE, ADDL. CIT-DR /BY RESPONDENT SHRI S. SINGHI, FCA & SHRI AVISHHEK TIBREWAL, ACA /DATE OF HEARING 11-06-2018 /DATE OF PRONOUNCEMENT 11-07-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2009-10 A RISES AGAINST COMMISSIONER OF INCOME TAX (APPEALS)-7,KOLKATAS OR DER DATED 04.10.2016 IN CASE NO.718/CIT(A)-7/KOL/WARD-11(1)/16-17 REVERSING ASSESSING OFFICERS ACTION DISALLOWING ASSESSEES CARRY FORWARD UNABSOR BED LOSS / DEPRECIATION CLAIMED OF 27,07,637/- PERTAINING TO ASSESSMENT YEAR(S) 1999-0 0 AND 2001- 02 SECTION 40(A)(IA) DISALLOWANCE OF 16,05,826/- AND PAYMENT OF 12 LAKH CLAIMED AS REVENUE BUT TREATED AS CAPITAL EXPENDITU RE; RESPECTIVELY INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. WE COME TO FIRST ISSUE OF BROUGHT FORWARD UNABSO RBED DEPRECIATION CLAIMED AMOUNTING TO 27,07,637/-. THE ASSESSEE HAD CLAIMED TOTAL ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 2 UNABSORBED DEPRECIATION OF 40,08,092/- RELEVANT TO INVOLVING SUMS OF 6,70,378/-, 20,37,259/-, 8,30,590/- AND 4,69,865/- RELEVANT TO ASSESSMENT YEAR(S) 1999-00, 2001-02 TO 2003-04; RESPECTIVELY. THE ASSESSING OFFICER TOOK NOTE OF VARIOUS AMENDMENTS IN SECTION 32(1) OF THE ACT APPLICABLE ABOVE ASSESSMENT YEAR(S) AND FROM ASSESSMENT YEAR 2002-03 ONWARDS TO CONCLUDE THAT DEPRECIATION OF ASSESSMENT YEAR 1996-97 WAS EL IGIBLE TO BE SET OFF UPTO ASSESSMENT YEAR 2004-05 AND THAT PERTAINING TO ASSE SSMENT YEAR 1997-98 TO 2001-02 WAS ELIGIBLE TO BE SET OFF ONLY AGAINST THE BUSINESS INCOME HEAD FOR A PERIOD OF NOT MORE THAN EIGHT ASSESSMENT YEARS. HE THUS DISALLOWED THE ASSESSEES UNABSORBED DEPRECIATION(S) PERTAINING TO ASSESSMENT YEAR(S) 1999-00 AND 2001-02 TOTALING SUM IN QUESTION OF 27,07,637/-. 3. THE CIT(A) DELETES THE ABOVE UNABSORBED DEPRECIA TION DISALLOWANCE VIDE HIS FOLLOWING DISCUSSION PARA 4.2.2 TO 4.2.3:- 4.2.2 DURING THE APPELLATE PROCEEDINGS, THE A/R OF THE APPELLANT AGITATED ON THE ISSUE AND FIELD WRITTEN SUBMISSION AS FOLLOWS:- ASSESSMENT YEAR CARRY FORWARD UNABSORBED DEPRECIATI ON (RS) 1999-2000 6,70,378 2001-2002 20,37,259 2002-2003 8,30,590 2003-2004 4,69,865 TOTAL 40,08,092 THE ASSESSING OFFICER DISALLOWED THE CLAIM OF RS.27 ,07,637/- OF CARRY FORWARD UNABSORBED DEPRECIATION FOR ASSESSMENT YEARS 1999-2 000 AND 2001-2002 CONTENDING THAT FROM THE LANGUAGE OF THE SUB-SECTI ON (2) OF SECTION 32 IT IS CLEAR THAT IT IS A SUBSTANTIVE PROVISION AND NOT A PROCEDURAL ONE. IT IS SETTLED LEGAL POSITION THAT THE AMENDMENT TO SUBSTANTIVE PROVISION IS NORMALLY PROSPECTIVE UNLESS EXPRESSLY STATED OTHERWISE. IT IS NOWHERE STATED THAT SUBSTIT UTION OF SUB-SECTION 32 IS RETROSPECTIVE. IT IS, THEREFORE, PATENT THAT THE SU BSTANTIVE PROVISION CONTAINED IN SECTION 32(2) AS SUBSTITUTED BY THE FINANCE ACT, 20 01 W.E.F. 1.4.2002, IS PROSPECTIVELY APPLICABLE TO ASSESSMENT YEAR 2002-20 03 ONWARDS. REGARDING