TMI Blog2018 (6) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the doctrine of impossibility of performance because- a) The judgment of the Hon'ble Karnataka High Court in the case of Samsung Electronics Co. [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] and the return of income was filed by the assessee on 30.11.2011. It is not the case of the assessee that the payments without TDS were made before this judgment of the Hon'ble High Court of Karnataka. b) Even if the payment was already made prior to 15.10.2011 then also, the tax could have been deducted in subsequent period against subsequent payments because, as per the Ld. DR the assessee had continued the business with the same party in the subsequent period also and the Ld. AR has not controverted this claim of the Ld. DR by establishing that no business was undertaken with the same party during the subsequent period. c) As per Section 40(a)(ia), if the assessee fails to deduct the tax in the relevant year and pay to the credit of the central government the assessee can deduct the tax in the subsequent period and make the payment to the credit of the central government. If the assessee does so, deduction is allowable u/s. 40(a)(ia) in the year of payment. d)Hence w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The Ld. CIT(A) erred in allowing the assessee company's appeal on the issue of disallowance u/s. 40a(i) of the Act in respect of non-deduction of TDS on software expenses and not following the judgment of Karnataka High Court in the case of CIT v. Samsung Electronics Co. Ltd., 320 ITR 209. 3. The Ld. CIT(A) erred in deleting the addition of ₹ 3,66,020/- made by the Assessing Officer on account of delayed payment of employees contribution to PF and ESI under section 43B and 2(24) read with Section 36(1)(va) as the matter has not reached its finality and an SLP of the Revenue in the case of CIT v. Samsung India Electronics Ltd. is pending for consideration before the Hon'ble Apex Court. 2. Brief facts of the case are as follows. The assessee had filed the original return of income on 30.11.2011 and subsequently revised return was filed on 27.02.2012 declaring total taxable income as nil as per the normal provisions of the Act. The assessee has declared business income of ₹ 3,36,50,563/- and income from other sources of ₹ 80,569/-. The assessee computed the book profit u/s. 115 JB for an amount of ₹ 6,63,574/- and the taxable liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in 345 ITR 494 (Kar). However, it is seen that the appellant has relied on the decision of the Hon'ble Bangalore Income Tax Appellate Tribunal in its own case for the asst. year 2009-10 in ITA No. 1370/Bang/2014 wherein in para 7 of the order the Hon'ble Tribunal, relying on the decision of the coordinate Bench in the case of Aurigene Discovery Technologies Pvt. Ltd. in ITA No. 1479/Bang/2013, has held that the software payment would not be taxable as royalty in considering the impossibility of performance as the judgement in the case of Samsung Electronic Company Ltd. was pronounced on 15.10.2011 much after the current financial year relevant to the asst. year 2011-12. Respectfully following the Hon'ble Income Tax Appellate Tribunal's order in the case of the appellant's own case for the assessment year 2009-10 (supra). I delete the disallowance made by the Assessing Officer in this regard. Therefore the Revenue is in appeal before us with respect to ground No. 2 for wrong deletion of the disallowances made by the AO to the extent of ₹ 10,07,64,509/- u/s. 40a(i) of the Act. 4. The Sr. DR who appeared before us had submitted that though th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TDS was not deducted, it is to be disallowed u/s. 40 (a) (i) but when the assessee carried the matter in appeal before CIT(A), he held that it is not Royalty and therefore, cannot be disallowed u/s. 40 (a) (i). The revenue filed appeal before the tribunal but the dispute raised was not this that it is Royalty or not? The dispute raised was this that it is capital expenditure and therefore, cannot be allowed. The tribunal held that the tribunal cannot go into this question as this is not what was urged before the lower authorities. The revenue filed appeal before Hon'ble Karnataka High ITA No. 1388/Bang/2013 Court and the tribunal order was confirmed. Hence, this is seen that as per this judgment of Hon'ble Karnataka High Court, the decision is not on this aspect that it is Royalty or not and therefore, this judgment is not relevant in the present case. 6. Now, we examine the applicability of the second judgment of Hon'ble Karnataka High Court rendered in the case of WIPRO Ltd. v. DCIT (Supra) rendered on 25.03.2015. As per this judgment, in Para 171, it was held that in earlier judgment dated 25.08.2010, similar question was decided in favour of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made by the Assessing Officer. It was further submitted by the Ld. AR that it is impossible for the assessee to deduct the tax at the time of making the payment and therefore the doctrine of impossibility was invoked by the assessee before the CIT(A) and therefore the CIT(A) was right in granting relief to the assessee. The Ld. AR had further drawn our attention