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2020 (5) TMI 160 - AT - Income TaxDisallowance of depreciation on the WDV of “imported software” - assessee had claimed depreciationon the WDV of “imported software” - assessee did not deduct tax at source on the payment made for purchase of software, the AO took the view that depreciation claimed by the assessee is not allowable as deduction u/s 40(a)(ia) - HELD THAT:- We are concerned here with AY 2012-13 and during the year under consideration, the assessee has claimed only depreciation thereon. In the earlier years, the AO had only disallowed the depreciation claimed by the assessee by invoking the provisions of sec.40(a)(ia) i.e., the AO has not disturbed the action of the assessee in capitalizing the payment of ₹ 5.00 crores. Hence the issue of capitalizing the payment has attained finality. Hence we are not able to understand as to how the CIT(A) can direct the AO to treat the amount of depreciation as royalty payment. The foregoing discussions would show that the CIT(A) has rendered his decision without properly appreciating the facts surrounding the issue. In any case, the facts presented by Ld A.R also, in our view, requires verification. Hence, we are of the view that this issue requires fresh examination at the end of the ld CIT(A). Accordingly we set aside the order passed by CIT(A) on this issue and restore the same to his file for examining it afresh, after affording adequate opportunity of being heard to the assessee. Disallowance for non deduction of tax at source u/s 195 - payment was made outside India for services rendered outside India i.e in Uganda - payment to a person for the purpose of handling of all operations including coordinating with Indian teams for maintaining, rectifying problems, testing, upgrading /supporting customers, contentproviders etc. in Uganda - HELD THAT:- Since the facts relating to this issue is identical in nature of assessee own case for asst. year 2011-12, we hold that disallowance made u/s 40(a)(i) is not justified and accordingly direct the AO to delete the same. Disallowance of write off of miscellaneous expenses - deduction being the rental/telephone deposits written off - HELD THAT:- Though the assessee claims that these payments were made in the normal course of business, we noticed that the rent deposits have been made to 5 persons and advance rent has been paid to one person. The payments made to 3 persons have been described as “advance for services”. Though there is no dispute with regard to the principle that the payment made in the normal course of conducting business, if not recoverable is allowed as deduction, yet we noticed that the AO did not examine the nature of payment and the fact whether these payments were made in the course of conduction of business. We have noticed earlier that the AO has disallowed the claim by holding that all the payments have been made on capital account. Accordingly we are of the view that this issue requires fresh examination at the end of the AO. Accordingly we set aside the order passed by the ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the nature of payment and decide the same afresh in the light of the discussions made supra.
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