DEPRECIATION FROM THE ASSESSMENT YEAR-199 7-98 TO 2001-02, THE ASSESSING OFFICER HAS STATED THAT THE PROVISIONS PR EVAILING DURING THOSE ASSESSMENT YEARS ARE AS FOLLOWS : A) BROUGHT FORWARD UNADJUSTED DEPRECIATION ALLOWANC E FOR AND UP TO THE ASSESSMENT YEAR-1996-97, WHICH COULD NOT BE SET OFF UP TO ASSE SSMENT YEAR 1996-97 SHALL BE CARRIED FORWARD FOR SET OFF AGAINST INCOME UNDER AN Y HEAD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS STARTING FROM ASSESSMENT YEA R-1997-98. B) CURRENT DEPRECIATION FOR THE YEAR U/S 32(1) (FOR EACH YEAR SEPARATELY STARTING FROM ASSESSMENT YEAR 1997-98 TO 2001-02) CAN BE SET OFF FIRSTLY AGAINST BUSINESS INCOME AND THEN AGAINST INCOME UNDER ANY OTHER HEAD. ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 3 C) AMOUNT OF CURRENT DEPRECIATION FOR ASSESSMENT YE ARS 1997-98 TO 2001-02 WHICH CANNOT BE SO SET OFF AS STATED ABOVE, SHALL BE CARR IED FORWARD FOR A MAXIMUM PERIOD OF EIGHT ASSESSMENT YEARS FROM THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH IT WAS FIRST COMPUTED, TO BE SET OFF ONLY AGAINST THE INCOME UNDER THE HEAD 'PROFIT & GAINS FOR BUSINESS OR PROFESSION'. THE APPELLANT SUBMITS THAT, THE AMENDMENT MADE BY T HE FINANCE ACT, 2001 DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION, TO ENABLE THE ASSESSEES TO CONSERVE S UFFICIENT FUNDS, TO REPLACE CAPITAL ASSETS. THE HON'BLE SUPREME COURT IN RELIANCE JUTE AND INDUSTRIES (120 ITR 921 SUPREME COURT DECISION) HAS HELD THAT CARRY FORWARD & SET OFF OF UNABSORBED LOSS IS GOVERNED BY THE LAW PREVAILING IN THE YEAR OF SET-O FF OR CARRY FORWARD AND NOT IN THE YEAR OF INCURRING THE LOSS. THUS IT NEEDS TO BE EMP HASIZED THAT THE CARRIED FORWARD DEPRECIATION OF EARLIER YEARS REMAINING UNABSORBED AS ON APRIL 1, 2001, WOULD BE GOVERNED BY THE CURRENT POSITION IN THE LAW. THE PO SITION TODAY IS THAT UNABSORBED DEPRECIATION ALLOWANCE CAN BE CARRIED FORWARD INDEF INITELY. IT IS CARDINAL PRINCIPLE OF THE TAX LAW THAT THE LAW TO BE APPLIED IS THAT IN F ORCE IN THE PARTICULAR ASSESSMENT YEAR UNLESS OTHERWISE PROVIDED EXPRESSLY OR BY NECE SSARY IMPLICATION. THE ASSESSMENT FOR ONE ASSESSMENT YEAR CANNOT, IN THE A BSENCE OF A CONTRARY PROVISION, BE AFFECTED BY THE LAW IN FORCE IN ANOTHER ASSESSME NT YEAR. FURTHER AS STATED ABOVE CARRIED FORWARD DEPRECIATIO N OF EARLIER YEARS REMAINING UNABSORBED AS ON APRIL 1, 2001, WOULD BE GOVERNED B Y THE CURRENT POSITION IN THE LAW. THE POSITION TODAY IS THAT UNABSORBED DEPRECIA TION ALLOWANCE CAN BE CARRIED FORWARD INDEFINITELY. THUS WHILE PASSING THE ASSESSMENT ORDER, THE ASSESS ING OFFICER SHOULD HAVE FOLLOWED THE LAW PREVAILING IN THE PREVIOUS YEAR 20 08-09 RELATING TO THE ASSESSMENT YEAR 2009-10, AND ALLOWED THE CARRY FORWARD OF UNAB SORBED DEPRECIATION AS PER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10. IN THE