M/s. Tyre Plaza, Jammu V. The Income tax Officer, Jammu

ITA 546/ASR/2013

• Counselvise Citation: 54620914 RSA 2013
• Duration Of Justice: 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: S K BANSAL
• Keywords: Depreciation; Double taxation relief; Rule of consistency; Question of law; Non-deduction of tax; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 546(ASR)/2013 ASSESSMENT YEAR: 2008-09 PAN: AAEFT4364L M/S TYRE PLAZA VS. INCOME TAX OFFICER, BEEN HOSPITAL, JAMMU WARD 2(3), JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.K. BANSAL, ADVOCATE RESPONDENT BY: SH. AMRIK CHAND, DR DATE OF HEARING: 20.09.2013 DATE OF PRONOUNCEMENT: 26.09.2013 ORDER 1) THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 28.06.2013 PASSED BY LEARNED CIT(A), JA MMU, FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS: I. THAT THE ORDER UNDER APPEAL IS AGAINST THE LAW AND FACTS OF THE CASE. II. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A), JAMMU, HAS ERRED BOTH ON LAW AND FACTS IN SUSTAININ G THE ADDITION OF RS. 1,05,000/- FOR NON-DEDUCTION OF TAX AT SOURC E U/S 40(A)(IA) FOR INTERIOR AND EXTERIOR DECORATION OF THE BUSINES S PREMISES AS IT IS A CAPITAL EXPENDITURE. 2 III. THAT THE LEARNED CIT(A) HAS ERRED IN LAW IN HOLDING THAT THE SECTION 40(A)(IA) IS APPLICABLE TO THE APPELLANT WHEN IN FA CT THE SECTION 40(A)(IA) IS APPLICABLE ON THE REVENUE EXPENSES AND NOT ON THE CAPITAL EXPENSES. THE LEARNED CIT(A) IN SPITE OF AD MITTING THE FACT THAT THE APPELLANT HAS INCURRED CAPITAL EXPENSES FO R INTERIOR AND EXTERIOR DECORATION OF THE BUSINESS PREMISES STILL CONFIRMED THE ADDITION OF RS. 1,05,000.00 FOR NON-DEDUCTION OF TA X AT SOURCE WHICH IS NOT SUSTAINABLE IN LAW. IV. THAT EVEN ASSUMING BUT NOT ADMITTING THAT DEDUCTION OF TAX AT SHOULD HAVE BEEN MADE EVEN THEN IT IS SUBMITTED THA T AS THE EXPENDITURE IN QUESTION WAS INCURRED DURING THE YEA R AND THERE WAS NOTHING WHICH REMAINED PAYABLE ON THE PRINCIPLE THA T ONLY ON EXPENDITURE WHICH REMAINS PAYABLE DEDUCTION OF TAX IS TO BE MADE. THE PROVISION OF SECTION 40(A)(IA) ARE NOT APPLICAB LE IN VIEW OF JUDGMENT OF HIGH COURT OF JAMMU & KASHMIR IN CIT VS . JAMKASH VEHICLEADES PVT. LTD. THE ADDITION THEREFORE SUSTAI NED IS ILLEGAL. V. ANY OTHER GROUND WHICH MAY BE URGED AND ALLOWED AT THE TIME OF HEARING. 2) THE FACTS IN BRIEF RELATING TO THE ISSUE IN DISP UTE ARE THAT THE ASSESSEE, IN THE STATUS OF FIRM, FILED ITS RETURN O F INCOME ON 29.09.2008 AT A LOSS OF RS. 1,33,530/- FOR THE ASSESSMENT YEAR IN DISPUTE. THE SAME WAS PROCESSED ON THE RETURNED INCOME AND LATER ON THE C ASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY ON CASS. ASSESSING OFFI CER ISSUED NOTICE TO THE ASSESSEE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). NOTICE UNDER SECTION 142(1) OF THE ACT ALONG WITH A DETAILED QUESTIONNAIRE WAS ALSO ISSUED BY THE ASSESSING OFFI CER TO THE ASSESSEE. IN RESPONSE TO THE SAME, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE 3 APPEARED AND FURNISHED REQUIRED DETAILS AND INFORMA TIONS, WHICH HAVE BEEN EXAMINED BY THE ASSESSING OFFICER. 3) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS INCURRED EXPE NSES OF RS. 1,05,000/- FOR ROOM INTERIOR AND EXTERIOR DECORATION BUT ON TH E SAID CONTRACT PAYMENT NO TDS WAS FOUND DEDUCTED. THE ASSESSING OFFICER AS KED THE ASSESSEE TO EXPLAIN ABOUT THE EXPENSES BUT THE ASSESSEES COUNS EL AGREED FOR THE DISALLOWANCES OF THESE EXPENSES AND THE ASSESSING O FFICER ADDED THE SAME TO THE RETURNED INCOME. SOME OF THE BILLS WERE NOT VOUCHED FOR THE EXPENSES CLAIMED BY THE ASSESSEE LIKE WORKSHOP INAU GURATION AT RS. 27,219/-, CONSUMABLES AT RS. 54,721/-, REPAIR AND M AINTENANCE AT RS. 42,022/-, THEREFORE, THE ASSESSING OFFICER DISALLOW ED THE EXPENSES OF RS. 28,530/- AND ADDED IT TO THE INCOME RETURNED AND CO MPLETED THE ASSESSMENT ON 27.10.2010 UNDER SECTION 143(3) OF TH E ACT. 4) AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE AP PEAL BEFORE THE LEARNED FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNE D ORDER DATED 28.06.2013, PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE BY DELETING THE ADDITION OF RS. 28,530/- MADE BY THE ASSESSING OFFICER AND CONFIRMED THE ADDITION OF RS. 1,05,000/- ON ACCOUNT OF NON-DEDUCTION OF 4 TDS ON INTERIOR AND EXTERIOR DECORATION. NOW, BEING AGGRIEVED BY THE IMPUGNED ORDER, THE ASSESSEE FILED THE PRESENT APPE AL. 5) AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE FILED THE SMALL PAPER BOOK CONTAINING PAGE NOS. 1 TO 22, IN W HICH HE HAS ATTACHED THE WRITTEN SUBMISSIONS; COPY OF ACCOUNT OF M/S REE MA INTERIOR AND EXTERIOR; COPY OF JUDGMENT OF I.T.A.T., D BENCH- AHMEDABAD IN THE CASE OF METRO AUTOMOBILE, VAPI V/S ASSISTANT COMMIS SION OF INCOME TAX; AND COPY OF JUDGMENT OF HON'BLE HIGH COURT OF JAMMU & KASHMIR IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S J AMKASH VEHICLEADES. HE MAINLY EMPHASIZED THAT THE ISSUE RE GARDING CAPITALIZATION OF RENOVATION EXPENSES AND REGARDING ADDITION ON THE ACCOUNT THAT TDS HAS NOT BEEN DEDUCTED IS NO LONGER RES INTEGRA AS THIS ISSUE SPECIFICALLY AROSE BEFORE THE I.T.A.T. D BE NCH, AHMEDABAD IN THE CASE OF M/S METRO AUTOMOBILE, VAPI VS. ASSISTANT CO MMISSIONER OF INCOME TAX AND THE TRIBUNAL HAS HELD THAT THE ADDIT ION ON ACCOUNT OF NON-DEDUCTION OF TDS IS NOT WARRANTED BECAUSE THES E EXPENSES WHICH IS TREATED AS CAPITAL EXPENDITURE UNDER SECTION 40(A)( IA) OF THE ACT, IS NOT APPLICABLE. HE STATED THAT THE ISSUE IN DISPUTE HAS ALREADY BEEN ADJUDICATED AND DECIDED IN FAVOUR OF THE ASSESSEE B Y THE I.T.A.T., D BENCH, AHMEDABAD IN THE CASE OF M/S METRO AUTOMOBIL E (SUPRA). HE HAS 5 ATTACHED THE COPY OF THE DECISIONS OF I.T.A.T., D BENCH, AHMEDABAD, AT PAGE 6 TO 17 OF THE PAPER BOOK AS WELL AS THE DECIS ION OF I.T.A.T., DELHI G BENCH IN THE CASE OF DEMAG PVT. LTD. VS. DCIT PASSED IN I.T.A. NO. 3636/DEL/2008, DATED 29.01.2010. AT THE END, HE REQ UESTED THAT AS THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISIONS OF I.T.A.T., D BENCH, AHMEDABAD AND I.T .A.T., DELHI G BENCH (SUPRA), THEREFORE THE PRESENT APPEAL FILED B Y THE ASSESSEE MAY BE ALLOWED AND THE ADDITION IN DISPUTE MAY BE DELETED. 6) ON THE CONTRARY, LEARNED DR RELIED UPON THE ORDE R PASSED BY THE LEARNED FIRST APPELLATE AUTHORITY. 7) I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE LEVANT RECORDS AVAILABLE WITH ME, ESPECIALLY THE WRITTEN SUBMISSIO N FILED BY LEARNED COUNSEL FOR THE ASSESSEE ALONG WITH THE COPY OF ACC OUNT OF M/S REEMA INTERIOR AND EXTERIOR AS WELL AS THE DECISIONS OF I .T.A.T. D BENCH, AHMEDABAD AND I.T.A.T. G BENCH, DELHI ATTACHED WI TH THE PAPER-BOOK. I AM OF THE VIEW THAT THE ISSUE IN DISPUTE HAS ALRE ADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY I.T.A.T. D BENCH, AHMED ABAD IN THE CASE OF M/S METRO AUTOMOBILE, VAPI VS. ASSISTANT COMMISSION ER OF INCOME TAX, PASSED IN