TMI Blog2021 (12) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... nery should not be installed in any office premises or residential accommodation. We note that the development activity carried on by the assessee cannot be considered to be a manufacturing activity. Accordingly, relying on the decision of IBM World Trade Corporation [ 1977 (11) TMI 4 - BOMBAY HIGH COURT] , we do not find any infirmity in the disallowance of additional depreciation to assessee. However, the alternative plea to allow the deprecation in the subsequent assessment year on the enhanced WDV of block of assets at the prevailing rates cannot be denied. - Decided in favour of assessee. Addition of CSR activities - as submitted that donations were made to eligible institutions and deduction u/s. 80G was claimed that pertained to such donations - HELD THAT:- Assessee has suo moto disallowed the expenditure towards the CSR responsibilities u/s. 37(1) of the Act and claimed deduction u/s. 80G to the extent of donations paid to eligible charitable institutions. Thus as relying on FIRST AMERICAN (INDIA) PVT. LTD. case [ 2020 (5) TMI 187 - ITAT BANGALORE] we direct the Ld.AO verify the payments made by assessee towards CSR that also forms part of deduction u/s. 80G. Ld.AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim ii. By incorrectly holding that the said assets were installed in the 'Office premises' of the Appellant and therefore, were not eligible for the said claim; This stand of the LAA were without appreciating the argument of the Appellant that having regard to its nature of business and on the basis of the applicable judicial precedents, restriction of the benefit of additional depreciation adopting of such interpretation of the words 'Office Premises' by the Lower authorities would not be appropriate in the facts and circumstances of the case. iii. Despite the Appellant's claim that such assets were primarily, essentially and extensively used by the Appellant in its core business activities of software development and not for any general purpose (Tax effect being ₹ 8,09,145) 4. The Lower authorities erred in denying the deduction u/s 80G of the Act amounting to ₹ 7,71,505 claimed by the Appellant on donations made to certain eligible organizations made as a part of its Corporate Social Responsibility (CSR) programmea. Without appreciating the Appellant's claim that in the absence of any express prohibition under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various documents, that were submitted by the representative of assessee. 2.1 The Ld.AO noted that assessee claimed sum of ₹ 24,47,283/- towards additional depreciation u/s. 32(1)(iia) of the Act, on additions made during the AY 2016-17 on block of assets like Computers and Software. After considering the submissions, the Ld.AO disallowed the claim on the premise that the computers were installed in the office premises, thus would disentitle claim for additional depreciation within the meaning of the Proviso 2B to section 32(1)(iia) of the Act. 2.2 The Ld.AO further noted that the assessee had spent ₹ 15,77,889 towards CSR activities in the nature of donations made to certain eligible institutions and claimed deduction of ₹ 7,71,505 u/s. 80G of the Act. The Ld.AO sought to disallow the deduction claimed u/s. 80G of the Act. 3. Aggrieved additions made by the Ld.AO, assessee filed appeal before the Ld.CIT(A). 3.1 The Ld.CIT(A) after considering submissions of assessee held as under: The appellant's claim that it is engaged in the manufacturing and production of article or thing is not accepted in light of the foregoing facts. The AO, while not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of ESI vs. Reliable Software Systems Pvt. Ltd. reported in [2012] 5 AIR BOM. R 795. He submitted that the said decision was relied by the co-ordinate bench of this Tribunal in case of Manhattan Associates (India) Development Centre Pvt. Ltd. vs. DCIT reported in [2019] 112 taxmann.com 200. 5.2 On the contrary, the Ld.Sr.DR relied on the observations of Ld.CIT(A). He submitted that assessee is a capital service provider as per the Master Service Agreement placed at page 180 of the paper book. He submitted that the Master Service Agreement further specifies that assessee is engaged in the business of software development, consulting services etc., which cannot be considered to be manufacturing activity. He placed reliance on the specific observations by the Ld.CIT(A) in para 5.1 of the impugned order. 5.3 Alternatively, the Ld.AR raised additional ground, wherein it is prayed that assessee may be allowed depreciation in subsequent years on the enhanced Written Down Value of Block of Assets at the prevailing rates. 5.3.1 The Ld.Sr.DR did not object for the additional ground being admitted. 5.4 We note that the additional ground is directly connected with the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause(ii): 19. A bare reading of the aforesaid provisions shows that the new machinery or plant should be used by an assessee engaged in the business of manufacture or production of any article or thing and the new machinery or plant need not be used in manufacture or production of any article or thing. The learned counsel has before us relied on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee before the lower authorities nor before us. He also IT(TP)A No.169 149/Bang/2014 placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT Vs. IBM World Trade Corpn. (1981) 130 ITR 739 (Bombay) wherein the Hon'ble Bombay High Court held the expression office equipment used in Sec.33 should be construed in context of appliances which are generally used in office as an aid for proper function of office and that EA machines, data processing machines installation and operation of which is on scientific basis, and which has their roles to play cannot be equated with office appliances and therefore such machines are Plant and not Office appliances . As we have already observed there is complete lack of details to decide whether the assets in question are Plant or Office equipment in the absence of the role these assets perform and purpose for which these assets are used by the Assessee. We therefore set aside the order of CIT(A) on this limited issue of determining whether the assets on which additional depreciation is claimed by the Assessee can be regarded as Plant. The Assessee is directed to furnish the details and description to the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of co-ordinate bench of this Tribunal in the case of First American (India) Pvt. Ltd. vs. ACIT in ITA No. 1762/Bang/2019 by order dated 29.04.2020. The Ld.Sr.DR placed reliance on the orders passed by authorities below. We have perused the submissions advanced by both sides. 6.1 We note that assessee has suo moto disallowed the expenditure towards the CSR responsibilities u/s. 37(1) of the Act and claimed deduction u/s. 80G to the extent of donations paid to eligible charitable institutions. The observations of co-ordinate bench of this Tribunal in case of First American (India) Pvt. Ltd. vs. ACIT (supra) on the same issue is as under. 15. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession , where as monies spent under section 80G are claimed while computing Total Taxable income in the hands of assessee. The point of claim under these provisions are different. 16. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
