2017 (11) TMI 1845

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....cts are, the assessee is a captive service provider and is engaged in the business of providing engineering analysis and related software development services / export of customised electronic data. During the relevant assessment year the assessee filed its return of income declaring total income of Rs. 76.13.59,776/-. The AO disallowed Rs. 16,21,82,523/- u/s.40(a)(i) of the Act, on the ground that the assessee was liable to deduct tax at source on payments made to non-resident vendors, for the purchase of software. Aggrieved by the disallowance by the AO, the assessee filed an appeal before the CIT (A). 03. The CIT (A), in his order confirmed the disallowance made by the AO, on the ground that the issue was considered by the Hon'ble juri....

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....s Co. Ltd. (Supra) is dated 15.10.2011. In reply, learned AR of the assessee submitted that the earlier judgment in the case of Wipro Ltd. (Supra) dated 25.08.2010 was also not brought to the notice of Hon'ble Karnataka High Court in the case of CIT vs. Samsung Electronics Co. Ltd. (Supra) decided on 15.10.2011 and therefore, the first judgment dated 25.08.2010 should be followed and this judgment is in favour of the assessee. In reply, learned DR of the revenue supported the order of CIT (A) and submitted that both the judgments in the case of Wipro Ltd. (Supra) are in the context of section 40 (a) (i) whereas the judgment of Hon'ble Karnataka High Court rendered in the case of CIT vs. Samsung Electronics Co. Ltd. (Supra) is in con....

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....as this that the import of software is capital expense in that case and therefore, how the same can be allowed as deduction. In that case also, the A.O. held that the payment for software is Royalty and since 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 r....