I.T.A. NO. 3999/AHD/2008, DATED 23.0 7.2010 AND I.T.A.T., DELHI G BENCH IN THE CASE OF DEMAG PVT. LTD. VS. DCIT 6 PASSED IN I.T.A. NO. 3636/DEL/2008, DATED 29.01.201 0. THE RELEVANT PORTION OF THE DECISION OF I.T.A.T. D BENCH, AHME DABAD IN THE CASE OF M/S METRO AUTOMOBILE (SUPRA) IS REPRODUCED AS UNDER : 8. GROUND NO. 2 OF THIS APPEAL IS AGAINST DISALLOW ANCE OF RS. 3,05,641/- AND RS. 21,221/- INCURRED BY THE ASSESSE E FOR RENOVATION OF BUSINESS PREMISE, SHOP DECORATION AND TELEPHONE TEL ECOMMUNICATION IN/AT THE EXISTING PLACE OF BUSINESS, AS CAPITAL E XPENDITURE INSTEAD OF REVENUE EXPENDITURE. WITH REGARD TO THE DISALLOWANC E, THE LEARNED COUNSEL OF THE ASSESSEE POINTED OUT THAT THE ASSESS EE HAS NO OBJECTION WITH REGARD TO TREAT THE EXPENDITURE IN QUESTION AS CAPITAL EXPENSES. HOWEVER, HE POINTED OUT THAT THE ASSESSING OFFICER INVOKED THE PROVISIONS CONTAINED IN SECTION 40(A)(IA) OF THE AC T FOR CAPITAL EXPENSES IS NOT IN ORDER AS SECTION 40(A)(IA) TALKS FOR EXPENSES DEBITED AND CLAIM IN PROFIT & LOSS A/C. THEREFORE, HE POINT ED OUT THAT THE EXPENDITURE WHICH IS TREATED AS CAPITAL EXPENDITURE , UNDER SECTION 40(A)(IA) IS NOT APPLICABLE. THIS ISSUE IS SQUARELY COVERED BY THE DECISION DATED 29.01.2010 OF I.T.A.T., G BENCH, D ELHI IN THE CASE OF SMS DEMAG PVT. LTD. VS. DCIT IN I.T.A. NO. 3636/DEL /2008. THE LEARNED DR APPEARING ON BEHALF OF THE REVENUE COULD NOT CONTROVERT THIS CONTENTION OF THE ASSESSEE. 9. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF I.T. A.T., DELHI BENCH, DELHI IN THE CASE OF SMS DEMAG PVT. LTD. (SU PRA) RELIED BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN THAT DECISION, IT HAS BEEN HELD THAT THE CLAIM OF THE ASSESSEE TOWARDS DEPRECIATION ON A SSETS CAPITALIZED CANNOT BE DISALLOWED ON THE GROUND THAT NO TAX WAS DEDUCTED AT SOURCE. THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE FOR CLAIM OF DEDUCTION UNDER SECTION 32 OF THE ACT. WE, THEREFORE, FOLLOWING THE SAID DECISION OF I.T.A.T., DELHI (SUP RA) DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION ON ASSE TS CAPITALIZED IN ACCORDANCE WITH LAW. RESULTANTLY, THIS GROUND OF AP PEAL IS ALLOWED. 8) THE I.T.A.T. D BENCH, AHMEDABAD HAS FOLLOWED T HE DECISION OF I.T.A.T. G BENCH, DELHI IN THE CASE OF DEMAG PVT. LTD. VS. DCIT 7 PASSED IN I.T.A. NO. 3636/DEL/2008, DATED 29.01.201 0, REPORTED IN (2010) 132 TTJ (DEL) 498 AND DECIDED THE ISSUE IN DISPUTE IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE SAID ORDER IS REPRODUCED AS UNDER: 3. THE NEXT ISSUE FOR CONSIDERATION RELATES TO UPHO LDING THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS. 54,74 ,602. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE M/S SMS DEMAG (P) LTD. IS A SUBSIDIARY OF M/S SMA, DEMAG AG GERMANY. M/S S MS DEMAG INDIA (P) LTD. IS ENGAGED IN THE BUSINESS OF SUPPLY AS ASSEMBLIES/SUB- ASSEMBLIES OF METALLURGICAL EQUIPMENT, PROFESSION O F CONSULTATION AND TECHNICAL SERVICE IN DESIGN AND ENGINEERING TO FERR OUS AND NON FERROUS SECTORS. