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2019 (5) TMI 995 - AT - Income TaxAllowable business expenses u/s 37(1) - rental payments for office space and software made to non-resident - payment of the rent which has been treated to be for non business purpose by AO owing to the absence of any agreements filed before him - assessee has filed additional evidences under Rule 29 consisting of rent agreements invoices issued by the company - HELD THAT:- We find that the additional evidences are required for adjudication of the matter at hand and goes to the root of the addition made by the Assessing Officer and as upheld by the Ld. CIT(A). Since, the Revenue did not get the opportunity to go through the evidences filed for the first time before us, in the fitness of things we deem it proper to refer the matter back to the file of the Assessing Officer to adjudicate and pass an order on this issue in accordance with the provisions of the Income Tax Act,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. Disallowance of interest paid u/s 36(1)(iii) - money advanced to wholly owned subsidiaries of the assessee company - 'commercial expediency' - HELD THAT:- As in SA BUILDERS LTD. VERSUS COMMISSIONER OF INCOME-TAX [2006 (12) TMI 82 - SUPREME COURT] endorsed the view that since a holding company has a deep interest in its subsidiary and if the holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee is entitled to deduction of interest on the borrowed funds. In the present case, there is no dispute about the fact that the amounts have been advanced to the wholly owned subsidiaries of the assessee company and there is no fact brought on record by any of the lower authorities that the amounts have been used by these subsidiary companies for any 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 the Act can be made in this case - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - TDS u/s 195 - payment on account of commission, legal and professional charges, marketing and selling expenses and outstanding and business development expenses - income accrued in India - HELD THAT:- The argument of the learned D.R. that even if the provisions of DTAA are applied, in the absence of any services coming out from the evidences, it should be presumed that non-residents have 'made available' certain technical services 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-residents are not in the nature of technical services, no income deemed to have accrued to the non-resident entities, there is no liability on the assessee to deduct tax at source on such payment. Therefore, the provisions of section 40(a)(i) not exigible - Decided in favour of assessee. Additional depreciation on computers u/s 32(ii)(a) denied - A.O held that additional depreciation is available to plant and machinery and not to computer and software as the same have not been used in the production/manufacture of an article/things - computers and merely used in processing of date or preparing software which is not manufacture into a new article/things and therefore additional depreciation was disallowed - HELD THAT:- The computers have to be treated as plant and machinery in the case of the assessee as is in the business of Software Development And Export as per the order of the Hon’ble High Court in STATRONICS AND ENTERPRISES PVT. LTD. [2006 (8) TMI 111 - GUJARAT HIGH COURT] . The computers have been mentioned 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 Assessing Officer is directed to allow him the depreciation as per the rate allowed on computers under the head plant and machinery in the schedule and further allow the benefit of additional depreciation @ 20% as stipulated by the provisions of the Income Tax Act,1961. - Decided in favour of assessee.
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