TaxTMI 
TaxTMI 
2019 (1) TMI 1056
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....;CIT(A)'] erred in rejecting the contention of the Appellant that software purchased from Techent Solution of Rs. 7,43,689/- are capitalized in block of asset and on the facts and circumstances of the case of the Appellant and in law, no disallowance is attracted u/s 40(a)(ia) of the Act. (b) Without prejudice to above, the CIT(A) erred in not appreciating that on the facts and circumstance of the case and in law, no TDS u/s 194J of the Act was deductible on payment made to Technet Solution towards purchase of software; hence no disallowance is attracted u/s 40(a)(ia) of the Act. The grounds urged by revenue reads as under:- 1.Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition on account of estimation of Gross Profit @ 9 % and rejection of books u/s. 145." 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) failed to appreciate the fact that the assessee had failed to provide the details of consumption of raw material (seeds) vis-a-vis yields, separately in respect of different types of oils (cotton, mustard and ground nut, etc.) extracted from different se....
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....er of Rs. 942.30 Crores as reflected by the assessee. After adjusting the already declared Gross Profit, the net addition thus worked out to be Rs. 56.27 Crores which was added to the income of the assessee. 2.3 The second addition u/s 40(a)(ia) stem from the fact that the assessee failed to deduct tax at source u/s 194J against software payment of Rs. 7.43 Lacs stated to be made to an entity namely Technet Software Solutions. The assessee pointed out that the said expenditure was capitalized in the books and therefore, disallowance u/s 40(a)(ia) was not justified. However, disregarding the same, Ld. AO disallowed the same u/s 40(a)(ia). 3. Aggrieved, the assessee agitated the same with partial success before Ld. CIT(A) vide impugned order dated 21/04/2017 wherein Ld. CIT(A) relying upon Tribunal's order in assessee's own case for AY 2011-12 over-ruled the stand of Ld.AO in rejecting the books of accounts u/s 145(3). The assessee had raised an alternative ground number-3 to submit that the comparable GP Rate of the impugned AY was 5.31% and not 3.03% as adopted by Ld. AO. It was explained that the variation in GP Rate arose on account of the fact that there was a change in gr....
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....hat similar GP additions made in earlier two AYs has been deleted by the Tribunal and facts were similar in the impugned AY. Our attention was also drawn to the fact that the comparable GP Rate for the impugned AY works out to 5.31% and therefore, there was only a minor variation in the same which do not justify rejection of books of accounts. Regarding disallowance u/s 40(a)(ia), it was submitted that the assessee has claimed only depreciation against the software expenditure which was only statutory allowance and therefore, could not be disallowed by applying the provisions of Section 40(a)(ia). Per Contra, Ld. Departmental Representative, Shri B.Srinivas CIT-DR, submitted that fall in GP Rate was not satisfactory and mere grouping of expenditure would not alter the net profit offered by the assessee to tax. Regarding disallowance u/s 40(a)(ia), it was submitted that the same was to apply in all cases since the statutory provisions override all the other provisions of the act. 6.1 We have carefully heard the rival contentions and perused relevant material on record including documents placed in the paper-book and judicial pronouncements as cited before us. Upon due considerati....
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..... During impugned AY, the Ld. first appellate authority, relying upon the stand of Tribunal in AY 2011-12, has over-ruled the stand of Ld. AO in rejecting the books and estimating the income on the basis of GP rate. Nothing on record suggest that the aforesaid order of the Tribunal for AY 2011-12 has ever been overruled by any competent judicial authority. There is no change in the material facts or circumstances during impugned AY. The matter for AY 2012-13 has also reached up-to the level of this Tribunal vide ITA No. 5010/Mum/2016 & 4964/Mum/2016 order dated 10/10/2018 wherein, following the order for AY 2011-12, similar stand has been taken. 6.3 Therefore, viewed from any angle, the stand of Ld. AO in rejecting the books of accounts u/s 145(3) and making addition on the basis of GP rate could not be upheld and therefore, we see no reason to interfere with the impugned order. The revenue's appeal stand dismissed. 7.1 The only ground in assessee's appeal is related with disallowance u/s 40(a)(ia). We find that Ld. first appellate authority, in the original appellate order, has already deleted the impugned addition by following the decision of Vishakhapatnam Tribunal rendere....
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.... claim made by the assessee. Therefore, depreciation is a mandatory deduction on the asset which is wholly or partly owned by the assessee and used for the purpose of business or profession which means the depreciation is a deduction for an asset owned by the assessee and used for the purpose of business and not for incurring of any expenditure. 16.3 The deduction u/s 32 is not in respect of the amount paid or payable which is subjected to TDS; but is a statutory deduction on an asset which is otherwise eligible for deduction of deprecation. Depreciation is not an outgoing expenditure and therefore, the provisions of sec. 40(a)(i) of the Act are not attracted on such deduction. This view has been fortified by the decision of the Hon'ble Punjab & Haryana High Court in the case of Mark Auto Industries Ltd. (supra) in pars 5 & 6 as under: "5. Adverting to questions (ii) and (iii), the issue which arises for consideration is whether the assessee could be disallowed claim for depreciation under Section 40(a)(i) of the Act on the ground that the payments made for technical know-how which had been capitalized, no tax deduction at source has been made thereon. The Tri....