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE AO NOTED THAT AN INFORMATION WAS RECEIVED FROM ADDL. DIRECTO R OF IT, INTERNATIONAL TAXATION, RANGE-2 THAT ASSESSEE COMPA NY HAD MADE PAYMENT OF ROYALTY. AS PER THE ORDER UNDER S. 201/2 01(1A) OF THE ACT PASSED BY THE ITO, TDS-1(2) (INTERNATIONAL TAXATION ), THE ASSESSEE MADE SAP MAINTENANCE EXPENSES OF RS. 1,82,48,673 TO THE PARENT COMPANY M/S SMA DEMAG AG GERMANY WITHOUT DEDUCTING TAX IN INDIA DURING THE FINANCIAL YEAR 1999-2000 RELEVANT TO ASST. YR. 2000- 01. THE AO ISSUED SHOW-CAUSE NOTICE AS TO WHY THE P AYMENT OF RS. 1,82,48,673 SHOULD NOT BE DISALLOWED UNDER S. 40(A) (I). IT WAS SUBMITTED BY THE ASSESSEE THAT THE AMOUNT OF RS. 1, 82,48,673 WAS NOT CHARGED TO P&L A/C RELEVANT TO ASSESSMENT YEAR. THE AMOUNT REPRESENTED THE CHARGES PAYABLE TO SAP INSTALLATION CHARGES WHICH WERE CAPITALIZED IN THE BOOKS OF ACCOUNT UNDER THE HEAD 'COMPUTER' IN THE RELEVANT ASSESSMENT YEAR. THE AMOUNT REFERRE D TO IN THE NOTICE FORMED PART OF THE TOTAL ADDITION UNDER THE HEAD 'C OMPUTER'. THE ASSESSEE FILED THE COPY OF AUDITED ACCOUNTS SHO WING THE ADDITIONS TO THE COMPUTER AMOUNTING TO RS. 4,32,23,878 WHICH INCLUDED THE AMOUNT OF RS. 1,82,48,673. SINCE THE AMOUNT WAS NOT CHARGED TO P&L A/C, THE PROVISIONS OF S. 40(A)(I) HAVE NO APPLICAB ILITY. HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE AO R ELYING ON PROVISIONS OF S. 40(A)(I) UNDER WHICH DEDUCTION WIL L NOT BE ALLOWABLE UNLESS TAX IS DEDUCTED AT SOURCE. THE AO ALSO NOTED THAT ASSESSEE 8 COMPANY HAD CHARGED DEPRECIATION @ 60 PER CENT UNDE R S. 32 OF THE ACT ON AMOUNT OF RS. 1,82,48,673 WHICH WAS PAID TO ITS PARENT COMPANY. THE AO RESTRICTED THE ALLOWANCE OF DEDUCTI ON TO THE EXTENT OF 50 PER CENT ALLOWABLE ON COMPUTERS WHICH RESULTE D IN ADDITION OF RS. 54,74,602. 4. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THA T THE EXPENDITURE OF RS. 1,82,48,673 WAS INCURRED ON INSTALLATION/MAINTE NANCE OF SOFTWARE AND CONSIDERING THE NATURE OF COST, THE ASSESSEE HA D CHOSEN TO CAPITALIZE THE SAID AMOUNT IN THE BOOKS OF ACCOUNT. THE AMOUNT WAS CAPITALIZED IN THE RELEVANT ASSESSMENT YEAR. HOWEVE R, THE REMITTANCE FOR THE SAME WAS MADE ONLY IN 2006. IT WAS ALSO SUB MITTED THAT THE PAYMENT WAS NOT IN THE NATURE OF ROYALTY FOR TECHNI CAL SERVICES. IT WAS ALSO ADMITTED THAT THE SOFTWARE WAS INSTALLED AND U SED AND PAYMENT FOR THE SAME WAS MADE IN 2006 AND IT WAS NOT CHARGE ABLE TO TAX IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE PLACED RELIA NCE ON THE DECISION OF THE TRIBUNAL IN THE CASE OF HERBALIFE I NTERNATIONAL INDIA (P) LTD. VS. ASSTT. CIT (2006) 103 TTJ (DEL) 78 : ( 2006) 101 ITD 450 (DEL). THE LEARNED CIT(A), HOWEVER, NOTED THAT NOTH ING HAD BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE SAID PAYMEN T WAS NOT IN THE NATURE OF INTEREST/ROYALTY/FEE FOR TECHNICAL SERVIC ES. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE SAID AMOUNT OF RS. 1,82,48,673 WAS AN EXPENDITURE TOWARDS INSTALLATION/MAINTENANCE OF SOFTWARE NAMED SAP. LEARNED CIT(A) RELIED ON THE DECISION OF HONB LE MADRAS HIGH COURT IN THE CASE OF C.R. CORERA & BROTHERS VS. CIT (1963) 49 ITR 188 (MAD) WHEREIN IT HAS BEEN HELD THAT IT WAS NOT LARGENESS OF THE PAYMENTS WHICH WAS CONSIDERED FOR CAPITALIZING. IT WAS THE ACTUAL NATURE OF PAYMENT WHICH WAS TO BE EXAMINED. SINCE T HE EXPENDITURE WAS INCURRED TOWARDS INSTALLATION OF SOFTWARE, NAME LY, SAP, THE SAID PAYMENT WAS IN THE NATURE OF ROYALTY/FEE FOR TECHNI CAL SERVICES/INTEREST. THIS BEING SO, THERE WAS NO ISSU E LEFT FOR ITS BEING CAPITALIZED AND SUBSEQUENT CLAIM OF DEPRECIATION ON THE SAME. SHE ACCORDINGLY HELD THAT THE PAYMENT WAS IN THE NATURE OF ROYALTY/TECHNICAL SERVICES FOR THE SAID SOFTWARE. S HE ALSO UPHELD THE DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSE E. 5. BEFORE US, THE LEARNED AUTHORISED REPRESENTATI VE OF THE