AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 1760
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....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 Rs. 3,36,50,563/- and income from other sources of Rs. 80,569/-. The assessee computed the book profit u/s. 115 JB for an amount of Rs. 6,63,574/- and the taxable liability shown at Rs. 1,23,026/- under the MAT provision. The assessee has also claimed the refund of Rs. 5,08,11,992/-. Case of the assessee was selected for scrutiny. While going through the details furnished by the assessee it was noted by the AO that the assessee has debited an amount of Rs. 8,82,74,266/- towards purchase of software licence resold and Rs. 2,36,87,914/-, as software maintenance/licences under Schedule 12 and general and administration expenses. It was informed by the assessee that it has deducted th....
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....ement 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 Rs. 10,07,64,509/- u/s. 40a(i) of the Act. 4. The Sr. DR who appeared before us had submitted that though the Hon'ble jurisdictional High Court in the matter of Samsung Electronic Co. Ltd. (supra) had held that the consideration paid for purchase of software is 'royalty', however the Hon'ble jurisdictional High Court has not brought into the statute book any new law, but has only given the interpretation of the existing law. Therefore it was submitted by the Ld. DR that it is the duty of the assessee to deduct the tax at the time of making the payment for purchase of the software. After the categorical finding recorded by the Hon&....
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....orities. 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 against the revenue and therefore, in those appeals also, the issue was decided in favour of the assessee. We have already seen that the decision dated 25.08.2010 is not on this aspect that it is Royalty or not and therefore, this judgment is not relevant in the present case. Accordingly, this later judgment dated 25.03.2015 is also not relevant. 7. There is no dispute that the present issue is covered against the assessee by the judgment of Hon'ble Karnataka High Court rendered in the case of CIT v. Samsung....
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....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 CIT(A) and dismiss the grounds raised by the Revenue. Lastly the Ld. AR has submitted that the principle of consistency and discipline required that the Tribunal should follow the decision of the Third Member decision of the ITAT Cochin Bench in and for that purposes, our attention was drawn to para 15.7, 15.8 and 16, to the following effect : 15.7 Next, we shall discuss the question of our order for the current year being contrary to or inconsistent with the Tribunal's Order for the immedia....
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....iation 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 pertains to a relevant assessment year not specified in section 10B(6)(i), i.e., from assessment year 2001-02 onwards. Not so considering, as also noted earlier, would amount to not applying section 32(2) even to years which are not the (specified) relevant assessment years, as assessment years 1994-95 to 1996-97 and assessment year 1997-98 for Unit 'A' and 'B' respectively, and for which there is no mandate in law. In fact, that would in effect be applying the fiction of section 10B(6)(i) ....
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....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 the payment towards the consideration for purchase of software pertaining to AY 2011-12; iii) Whether the assessee has deducted the TDS from the payment made for AY 2011-12 in the subsequent assessment year, i.e., AY 2012-13. Despite the specific direction during the course of hearing, the assessee has not produced the above documents. 7. The CIT(A) in para 7 at page 6, had agreed to the decision of the AO to the extent that the consideration paid for purchase of software is in ....
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....ther 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 made at the time of making the payment, and then such amount shall not be eligible for deduction. 10.1 The Bench is not able to appreciate the contention of the Ld. AR that once the CIT(A) held that the provisions of Section 40(a)(i) are applicable as the payments made by the assessee was in the nature of royalty, where is the occasion for deleting the disallowance made by the AO, ld. CIT(A). There is no such power u/s. 40(a)(i) with CIT(A) to disallow the disallowance made by the AO fo....
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.... 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 at source and dismissed the appeal Being aggrieved by the said order, the respondent filed an appeal before the Income Tax Appellate Tribunal. Bangalore (hereinafter called the Tribunal) in ITA Nos. 264 to 266/Bang/2002 and the Tribunal by order dated 18-12-2005 allowed the appeal by setting aside the order passed by the appellate authority confirming the order passed by the Assessing Officer and held that payment made by the respondent to the non-resident company....
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....urchase 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 years. Further in our view when deduction of TDS can be deducted in subsequent year and further assessee is continuing its business in subsequent year, conclusion recorded by the CIT(A) was wrong as there was no impossibility of performance. 11.2 The Ld. AR during the course of argument had relied upon the decisions of the Tribunal in Aurigene Discovery Technologies Ltd., [ITA 1479/Bang/2015, dt. 23.11.2016, for A.Y. 2012-13], in the assessee's own case in ITA.1370/Ban....
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.... 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) and had allowed the issue. In our opinion the decision rendered by the Tribunal in ITA.10/Bang/2014 is also not applicable to the present facts as the Tribunal had had merely held that purchase of software does not fall within the definition of 'Royalty', whereas the present dispute pertains to section 40(a)(i) and the doctrine of impossibility of performance. 11.6 We can therefore summarize that it is not impossible for the assessee to deduct the tax at source at the....
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....S 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 deals with the issue of delayed payment of employees' contribution to ESI and PF, u/s. 43B of the Act. 13. In this regard, the Ld. DR relies upon the decision of the Hon'ble Gujarat High Court in CIT v. Gujarat State Road Transport Corporation [(2014) 41 taxmann.com 100] in the in the order of the AO, to substantiate that the action of the AO was correct. 14. On the other hand the Ld. AR brought to our notice the decision of the Hon'ble jurisdictional High C....