MATTER OF ALLOWABILITY FOR CARRY FORWARD UNA BSORBED DEPRECIATION AND ITS SET OFF, THE APPELLANT LIKE TO INVITE YOUR ATTENTION TO THE JUDGMENT OF THE HIGH COURT OF GUJARAT AT AHMEDABAD (SPECIAL CIVIL APPLICATION NO. 1773 OF 2012) IN GENERAL MOTORS INDIA PVT.LTD VS DEPUTY COMMISSIONER OF INCOME- TAX, IN WHICH HON'BLE COURT IN ITS ORDER STATED AS UNDER :- 'THEREFORE, IT CAN BE SAID THAT, CURRENT DEPRECIATI ON IS DEDUCTIBLE IN THE FIRST PLACE FROM THE INCOME OF THE BUSINESS TO WHICH IT R ELATES. IF SUCH DEPRECIATION AMOUNT IS LARGER THAN THE AMOUNT OF THE PROFITS OF THAT BUSINESS, THEN SUCH EXCESS COMES FOR ABSORPTION FROM THE PROFITS AND GA INS FROM ANY OTHER BUSINESS OR BUSINESSES, IF ANY, CARRIED ON BY THE A SSESSEE. IF A BALANCE IS LEFT EVEN THEREAFTER, THAT BECOMES DEDUCTIBLE FROM OUT O F INCOME FROM ANY SOURCE UNDER ANY OF THE OTHER HEADS OF INCOME DURING THAT YEAR. IN CASE THERE IS A STILL BALANCE LEFT OVER, IT IS TO BE TREATED AS UNA BSORBED DEPRECIATION AND IT IS TAKEN TO THE NEXT SUCCEEDING YEAR. WHERE THERE IS C URRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR THE UNABSORBED DEPRECIATION IS ADDED TO THE CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR AND IS DEEMED AS PART THEREOF. IF, HOWEVER, THERE IS NO CURRENT DEPRECIATION FOR SUCH SUCCEEDING YEAR, THE UNABSORBED DEPRECIATION BECOMES THE DEPRECIATION AL LOWANCE FOR SUCH SUCCEEDING YEAR. WE ARE OF THE CONSIDERED OPINION T HAT ANY UNABSORBED DEPREDATION AVAILABLE TO AN ASSESSEE ON 1ST DAY OF APRIL 2002 (ASSESSMENT YEAR 2002-03) WILL BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. AND ONCE THE CIRCULAR NO.14 OF 2001 CLARIFIED THAT THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATIO N HAD BEEN DISPENSED ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 4 WITH, THE UNABSORBED DEPRECIATION FROM ASSESSMENT Y EAR 1997-98 UPTO THE ASSESSMENT YEAR 2001-02 GOT CARRIED FORWARD TO THE ASSESSMENT YEAR 2002- 03 END BECAME PART THEREOF, IT CAME TO BE GOVERNED BY THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001 AND W ERE AVAILABLE FOR CARRY FORWARD AND SET OFF AGAINST THE PROFITS AND GAINS O F SUBSEQUENT YEARS, WITHOUT ANY LIMIT WHATSOEVER. ' THE APPELLANT SUBMITS THAT CARRY FORWARD OF UNABSOR BED DEPRECIATION OF RS.40,08,092/- WAS CLAIMED BY THE APPELLANT IN THE RELEVANT ASSESSMENT YEAR. CIRCULAR NO. 762 DATED 18.2.1998 ISSUED BY THE CENT RAL BOARD OF DIRECT TAXES (CBDT) IN THE FORM OF EXPLANATORY NOTES CATEGORICAL LY PROVIDED, THAT THE UNABSORBED DEPRECIATION ALLOWANCE FOR ANY PREVIOUS YEAR TO WHI CH FULL EFFECT CANNOT BE GIVEN IN THAT PREVIOUS YEAR SHALL BE CARRIED FORWARD AND ADD ED TO THE DEPRECIATION ALLOWANCE OF THE NEXT YEAR AND BE DEEMED TO BE PART THEREOF. IT IS TO BE NOTED THAT SUCH UNABSORBED DEPRECIATION WAS AVAILABLE FOR CLAIM TO THE ASSESSEE ON 1ST DAY OF APRIL 