ASSESSEE SUBMITTED THAT THE PAYMENT MADE IS NOT IN THE NATUR E OF ROYALTY OR FEE FOR TECHNICAL SERVICES. ACCORDING TO HIM, THE EXPEN DITURE WAS INCURRED 9 TOWARDS INSTALLATION OF A SOFTWARE NAMED SAP FOR WH ICH PAYMENT WAS MADE BY THE ASSESSEE. IT WAS, THEREFORE, SUBMITTED THAT SINCE THE PAYMENT WAS TOWARDS PURCHASE OF SOFTWARE IT COULD N OT BE TREATED AS IN THE NATURE OF ROYALTY OR FEE FOR TECHNICAL SERVI CES. LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE FURTHER S UBMITTED THAT AS PER ART. 24 OF DTAA ENTERED INTO BETWEEN REPUBLIC O F INDIA AND FEDERAL REPUBLIC OF GERMANY, THE NATIONALS OF CONTR ACTING STATE SHALL NOT BE SUBJECT IN OTHER CONTRACTING STATE TO ANY TA XATION OR ANY REQUIREMENT CONNECTED THEREWITH WHICH IS MORE BURDE NSOME THAN THE TAXATION AND CONNECTED REQUIREMENT TO WHICH NATIONA LS OF OTHER STATE IN THE SAME CIRCUMSTANCES AND UNDER THE SAME CONDIT IONS ARE OR MAY BE SUBJECTED TO. LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE ALSO CLARIFIED THAT EVEN IF IT IS ASSUMED FOR ARGUM ENT SAKE THAT THE PAYMENT MADE TO PARENT COMPANY WAS IN THE NATURE OF ROYALTY OR FEE FOR TECHNICAL SERVICES, THE SAME WILL NOT BE LIABLE FOR TAXATION UNDER NON-DISCRIMINATORY CLAUSE CONTAINED IN DTAA WITH RE PUBLIC OF GERMANY. ACCORDING TO HIM, THE ISSUE IS COVERED BY THE DECISION OF TRIBUNAL, DELHI BENCH IN THE CASE OF HNS INDIA VSAT INC. VS. DY. DIRECTOR OF IT (2005) 96 TTJ (DEL) 486 : (2005) 95 ITD 157 (DEL). IT WAS ALSO SUBMITTED THAT THE ISSUE IS ALSO COVERED B Y THE DECISION OF TRIBUNAL IN THE CASE OF MILLENNIUM INFOCOM TECHNOLO GIES LTD. VS. ASSTT. CIT (2008) 117 TTJ (DEL) 456 : (2008) 9 DTR (DEL)(TRIB) 538 : (2009) 117 ITD 114 (DEL). 6. ON THE OTHER HAND, THE LEARNED SENIOR DEPARTMEN TAL REPRESENTATIVE SUBMITTED THAT MAINTENANCE CHARGES F OR SOFTWARE SAP ARE IN THE NATURE OF ROYALTY AND, THEREFORE, FOR DE DUCTION UNDER S. 40(A)(I) THE TAX AT SOURCE HAS TO BE MADE. SHE PLAC ED RELIANCE ON SEVERAL DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATION OF A.P. LTD. & ANR. VS. CIT (1999) 155 CTR (SC) 489 : (1999) 239 ITR 587 (SC). IT WAS ALSO SUBMITTED THAT NOTHING HAS BEEN BROUGHT ON RECORD O R SUBMITTED TO ESTABLISH THAT THE SAID PAYMENT WAS NOT IN THE NATU RE OF INTEREST/ROYALTY/FEE FOR TECHNICAL SERVICES. SHE PL ACED RELIANCE ON THE DECISION OF TRIBUNAL DELHI BENCH IN THE CASE OF HNS INDIA VSAT INC. VS. DY. DIRECTOR OF IT (SUPRA) FOR THE PROPOSITION THAT WHERE ASSESSEE HAS NOT SUPPLIED RELEVANT TECHNICAL AGREEMENT BEFOR E THE LOWER AUTHORITIES TO STATE THAT THE SAID PAYMENTS TO ITS PARENT COMPANY WAS OUTSIDE THE PURVIEW OF ROYALTY OR FEE FOR TECHNICAL SERVICES. SINCE THE 10 ASSESSEE COMPANY HAS NOT BEEN IN A POSITION TO SUBM IT THE COPY OF AGREEMENT BETWEEN SUBCONTRACTOR AND HAS ALSO NOT GI VEN THE BASIS OF AMOUNT PAID TO THE CONTRACTOR, SUCH SERVICES WERE C HARGEABLE TO TAX IN INDIA AS THE AMOUNT HAS BEEN PAID ON GENUINE BASIS AND THE PROVISIONS OF S. 195 WERE CLEARLY ATTRACTED. IT HAS ALSO BEEN SUBMITTED THAT ASSESSEE HAS MADE PAYMENT IN THE YEAR UNDER CO NSIDERATION TO ITS PARENT COMPANY WHICH IS AN ADMITTED FACT. SUBSEQUEN T TO ITS PAYMENT THE TREATMENT AS CAPITAL EXPENDITURE HAS NO NEXUS T O THE DEDUCTION OF TAX ON SAID PAYMENTS TO THE PAYEE AND BURDEN TO DED UCT TDS IS NOT DETERMINED IN THE NATURE OF OUTGO WHETHER IT WAS CA PITAL OR REVENUE. FURTHER, IT WAS ALSO SUBMITTED THAT THE PAYMENT WAS ROYALTY AND, THEREFORE, PROVISIONS OF S. 40(A)(I) WERE APPLICABL E. LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE RELYING ON THE DECISION OF TRIBUNAL IN THE CASE OF CREDIT LLYONNAIS VS. DY. CIT (2005) 94 TTJ (MUMBAI) 1074 : (2005) TIOL 102 TRIBUNAL MM SUBMITTED THAT I N APPLYING THE NONDISCRIMINATORY CLAUSE WHAT IS REALLY TO BE SEEN IS WHETHER TWO PERSONS WERE RESIDENTS OF THE SAME STATE AND WERE B EING TREATED DIFFERENTLY. HENCE ASSESSEES CASE DID NOT FALL IN THE SCOPE OF NONDISCRIMINATORY CLAUSE. