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2022 (7) TMI 272 - AT - Income TaxRectification of mistake u/s 154 - addition on account of doubtful nature or non genuineness of the expenditure whether when the entire expenditure as claimed by the assesses on software development has been disallowed while framing the assessment under section 143(3), question of disallowance of any depreciation on the same would not arise? - HELD THAT:- We find that in the original order dated 31.12.2020 the AO had disallowed an expenditure for violation of provisions regarding tax deduction at source and the disallowance was made u/s. 40(a)(ia) of the Act. In the assessment completed u/s. 154, AO has made a further disallowance being the depreciation on such software development expenses. We find that since the disallowance of software development expenses in the original assessment was made on account of non deduction of TDS, which is a specific provision in the shape of a penal provision whereby the disallowance is made if the assessee fails to deduct TDS at source. AO did not make the addition on account of doubtful nature or non genuineness of the expenditure, therefore, the depreciation on such expenditure disallowed by passing u/s. 154 is not justified as there was no mistake apparent from record found in the original assessment order. Had it been a case of disallowing expenditure of software development due to the findings that such expenditure was not genuine then the issue of disallowance of depreciation would have become an issue of rectification u/s. 154 - Decided in favour of assessee.
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