2002 AND THUS DEEMED T O BE PART OF DEPRECIATION ALLOWANCE OF THAT ASSESSMENT YEAR. DUE TO THE AMEND MENT IN THE FINANCE ACT, 2001 THE BROUGHT FORWARD UNABSORBED DEPRECIATION COULD B E CARRIED FORWARD FOR AN INDEFINITE PERIOD AND THE SAME SHOULD BE DEALT WITH IN ACCORDANCE WITH THE PROVISIONS OF SECTION 32(2) AS AMENDED BY FINANCE ACT, 2001. THUS, FROM THE ABOVE IT IS APPARENT THAT THE BROUGH T FORWARD UNABSORBED DEPRECIATION CLAIMED BY THE APPELLANT CAN BE CARRIED FORWARD FOR INDEFINITE PERIOD AS PER THE AMENDED SECTION 32(2) OF THE ACT. , THE APPELLANT REQUESTS TO GIVE DIRECTION TO ALLOW D EPRECIATION ALLOWANCE ACCORDINGLY. 4.2.3 I AGREE WITH THE CONTENTION OF THE APPELLANT. IN VIEW OF DECISIONS CITED SUPRA I AGREE THAT UNABSORBED DEPRECIATION SUBSISTING AS ON 1-4-2002, CAN BE CARRIED FORWARD INDEFINITELY. THE HON'BLE SUPREME COURT IN RELIANCE JUTE AND INDUSTRIES (120 ITR 921 SUPREME COURT DECISION) HAS HELD THAT CARRY FORWARD & SET OFF OF UNABSORBED LOSS IS GOVERNED BY THE LAW PREVAILING I N THE YEAR OF SET-OFF OR CARRY FORWARD AND NOT IN THE YEAR OF INCURRING THE LOSS. THUS IT NEEDS TO BE EMPHASIZED THAT THE CARRIED FORWARD DEPRECIATION OF EARLIER YEARS R EMAINING UNABSORBED AS ON APRIL 1, 2001, WOULD BE GOVERNED BY THE CURRENT POSITION IN THE LAW. THE POSITION TODAY IS THAT UNABSORBED DEPRECIATION ALLOWANCE CAN BE CARRIED FO RWARD INDEFINITELY. IT IS CARDINAL PRINCIPLE OF THE TAX LAW THAT THE LAW TO BE APPLIED IS THAT IN FORCE IN THE PARTICULAR ASSESSMENT YEAR UNLESS OTHERWISE PROVIDED EXPRESSLY OR BY NECESSARY IMPLICATION. THE ASSESSMENT FOR ONE ASSESSMENT YEAR CANNOT, IN T HE ABSENCE OF A CONTRARY PROVISION, BE AFFECTED BY THE LAW IN FORCE IN ANOTH ER ASSESSMENT YEAR. FURTHER AS STATED ABOVE CARRIED FORWARD DEPRECIATIO N OF EARLIER YEARS REMAINING UNABSORBED AS ON APRIL 1, 2001, WOULD BE GOVERNED B Y THE CURRENT POSITION IN THE LAW. THE POSITION TODAY IS THAT UNABSORBED DEPRECIA TION ALLOWANCE CAN BE CARRIED FORWARD INDEFINITELY. THUS WHILE PASSING THE ASSESSMENT ORDER, THE ASSESS ING OFFICER SHOULD HAVE FOLLOWED THE LAW PREVAILING IN THE PREVIOUS YEAR 20 08-09 RELATING TO THE ASSESSMENT YEAR 2009-10, AND ALLOWED THE CARRY FORWARD OF UNAB SORBED DEPRECIATION. A.O IS DIRECTED TO DO ACCORDINGLY. 4. LEARNED ADDITIONAL CIT DR VEHEMENTLY CONTENDS DU RING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAD RIGHTLY DISA LLOWED ASSESSEES UNABSORBED DEPRECIATION SET OFF CLAIM SINCE THE SAM E WAS WELL BEYOND EIGHT ASSESSMENT YEAR(S) AS THE CORRESPONDING YEARS INVOL VED THEREIN ARE AY 1999- ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 5 00 AND 2001-02 (SUPRA). CASE LAW OF HON'BLE APEX CO URTS DECISION IN PEERLEES GENERAL FINANCE AND INVESTMENT CO. (2016) 73 TAXMAN 258 (SC) IS QUOTED IN SUPPORT. WE FIND NO MERIT IN REVENUES INSTANT SUBS TANTIVE GRIEVANCE. HON'BLE