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE FROM RECORD. FROM THE FACTS STATED ABOVE, IT IS CLEAR THAT THE ASSESSEE HAD MADE PAYMENT FOR THE PURCHASE OF SOFTW ARE NAMED AS SAP. THE ASSESSEE HAD CAPITALIZED THE COST OF INSTA LLATION OF SAP IN THE BOOKS OF ACCOUNT AND HAS CLAIMED DEPRECIATION A S APPLICABLE TO COMPUTERS. THE ASSESSEE WHILE MAKING PAYMENT IN 200 6 TO THE PARENT COMPANY HAS NOT DEDUCTED TAX AT SOURCE. THE AO HAD DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEPRECIATION ON THE GROUN D THAT TAX WAS NOT DEDUCTED UNDER S. 40(A)(I). UNDER S. 40(A)(I) ANY I NTEREST (NOT BEING INTEREST ON LOAN ISSUED FOR PUBLIC BEFORE 1 ST APRIL, 1938), ROYALTY FEE FOR TECHNICAL SERVICES OR SUM CHARGEABLE UNDER THIS ACT, WHICH IS PAYABLE OUTSIDE INDIA OR INSIDE INDIA TO A NON-RESI DENT NOT BEING A COMPANY OR TO A FOREIGN COMPANY ON WHICH TAX IS DED UCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCT ION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF TIME PRESCRIBED UNDER SUB-S. (1) OF S. 20 0 SHALL NOT BE ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME CHA RGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON'. FROM THE LANGUAGE OF S. 40(A)(I), IT IS CLEAR THAT PAYMENT M ADE OUTSIDE INDIA 11 SHOULD BE IN THE NATURE OF INTEREST, ROYALTY, FEE F OR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THE ACT. THE AO HAS S IMPLY REOPENED THE ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED FROM ADDL. DIRECTOR OF IT (INTERNATIONAL TAXATION) RANGE-2, NE W DELHI AND DISALLOWED DEPRECIATION ON ASSETS CAPITALIZED IN TH E BOOKS OF ACCOUNT. THE LEARNED CIT(A) HAS ALSO NOT EXAMINED THE NATURE OF THE EXPENDITURE INCURRED TOWARDS INSTALLATION OF SOFTWA RE NAMED SAP. SHE HAS TREATED THE PAYMENT WITHOUT ANY DISCUSSION IN THE NATURE OF ROYALTY/FEE FOR TECHNICAL SERVICES OR INTEREST. ACC ORDING TO HER, THE PAYMENT MADE MAY FALL IN ANY OF THE CATEGORIES. APP ARENTLY, THE PAYMENT MADE TOWARDS INSTALLATION OF SOFTWARE IS NO T IN THE NATURE OF INTEREST. THE ASSESSEE HAD MADE PAYMENT TO PARENT C OMPANY FOR THE PURPOSE OF SOFTWARE. THE PAYMENT MADE FOR PURCHASE OF SOFTWARE CANNOT BE TREATED EITHER AS ROYALTY OR EVEN FOR TEC HNICAL SERVICES. THEREFORE, THE PAYMENT FOR SAP SOFTWARE CANNOT BE C HARGED TO TAX IN INDIA AS INTEREST OR ROYALTY OR FEE FOR TECHNICAL S ERVICES. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS ALSO CONTENDED THAT EVEN IF THE INCOME IS CHARGEABLE TO TAX IN INDIA BE CAUSE OF NONDISCRIMINATION CL. 24 (1) OF DTAA BETWEEN REPUBL IC OF INDIA AND FEDERAL REPUBLIC OF GERMANY, THE NATIONALS OF A CON TRACTING STATE SHALL NOT BE SUBJECTED IN OTHER CONTRACTING STATE T O ANY TAXATION OR ANY REQUIREMENT CONNECTED THEREWITH WHICH IS MORE B URDENSOME THAN THE TAXATION AND CONNECTED REQUIREMENT TO WHICH NAT IONALS OF THAT OTHER STATE IN THE SAME CIRCUMSTANCES AND UNDER THE SAME CONDITIONS ARE/OR MAY BE SUBJECTED. THIS PROVISION