to the order passed by the coordinate bench in the matter of ACIT v. Aurigene Discovery Technologies Ltd., [ITA 1479/Bang/2015, dt. 23.11.2016, for A.Y. 2012-13] wherein at para 5 it was held by the coordinate bench as under : 5. The CIT(A) followed the decision of this Tribunal in M/s. WS Atkins India Pvt. Ltd., supra, which referred the decisions of Hyderabad Bench of the Tribunal in Infotech Enterprises Ltd. in ITA 115/HYD/2011 wherein it has been held that section 40(a)(ia) would not apply to disallow payments when TDS was not done and subsequently become taxable on account of a retrospective legislation. It has also referred to the decisions of the Delhi Mumbai Tribunal in SMS Demag Pvt. Ltd., 132 ITJ 498 Sonic Biochem Extractions Pvt. Ltd. 23 ITR (Trib) 447, respectively. We uphold the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and incumbent, for adjudicating the issue arising for our consideration, to see if the claim could indeed be said to relate to the stated years, given the provision of section 32(2), a substantive provision, on the mandatory nature of which there is no dispute. As such, the claim for depreciation for any year, irrespective of it being a relevant assessment year or not, to the extent effect thereto could not be given in that year, by virtue of the deeming fiction of section 32(2), is deemed to be depreciation for the year next following, and so on, so as to in effect 'transfer' the unabsorbed depreciation sequentially to the first of the relevant assessment years, being assessment year 1997-98 for Unit 'A' and assessment year 2000-01 for Unit 'B' (refer para 15.4). Section 10B(6)(i) would then apply (Unit 'A'), deeming its allowance for that year itself, precluding its carry forward. It may be appreciated that but for the deeming effect of section 32(2), there is no question of the claim being considered, in whole or in part, as of another year and, thus, the assessee (or the assessees in general) being not entitled to a higher deduction where it p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of ITO v. Baker Technical Services (P.) Ltd. [2009] 126 TTJ (Mum.) 455 (TM), wherein the principle of adoption of a different view, i.e., from that of the Coordinate Bench of the Tribunal, under certain circumstances, stands recognized. Further, this is only subject to our considered view of the present order being only supportive of the said order, and not in contradiction to what stands considered and laid out therein (refer paras 15.3 and 15.7 of this order). 16. The only consequence of the foregoing, including the decisions cited, would be that the entire depreciation being claimed would be in law the depreciation for or allowable for the first of the relevant assessment years, and being an assessment year(s) prior to assessment year 2001-02, prescribed for carry forward under the provisions of section 10B(6)(i). We decide accordingly. 6. We have heard the rival contentions and perused the material. At the time of hearing the Ld. AR was directed by the Bench to produce the following documents/clarify : i) Whether the assessee continued its business with the same company in the subsequent years; ii) When the assessee has actually made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is making the payment either on account of interest, royalty, fees for technical services or other sums chargeable under this Act which is chargeable outside India or in India to a non-resident, not being a company or a foreign company on which tax is deductible and tax is deductible at source and such tax has not been deducted, then the same shall not be deducted while computing the income charged under the head 'profits and gains of business or profession'. 9.1 Further the proviso to Section 40(a)(i) provides that where on any such sum tax has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in Sub-section (1) of Section 139, such sum shall be allowed as deduction in computing the income of the previous year in which such tax has been paid. 10. It is thus clear that for the purposes of attracting the provisions of Section 40(a)(i) of the Act, the payment made by the assessee should be in the form of royalty or in any other form and it should have been paid either outside India or paid to a nonresident in India, for which there is an obligation to deduct TDS. If tax deduction was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A), we have to see whether it is impossible for the assessee to deduct the tax in the year under consideration or in the subsequent year i.e., for A Y. 2012-13. 