GUJARAT HIGH COURTS DECISION IN GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (2013) 354 ITR 244 (GUJ) AS RELIED UPON IN CIT(A)S FINDIN GS HAS REJECTED REVENUES IDENTICAL ARGUMENT SEEKING TO RESTRICT A DEPRECIATI ON CLAIM ONLY UPTO EIGHT ASSESSMENT YEAR(S). ITS LATTER PLEA QUOTING HON'BLE APEX COURTS DECISION HEREINABOVE (SUPRA) IS ALSO FOUND TO BE DEVOID ON M ERIT AS THE ASSESSMENT YEAR BEFORE THEIR LORDSHIPS IS 1998-99 WHEREAS WE A RE DEALING WITH THE STATUTORY AMENDMENTS IN SECTION 32(2) OF THE ACT BY THE FINANCE ACT, 2001. THIS ISSUE BEFORE THEIR LORDSHIPS WAS THAT OF INTRA HEAD SET OFF ONLY. THE CBDTS CIRCULAR NO. 14/2001 ALSO MADE IT CLEAR THAT THE RESTRICTION IN QUESTION OF EIGHT YEAR(S) FOR SUCH A CARRY FORWARD OF UNABSO RBED DEPRECIATION STANDS DISPENSED WITH. WE CONCLUDE IN THE FACTUAL BACKDROP THAT ASSESSEES IMPUGNED UNABSORBED DEPRECIATION CARRIED FORWARD FR OM PRECEDING ASSESSMENT YEARS BECOMES DEPRECIATION OF IMPUGNED A SSESSMENT YEAR ELIGIBLE TO BE SET OFF AS PER LAW AND SO ON. WE REJ ECT REVENUES FIRST SUBSTANTIVE GROUND ACCORDINGLY. 5. THE REVENUES SECOND SUBSTANTIVE GRIEVANCE IS TH AT CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEALING SECTION 40(A)(IA) DISAL LOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ASSESSEES FAILURE IN DEDUCTING TDS ON INTERNET ACCESS NETWORK SERVER CHARGES PAYMENT OF 16,05,826/- ATTRACTING SECTION 194-I AND SECTION 194-J OF THE ACT. THERE I S NO DISPUTE ABOUT THE FACT THAT ASSESSEE HAS AVAILED THE SAID INTERNET SERVICE S IN THE NATURE OF PAYEE ACCESS AND SERVER CHARGES WITHOUT DEDUCTING TDS. TH E ASSESSING OFFICER THEREFORE INVOKED SECTION 40(A)(IA) OF THE ACT FOR DISALLOWING THE SUM IN QUESTION. 6. THE CIT(A) DELETES IMPUGNED DISALLOWANCE AS UNDE R:- ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 6 4.3.1 DURING THE FINANCIAL YEAR 2008-09 RELEVANT TO ASSESSMENT YEAR 2009-10, THE APPELLANT WAS ENGAGED MAINLY WEBSITE, INTERNET SERV ICES AND WEB CONSULTANCY ACTIVITIES. IT WAS NOTICED BY THE AO FROM THE DETAI LS IN RESPECT OF INTERNET ACCESS AND INTERNET SERVER CHARGES PAYMENT FILED BY THE APPELL ANT THAT THE APPELLANT HAS NOT DEDUCTED ANY TDS ON PAYMENT OF ABOVE SAID EXPENSES. THE AO HAS DISALLOWED RS.16,05,826/- U/S 40A(IA) OF THE I.T. ACT PAID FOR INTERNET ACCESS AND INTERNET SERVER CHARGES ON THE CONTENTIO N THAT SUCH PAYMENTS ARE IN THE NATURE OF TECHNICAL SERVICES AND RENTAL EXPENSES AN D HENCE ATTRACT LIABILITY OF TDS U/S 194J AND 1941 OF THE ACT. 4.3.2 IN RESPONSE TO THE ABOVE THE AUTHORIZED REPRE SENTATIVE OF THE APPELLANT APPEARED AND FILED WRITTEN SUBMISSION AS UNDER: 'DURING THE YEAR, THE APPELLANT CLAIMED AN AMOUNT O F RS.16,05,826/- AS EXPENSES WHICH INCLUDES RS. 2,33,665/- AS INTERNET ACCESS CHARGES AND RS.13,72,161/- AS INTERNET SERVER CHARGES RESPECTIV