SHALL, NOTW ITHSTANDING THE PROVISIONS OF ART. 1, ALSO APPLY TO THE PERSONS WHO ARE THE RESIDENTS OF ONE OR OF BOTH THE CONTRACTING STATES. IN OUR CONSI DERED OPINION THE PAYMENT MADE FOR ACQUISITION OF AN ASSET WHETHER IT IS A REVENUE EXPENDITURE OR CAPITAL, PROVISIONS OF S. 40(A)(I) O F THE ACT WILL NOT BE APPLICABLE IN CASE OF RESIDENT ASSESSEE FOR ASST. Y R. 2000-01. THEREFORE, AS PER DECISION OF TRIBUNAL IN THE CASE OF MILLENNIUM INFOCOM TECHNOLOGIES LTD. (SUPRA) AND ALSO IN THE C ASE OF HERBALIFE INTERNATIONAL INDIA (P) LTD. VS. ASSTT. CIT (SUPRA) BECAUSE OF NON- DISCRIMINATORY CL. 24(1) OF DTAA BETWEEN INDIA AND GERMANY THE FOREIGN NATIONAL CANNOT BE SUBJECTED TO PROVISIONS OF S. 40(A)(I) OF THE ACT. THEREFORE, THE LEARNED CIT(A) WAS NOT JUSTIFIE D IN HOLDING THAT THE AMOUNT PAID BY THE ASSESSEE FOR ACQUISITION OF COMPUTERS WAS CHARGEABLE TO TAX IN INDIA. ACCORDINGLY, THIS GROUN D OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. 12 9) HON'BLE JURISDICTIONAL HIGH COURT OF JAMMU AND KA SHMIR HAS ALSO DECIDED THE EXACTLY SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF COMMISSION OF INCOME TAX VS. M/S JAMKASH VEHICLE ADES PVT. LTD. PASSED IN I.T.A. NO. 11/2013 ON 20.02.2013, THE SAM E IS REPRODUCED AS UNDER: 1. THE INSTANT APPEAL BY THE REVENUE FILED UNDER SECTI ON 260-A OF THE INCOME TAX ACT, 1961 (FOR BREVITY THE ACT) IS DIREC TED AGAINST ORDER DATED 25.09.2012 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH IN I.T.A. NO. 304(ASR)/2010 IN RESPE CT OF ASSESSMENT YEAR 2006-07. THE REVENUE HAS CLAIMED THAT THE FOLL OWING SUBSTANTIVE QUESTION OF LAW WHETHER THE TRIBUNAL IS RIGHT IN LA W AND IN FACTS IN DELETING THE ADDITIONS MADE UNDER SECTION 40(A)(IA) ON LEASE RENT PAID, ON EXPENSES AND ON ACCOUNT OF INTEREST PAID. 2. THE ASSESSEE-RESPONDENT IS A DEALER OF MARUTI CARS. IT IS ALSO ENGAGED IN REPAIRS, SERVICE OF THE CARS AND OTHER ALLIED MA TTERS. IT HAD FILED ORIGINAL RETURN OF INCOME FOR THE ASSESSMENT YEAR 2 006-07 ON 31.11.2006 WHICH WAS SUBSEQUENTLY REVISED DECLARING AN INCOME OF RS. 21,64,600/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT IN WHICH ADDITIONS WERE MADE DISALLOWING UNDER SECTION 40(A)(IA) RENT PAID ON LEASE, ON EXPENSES AND ON AC COUNT OF INTEREST PAID. 3. ON APPEAL, THE CIT(A), BATHINDA, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE-RESPONDENT AND DELETED THE ADDITION IN RES PECT OF DISALLOWANCE UNDER SECTION 40(A)(IA) MADE ON LEASE RENT OF RS. 15,60,000/- BY HOLDING THAT THE LEASE RENT PAID IS ON ACCOUNT OF PLANT AND MACHINERY AS PER THE MOU AND THERE IS NO REQUIR EMENT UNDER SECTION 194-I TO DEDUCT TAX AT SOURCE ON ANY RENT F OR MACHINERY. IT WAS FURTHER HELD THAT THE EXPENDITURE OF RS. 15,60, 000/- HAS BEEN INCURRED DURING THE YEAR AND THERE WAS NOTHING PAYA BLE. THE CIT(A) 13 FOLLOWED THE PRINCIPLE THAT THE ONLY EXPENDITURE WH ICH REMAINED PAYABLE AND ON WHICH TAX HAS NOT BEEN DEDUCTED AND NOT DEPOSITED WOULD ATTRACT APPLICATION OF PROVISIONS OF SECTION 40(A)(IA) BY FOLLOWING THE JUDGMENT OF I.T.A.T. JAIPUR BENCH IN THE CASE OF M/S JAIPUR VIDYUT VITRAN NIGAM LTD. V. DCIT (2009) 123 TTJ 888 . LIKEWISE, DISALLOWANCE UNDER SECTION 40(A)(IA) MADE ON EXPENSES OF RS. 46,86,912/- WAS ALSO DELETED BY THE CIT(A) BY P LACING RELIANCE ON THE SAME JUDGMENT AND THE SAME PRINCIPLE. 