11. Firstly, we are of the opinion that the judgment passed by the superior court was declaratory in nature of the law which finds place in the statute book. The Courts do not lay down the fresh or new law, the court only authoritatively pronounces and interprets the law already existing in the statute book. Further we find that the Hon'ble jurisdictional High Court in Samsung Electronics (supra) in para 3 records important facts which are to the following effect : 3. Being aggrieved by the said order passed by the assessing officer, an appeal was filed before the Commissioner of Income Tax (Appeals)-V in appeal No. ITA 17/TDS/CIT(A)V/2001-02 wherein the appellate authority confirmed the order passed by the assessing officer holding that payment made to the non-resident companies was taxable in India and therefore non deduction of TDS under Section 195(1) of the Act would make liable the respondent to treat the same as income and therefore the respondent would be liable for default for non deduction of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between i.e., from 24.09.2009 and 09.09.2010, the decision rendered by the Division Bench in 185 taxmann.313 was holding the field with respect to payment made for purchase of software. Therefore there was a jurisdictional High Court judgment authoritatively pronouncing that payment made or consideration paid for acquiring the software were in the nature of royalty. Incidentally this was period when payments would have been made by the assessee to a foreign entity for purchase of software without deducting the TDS. Ironically, despite direction assessee had furnished details as to when exact payments for purchase of software were made and whether the assessee continued its business in the subsequent years or not. Further the assessee was having another chance to deduct the TDS in the subsequent year as the assessee was continuing its business with the same supplier, but however for the reasons best known to it, assessee had not produced the record as noted herein above. 11.1 Therefore we can draw adverse inference against assessee, that the assessee even in the subsequent years had not deducted TDS otherwise it would have produced record for deduction of tax in subsequent ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concerned was there in the assessment year under consideration in view of the provisions of Section 9(1)(vi) r.w. the jurisdictional High Court in the matter of Samsung Electronics Co. (supra). Therefore, ratio of Aurigene Discovery Technologies Ltd. (supra) decision relied upon by the assessee is not applicable to the present case. 11.4 The second decision of the Tribunal relied upon by the assessee was in its own case in ITA.1370/Bang/2014 (supra). However when we look into the finding recorded by the Tribunal in para 7, we notice that the Tribunal has not given any finding with respect to the issue of 40(a)(ia) and it has only mentioned that in view of the coordinate bench decision the purchase of software does not fall within the definition of 'Royalty', whereas the characteristic of the payment made by the assessee whether royalty or not is not in dispute in the present appeal. Therefore the decision is not applicable to the present case. 11.5 Lastly, the assessee relies again upon the decision of the coordinate bench in its own case in ITA No. 10/Bang/2014, dt. 20.09.2017, wherein the Tribunal has relied upon its earlier order in ITA.1370/Bang/2014 (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the credit of the central government. If the assessee does so, deduction is allowable u/s. 40(a)(ia) in the year of payment. d) Hence when TDS can be deducted in subsequent period and the assessee has not shown that the assessee was not dealing with the same party during the subsequent period, this claim of the assessee that there was impossibility of performance has no merit. The assessee can very well discharge its obligation by subsequently deducting the TDS in subsequent year and hence there is no impossibility of performance as claimed. 11.8 The law was in the statute book, when there was an obligation to deduct the tax by the assessee and law continues to be so by the decision rendered by the Hon'ble jurisdiction in the matter of Samsung Electronics [185 taxmann 313] and thereafter also law continues to be the same in Samsung Electronics Co. Ltd. [16 taxmann.com 141]. In view of the above, we find force, substance and merit in the contention of the Ld. DR and accordingly the order passed by the CIT(A) is reversed and that of the AO is restored. 11.9. In the result, ground No. 2 of the Revenue is allowed. 12. The third ground of the Revenue appeal de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated therein with the provident fund or the fund under the ESI Act within fifteen days of the closure of every month pay. It is clear that the word contribution used in Clause(b) of Section 43B of the IT Act means the contribution of the employer and the employee. That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section(F) of Section 139 of the IT Act is made, the employer is entitled for deduction. 21. The submission of Mr. Aravind, learned counsel for the revenue that if the employer fails to deduct the employees' contribution on or before the due date, contemplated under the provisions of the PF Act and the PF Scheme, that would have to be treated as income within the meaning of Section 2(24)(x) of the IT Act and in which case, the assessee is liable to pay tax on the said amount treating that as his income, deserves to be rejected. 22. With respect, we find it difficult to endorse the view taken by the Gujarat High Court. We agree with the view taken by this Court in W.A. No. 4077/2013. 15. We may like to record that the Revenue in the present case has relied upon the decision of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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