ELY. THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE U/S 40(A)(I A) OF THE ACT ON THE CONTENTION THAT SUCH PAYMENTS ARE IN THE NATURE OF TECHNICAL SERVICES AND RENTAL EXPENSES AND HENCE ATTRACT LIABILITY TO DEDU CT TDS U/S 194J AND 194I OF THE ACT. AS PER THE PROVISION LAID DOWN UNDER SECTION 40(A)( IA) OF THE ACT STATES THAT ' NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION ' ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALT Y, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RE SIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID. THE EXPENSES INCURRED AND PAID BY THE COMPANY AS IN TERNET ACCESS CHARGES AND INTERNET SERVER CHARGES DOES NOT COME WITHIN TH E AMBIT OF ANY OF THE PROVISIONS LAID DOWN UNDER ABOVE REFERRED SECTION A ND HENCE NO TAX WAS DEDUCTED ON PAYMENT OF INTERNET ACCESS AND INTERNET SERVER CHARGES. THE ASSESSEE ALSO RELIED ON THE JUDGEMENT IN CASE OF BH ARTI CELLULAR SERVICES AND SKY CELL COMMUNICATIONS LTD. THE HON'BLE HIGH COURT IN THE CIT VS. BHARTI CELLUL AR LIMITED (2009) 319 ITR 139 [DEL). HAS OBSERVED THAT THE EXPRESSION 'FEES FOR T ECHNICAL SERVICES: MEANS ANY CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TEC HNICAL OR CONSULTANCY 'SERVICES'. THE WORD TECHNICAL' IS PRECEDED BY THE WORD ' MANAGERIAL ' AND SUCCEEDED BY THE WORD CONSULTANCY . SINCE THE EXPRESSION ' TECHNICAL SERVICES ' IS IN DOUBT AND IS UNCLEAR, THE RULE OF NOSCITUR A COCIIS IS CLEARLY A PPLICABLE. THE RULE OF NOSCITUR A SOCIIS IS EXPLAINED IN MAXWELL ON THE 'INTERPRETATION OF S TATUTES' IN THE FOLLOWING WORDS 'WHERE TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE OF A NALOGOUS MEANING ARE COUPLED TOGETHER, NOSCITUR A SOCIIS, THEY ARE UNDERSTOOD TO BE USED IN THEIR COGNATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOUR FROM EACH OTHER , THE MEANING OF THE MORE GENERAL BEING RESTRICTED TO A SENSE ANALOGOUS TO THAT OF TH E LESS GENERAL. THUS BOTH THE WORDS ' MANAGERIAL ' AND ' CONSULTANCY ' INVOLVE A HUMAN ELEMENT. AND, BOTH, MANAGERIAL SERVICE AND CONSULTANCY SERVICE ARE PROV IDED BY HUMANS. CONSEQUENTLY, APPLYING THE RULE OF NOSCITUR A SOCIIS, THE WORD ' TECHNICAL ' AS APPEARING IN- EXPLANATION 2 TO SECTION 9(1)(VII) WOULD ALSO HAVE TO BE CONSTRUED AS INVOLVING A HUMAN ELEMENT. HENCE THE SAME WAS HELD AS OUTSIDE T HE SCOPE OF FEES FOR ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 7 TECHNICAL SERVICES. THUS, THE EXPRESSION 'TECHNICAL SERVICES' WOULD HAVE REFERENCE TO ONLY TECHNICAL SERVICES RENDERED BY A HUMAN AND THEREBY IT WOULD NOT INCLUDE ANY SERVICE PROVIDED BY MACHINES OR ROBOTS. THE ASSESSING OFFICER FURTHER TREATS THE AMOUNT P AID FOR INTERNET SERVER CHARGES AS RENTAL IN NATURE. HOWEVER RENT IS DEFINE D U/S 194I AS FOLLOWS: ' RENT ' MEANS ANY PAYMENT BY WHATEVER NAME CALLED, UNDER ANY LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR T HE USE OF ANY- LAND; OR BUILDING(INCLUDING FACTORY BUILDING); OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING); OR MACHINERY; OR PLANT; OR EQUIPMENTS; OR FURNITURE; OR FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE. FROM THE ABOVE DEFINITION, IT IS CLEAR THAT UNDER N O CIRCUMSTANCES INTERNET SERVER CHARGES WILL FALL WITHIN THE DEFINITION OF R ENT. SECTION 194I PROVIDES FOR TAX DEDUCTION AT SOURCE A T 5% ON PAYMENTS EXCEEDING RS.20,000 FOR FEES FOR PROFESSIONAL AND TECHNICAL S ERVICES. PROFESSIONAL SERVICES ARE DEFINED .TO INCLUDE LEGAL, MEDICAL, ENGINEERING, AR CHITECTURAL, ACCOUNTANCY, TECHNICAL CONSULTANCY, INTERIOR DECORATION, ADVERTISING OR AN Y OTHER NOTIFIED PROFESSION. TECHNICAL SERVICES ARE GIVEN THE SAME MEANING AS UN DER THE EXPLANATION TO SECTION 9(1)(VII), WHICH COMPRISES MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES, BUT EXCLUDING PAYMENTS FOR CONSTRUCTION, ASSEMBLY, MINI NG OR LIKE PRODUCTS AND WHAT IS ASSESSABLE UNDER THE HEAD ' SALARIES '. THE HIGH COURT IN SKYCELL COMMUNICATIONS LTD. V. DEPUTY CIT [2001] 251 ITR 53 (MAD) FOUND TH AT THE PROVISION OF CELLULAR MOBILE TELEPHONE FACILITY TO SUBSCRIBERS CANNOT BE TREATED AS TECHNICAL SERVICE AND THAT IT DOES NOT FALL UNDER ANY OTHER LISTED SERVICES NOR H AS IT BEEN NOTIFIED. MERELY BECAUSE THE SERVICE IS LINKED TO SCIENCE AND TECHNOLOGY AS ARE FOUND IN MOST OF THE GADGETS NOW IN USE IN EVERYDAY LIFE, EVERY SUCH INSTRUMENT OR GADGET TO MAKE LIFE EASIER CANNOT BE TREATED AS INVOLVING PROVISION OF TECHNIC AL SERVICE. PROVISION OF AGENCY SERVICE, RAILWAY OR AIR SERVICE ALSO INVOLVES HIGH TECHNOLOGY, BUT SUCH SERVICE DOES NOT BECOME TECHNICAL SERVICE. SO IS THE SERVICE MAD E AVAILABLE BY WAY OF SUPPLY OF ELECTRICITY, SATELLITE TELEPHONE AND VARIOUS OTHER SOPHISTICATED EQUIPMENTS. MERE SERVICE OR COLLECTION OF A FEE DOES NOT BECOME A TE CHNICAL SERVICE. IT WAS IN THIS CONTEXT, SECTION 194J WAS HELD INAPPLICABLE. HENCE EXPENSES INCURRED IN CONNECTION WITH INTERNET ACCESS CHARGES AND INTERNET SERVER CHARGES SHALL BE ALLOWED AS DEDUCTION WHILE COMPUTING BUSINESS INCOME, AS THESE EXPENSES DO NOT REQUIRE DEDUCTION OF TAX AS P ER LAW AND THEREFORE THE APPELLANT SUCCEEDS ON THIS GROUND AND IT IS ALLOWED . 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS REITERATING BOTH THE PARTIES RESPECTIVE STANDS AGAI NST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE. LEARNED DEPARTMENTAL REPRESE NTATIVES CASE BEFORE US IS THAT THE SERVICES IN QUESTION ARE TECHNICAL I N NATURE OR RENTAL PAYMENTS; AS THE CASE MAY BE REQUIRING TDS DEDUCTION UNDER CH APTER XVII OF THE ACT. WE FIND NO FORCE IN EITHER OF THE TWO PLEAS. WE FIR ST COME TO RENT ASPECT. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO INDICA TE ANY MATERIAL ON RECORD ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 8 WHICH COULD HIGHLIGHT THE ASSESSEES RELATION WITH ITS PAYEE TO BE INVOLVING LANDLORD TENANT DYNAMICS FOLLOWED BY PAYMENT. THERE IS NO EVIDENCE IN THE CASE FILE THAT THE ASSESSEE HAS MADE THE IMPUGNED P AYMENTS IN FURTHER AND TO AN AGREEMENT OR ARRANGEMENT SPECIFIED U/S. 194-I EX PLANATION (1)(A-H) IN THE ACT. SO FAR AS LATTER PART ASPECT OF FEE FOR TECHNI CAL SERVICES ARE CONCERNED, ADMITTED FACTUAL POSITION IS THAT THERE IS NO HUMAN ELEMENT AT ALL INVOLVED IN ASSESSEE AVAILING ITS PAYEES INTERNET AND SERVER AC CESS BY PAYING THE SUM OR CREDITED AS PER HON'BLE DELHI HIGH COURTS DECISION IN CIT VS. BHARTI CELLULAR LIMITED (2009) 319 ITR 139 (DEL) (SUPRA) DECLINING REVENUES IDENTICAL ARGUMENT TO THIS EFFECT. WE THUS SEE NO REASONS TO INTERFERE WITH CIT(A)S FINDINGS UNDER CHALLENGE HOLDING ASSESSEES PAYMENT S TO BE NEITHER RENT NOR FEE FOR TECHNICAL SERVICES. 8. THIS LEAVES US WITH REVENUES THIRD AND LAST GRI EVANCE SEEKING TO REVIVE ASSESSING OFFICERS ACTION TREATING ASSESSEES PAYM ENTS OF 12,00,000/- AS COMPENSATION FOR TERMINATING LEASE AGREEMENT AS PER ARBITRATION AWARD. THE ASSESSING AUTHORITY WAS FAIR ENOUGH IN NOT DISPUTIN G GENUINENESS OF ASSESSEES CLAIM. ITS ONLY CASE WAS THAT THE ASSESS EES EXPENDITURE IN QUESTION IS RELATABLE TO ACQUISITION OF OFFICE LEAS E TO BE TREATED AS CAPITAL EXPENDITURE. THE CIT(A) QUOTES CASE LAW ANJANI KUMA R CO. LTD 124 TAXMAN 429 AND CIT VS. PRAFULLA KUMAR MALLICK (1969) 73 IT R 119 TO INTER ALIA CONCLUDE THAT THE IMPUGNED EXPENDITURE IS REVENUE I N NATURE SINCE IT DID NOT GIVE ANY ENDURING BENEFITS TO THE TAXPAYER, IS INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THAT IT IS IN THE N ATURE OF COMPENSATION FOR PREMATURE TERMINATION OF LEASE AGREEMENT TO AVOID A NY FUTURE COMMERCIAL INCONVENIENCE. WE FIND NO SUBSTANCE IN REVENUES IN STANT LAST SUBSTANTIAL GRIEVANCE AS WELL. LEARNED DEPARTMENTAL REPRESENTAT IVE DOES NOT TO REFER ANY MATERIAL ON RECORD POINTING OUT ANY ENDURING ADVANT AGE TO ASSESSEE IN LOSS OF PAY COMPENSATION IN ISSUE. THE ASSESSEE APPEARS TO HAVE FOUND IT COMMERCIALLY EXPEDIENT NOT TO GO AHEAD WITH THE LEA SE IN QUESTION FOR ITA NO.52/KOL/2017 A.Y. 2009-10 DCIT CIR-11(1), KOL. VS. M/S ALL INDIA TE CHNOLOGIES LTD. PAGE 9 MINIMIZING ITS RUNNING COST WHICH COULD HAVE OTHERW ISE ALLOWABLE AS REVENUE EXPENDITURE. WE THEREFORE CONFIRM THE CIT(A)S FIND INGS UNDER CHALLENGE QUA THIS THIRD ISSUE AS WELL. 9. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 11/ 07/2018 SD/- SD/- ( %) (' %) (M.BALAGANESH) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 11 / 07 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-11(1), P-7, CHOWRINGHEE SQU ARE, KOLKATA-69 2. /RESPONDENT-M/S ALL INDIA TECHNOLOGIES LTD., 5, LOW ER ROWDON STREET, KOLKATA-20 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,