4. FEELING AGGRIEVED THE APPELLANT-DEPARTMENT HAS APPR OACHED THE TRIBUNAL AND THE APPEAL HAS BEEN DISMISSED BY CONFI RMING THE ORDER OF CIT(A). THE TRIBUNAL HAS PLACED RELIANCE ON THE ORDER PASSED BY JAIPUR, HYDERABAD AND VISHAKAPATNAM BENCHES. IN THA T REGARD, RELIANCE HAS BEEN PLACED ON THE ORDER OF THE TRIBUN AL RENDERED IN THE CASE OF VIDYUT VITRAN NIGAM LTD. V. DCIT (2009) 123 TTJ 88 8 AND I.T.A.T., HYDERABAD BENCH IN THE CASE OF M/S TEJA CONSTRUCTIONS V. ACIT IN I.T.A. NO. 30/HYD/2009 , ON THE IDENTICAL ISSUE. LIKEWISE A REFERENCE HAS BEEN INVITED TO THE JUDGMENT OF THE S PECIAL BENCH, VISHAKAPATNAM OF THE TRIBUNAL IN THE CASE OF M/S MERILYN SHIPPING AND TRANSPORTS, VISHAKAPATNAM V. ADDITIONAL COMMISS IONER OF INCOME TAX (I.T.A. NO. 477/VIZ./2008 DECIDED ON 29.03.2012). 5. AT THE HEARING, WE HAVE ASKED LEARNED COUNSEL FOR T HE REVENUE ABOUT THE STATUS OF THE AFORESAID ORDERS PASSED BY VARIOU S BENCHES OF THE TRIBUNAL, IN ORDER TO SATISFY OURSELVES WHETHER THE REVENUE HAS ACCEPTED THE ORDERS OR SUCH ORDERS HAVE BEEN SUBJEC T MATTER OF CHALLENGE IN APPEAL BEFORE THE JURISDICTIONAL HIGH COURTS. THERE IS NO SATISFACTORY ANSWER GIVEN WHICH, IN FACT, LEAD US T O CONCLUDE THAT THE ORDERS OF VARIOUS TRIBUNALS STAND ACCEPTED BY THE R EVENUE. IN SUCH A SITUATION, THE PRINCIPLE OF CONSISTENCY WOULD BE AT TRACTED AS HAS BEEN LAID DOWN IN THE CASES OF RADHA SOAMU SATSANG VS. COMMISSIONER OF INCOME TAX, 193 ITR 321 SC AND BERGER PAINTS INDIA LTD. VS. COMMISSIONER OF INCOME TAX 253 ITR 738 . THEREFORE, WE REGRET OUR INABILITY TO ACCEPT THAT ANY QUESTION OF LAW MUCH L ESS A SUBSTANTIVE QUESTION OF LAW WOULD EMERGE FOR ADMISSION OF THE A PPEAL, PARTICULARLY WHEN THERE WAS HARDLY ANY LOSS OF REVE NUE. ACCORDINGLY, THE APPEAL IS DISMISSED. 14 10) KEEPING IN VIEW THE AFORESAID DISCUSSIONS AND THE DECISIONS RENDERED BY THE I.T.A.T. BENCHES ON THE ISSUE IN DI SPUTE IN FAVOUR OF THE ASSESSEE, SPECIALLY THE JUDGMENT OF THE HON'BLE JUR ISDICTIONAL HIGH COURT OF JAMMU & KASHMIR (SUPRA), IN MY CONSIDERED VIEW, IN SUCH A SITUATION, THE PRINCIPLE OF CONSISTENCY WOULD BE ATTRACTED IN VIEW OF THE LAW LAID DOWN BY HON'BLE SUPREME COURT IN THE CASES OF RADHA SOAMU SATSANG VS. COMMISSIONER OF INCOME TAX, 193 ITR 321 SC AND BERGER PAINTS INDIA LTD. VS. COMMISSIONER OF INCOME TAX 253 ITR 7 38. RESPECTFULLY FOLLOWING THE DECISIONS OF COORDINATE BENCHES, SPEC IALLY THE HON'BLE JURISDICTIONAL HIGH COURT OF JAMMU AND KASHMIR (SUP RA), I ALLOW THE PRESENT APPEAL FILED BY THE ASSESSEE AND DELETE THE ADDITION AMOUNTING TO RS. 1,05,000/- IN RESPECT OF DISALLOWANCE MADE BY T HE REVENUE AUTHORITIES UNDER SECTION 40(A)(IA) OF THE ACT ON A CCOUNT OF EXTERIOR AND INTERIOR DECORATION OF ROOM, WHICH THE ASSESSEE HAS DEBITED AS CAPITAL EXPENDITURE IN ITS PROFIT AND LOSS ACCOUNT. THEREFO RE, THE EXPENDITURE, WHICH IS TREATED AS CAPITAL EXPENDITURE, SECTION 40 (A)(IA) OF THE ACT IS NOT APPLICABLE FOR THE CLAIM OF DEDUCTION AND THERE IS NO REQUIREMENT UNDER SECTION 194-1 TO DEDUCT TAX AT SOURCE ON THESE PAYM ENTS, AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT OF JAMMU AND KASH MIR IN THE AFORESAID CASE. 15 11) IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH SEPTEMBER, 2013 SD/./- (H.S. SIDHU) JUDICIAL MEMBER DATED: 26 TH SEPTEMBER, 2013 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S TYRE PLAZA BEEN HOSPITAL, JAMMU 2. INCOME TAX OFFICER, WARD 2(3), JAMMU 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, I.T.A.T., ASR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.