TMI Blog2021 (8) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... oss or trading liability. Commissioner (Appeals) has held that the payment has been made by the assessee for an outright purchase of Intellectual Property Rights and not towards royalty and therefore, the provision of section 40(a)(i) is not attracted in respect of a claim for depreciation. Decided in favour of the assessee. - IT(IT)A No. 1221/Bang/2014 - - - Dated:- 5-8-2021 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER For the Appellant : Appellant by : Shri Pradeep Kumar, CIT(DR), ITAT, Bengaluru. For the Respondent : Shri T. Suryanarayana, Advocate. ORDER Per Chandra Poojari, Accountant Member Originally this appeal came up for consideration before the Tribunal. The Tribunal recorded the facts and decided the issue as follows vide order dated 29.6.2015:- 02. Appeal of the Revenue is taken up first for disposal. Grievance raised by the Revenue is that depreciation on computers disallowed by the AO relying on Section 40(a)(i) of the Income-tax Act, 1961 (`the Act' in short), was allowed by the CIT (A). 03. Facts apropos are that the assessee had purchased software worth Rs. 4,05,38,250/- from one Cade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 to 16.4 of its order dt. 18.01.2013, it was held as under by the coordinate bench : 16. We have considered the rival submissions and carefully perused the relevant material on record. The Assessing Officer has disallowed the claim of depreciation on the ground that the assessee has not withheld the tax while remitting the amount despite the ruling of AAR in the case of Foster's Australia Ltd reported 302 ITR 289 whereby it has been held that the said amount is taxable as income in India. The question of taxability of the said payment in the hand of Foster's Australia Ltd is sub-judice before the Hon'ble Delhi High Court in the writ petition filed by Foster 's Australia Ltd challenging the order of the AAR. Since the operation of the order of the AAR has been stayed by the Hon'ble High Court till the disposal of the matter; therefore, it is not appropriate to give any finding or expression on the question of taxability of the said amount in India when the issue is sub-judice before the Hon'ble High Court. 16.1 As regards the alternative plea of the ld Sr counsel for the assessee that since the assessee has not claimed the entire amount as revenue ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in which such tax has been paid. Explanation. For the purposes of this sub-clause,---- - (A) royalty shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (B) fees for technical services shall have the same meaning as in Explanation 2 to clause (vii) of subsection (1) of section 9; 16.2 It is manifest from the plain reading of provisions of sec. 40(a)(i) that an amount payable towards interest, royalty, fee for technical services or other sums chargeable under this Act shall not be deducted while computing the income under the head profit and gain of business or profession on which tax is deductible at source; but such tax has not been deducted. The expression 'amount payable' which is otherwise an allowable deduction refers to the expenditure incurred for the purpose of business of the assessee and therefore, the said expenditure is a deductible claim. Thus, section 40 refers to the outgoing amount chargeable under this Act and subject to TDS under Chapter XVII-B. There is a difference between the expenditure and other kind of deduction. The other kind of deduction which includes any loss incidental to carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 40(a) (i) were not attracted. The learned DR could not find any fault with this direction of the CIT(A) also although she referred to page 4 of the assessment order, where it was mentioned that the tax deducted in respect of the payment was made over to the Government in the subsequent year and, therefore, depreciation could not be deducted on the capital expenditure incurred by the assessee. In reply, the learned counsel pointed out that the expenditure by way of technical know-how was capitalized and it was not claimed as revenue expenditure. Therefore, there was also no reason to disallow depreciation on such capitalized amount as the aforesaid provision does not deal with deduction of depreciation. Having considered arguments from both the sides, we are of the view that there is no error in the order of the learned CIT(A) which requires correction from us. Thus, this ground is also dismissed. 6. Learned counsel for the revenue was unable to substantiate that in the absence of any requirement of law for making deduction of tax out of the expenditure on technical know how which was capitalized and no amount was claimed as revenue expenditure, the deduction could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions of the review petitioner. From perusal of the judgment dated 09.12.2020, it is clear that we have not expressed any opinion as to whether or not the decision of M/s. WIPRO LTD., supra apply to the case of the assessee. Therefore, it is clarified that it would be open for the assessee to contend before the Tribunal that the aforesaid decision does not apply to the case of the assessee. 4. Accordingly, the appeal was listed for hearing before the Tribunal. The issue raised by the revenue in this appeal is that the CIT(Appeals) was not justified in allowing depreciation on computers disallowed by the AO by invoking the provisions of section 40(a)(ia) of the Income-tax Act, 1961 [the Act]. 5. We have heard both the parties and perused the material on record. The ld. counsel for the assessee while supporting the order of the CIT(Appeals) submitted that the issue is covered by the judgment of the Hon ble High Court of Karnataka in PCIT v. Tally Solutions Pvt. Ltd. [2021] 123 taxmann.com 21 wherein it was held as under:- Thus, from close scrutiny of section 40(a)(i), it is axiomatic that an amount payable towards interest, royalty, fee for technical services or other sum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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