TaxTMI 
TaxTMI 
2022 (8) TMI 1580
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....6/2016-17 dated 23.04.2019 & 03.09.2019 respectively. The assessments were framed by the DCIT, Corporate Circle 2(2), Chennai for the assessment years 2012-13 & 2014-15 u/s. 143(3) r.w.s. 92CA(3) of the Act vide orders dated 29.03.2016 & 19.12.2016 respectively. Revenue's Appeal in ITA No. 2018/CHNY/2019, AY 2013-14 2. The only issue in this appeal of Revenue is as regards to the order of CIT (A) deleting the disallowance of expenses made by the AO of expenses relatable to exempt income by invoking the provisions of section 14A r.w. rule 8D of the Income Tax Rules, 1962 for the reason that there is no exempt income in the case of the assessee. 2.1 We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the CIT (A) deleted the addition by noting the fact that the assessee has not earned any exempt income and following the decision of Hon'ble Jurisdictional High Court in the case of CIT v. Chettinad Logistics (P) Ltd., [2017] 80 taxmann.com 221 and Redington (India) Ltd., vs. Addl.CIT, [2017] 77 taxmann.com 257 and held as under:- 6. As regards to issue of disallowance u/s. 14A, the appellant before me has submitt....
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....on related activities, the shareholders infused advance towards equity of Rs. 89 crores during the previous year ended 31.03.2010 and during the preceding year ending 31.03.2011, the assessee company obtained specific term loans from banks and financial institutions to the extent of Rs. 887 crores. Further, during previous year ending 31.03.2012 i.e., year under consideration, the assessee company obtained such specific term loans from banks amounting to Rs. 554 crores and received FCCD's amounting to Rs. 146 crores. The assessee claimed that such funds were kept ready for purchase of land, plant & machinery and construction activity. Since the assessee was setting up a mega power plant it required huge extent of land and same was not available easily. Since the assessee was in the process of acquiring land, setting up plant & machinery and carrying out construction activity in these three assessment years, the assessee kept this idle fund i.e., loan taken from banks of Rs. 550 crores and FCCD of Rs. 146 crores in its bank account in the FDs and earned interest of Rs. 6,27,70,128/- in this year. The assessee in its account capitalized the same and....
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....see has earned interest income by depositing the loans received from banks as temporary deposit of funds with banks and group companies. We also noted that it is undisputed fact that this interest earned will go to reduce the expenditure incurred during construction period and as such, it should be deposited against capital work-in-progress. This view of ours is supported by the decision of Hon'ble Supreme Court in the case of Bokaro Steel Ltd., supra wherein the Hon'ble Supreme Court has considered the identical issue and observed as under:- "The company may also, as in that case, keep the surplus funds in short-term deposits in order to earn interest. Such interest will be chargeable under Section 56 of the Income-tax Act. This Court also emphasised the fact that the company was not bound to utilize the interest so earned to adjust it against the interest paid on borrowed capital. The company was free to use this income in any manner it liked. However, while interest earned by investing borrowed capital in short-term deposits is an independent source of income not connected with the construction activities or business activities of the assessee, the same cannot be said i....
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....and machinery. Hence, any income earned on such deposit is incidental to the acquisition of assets for the setting up of the plant and machinery. In this view of the matter the ratio laid down by this court in Tuticorin Alkali Chemicals and Fertilizers Limited v. CIT, will not be attracted. The more appropriate decision in the factual situation in the present case is in CIT v. Bokaro Steel Ltd. . The appeal is dismissed. There will be no order as to costs. 8. Respectfully following these two Supreme Court decisions, we delete the addition and allow capitalization of the same. Similar are the facts on the other two assessment years on this issue, hence taking a consistent view, we allow this issue of assessee's appeals. ITA No. 1989/CHNY/2019, Assessment year 2012-13 9. The next issue in this appeal of assessee is as regards to the order of CIT (A) confirming the action of the AO in restricting the claim of depreciation of computer software at 25% as against the claim of assessee at 60%. For this, assessee has raised Ground No. 3, which we need not to reproduce. 10. At the outset, we noted that the assessee has claimed depreciation on computer software i.e., li....
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....in number, from which, we find that substantial amount of server licences, which have been obtained by the assessee are customized and some of which are single user licenses. 8. The question would be as to whether the software application, which was acquired by the assessee would fall under Entry 5 of Part A of New Appendix I, which states that computers including computer software are entitled to depreciation at 60%. Note 7 of the Appendix defines the expression 'computer software' to mean any programs recorded on CD or disc, tape, perforated media or other information storage devices. 9. The case of the Revenue is that software are licences and that they are intangible assets and would fall under Part B of New Appendix I, which deals with knowhow, patents, copyrights, trademarks, licenses, francises or any other business or commercial rights of similar nature. 10. We find that Part B of New Appendix I is a general entry whereas Entry 5 of Part A of New Appendix I is a specific entry read with Note 7. In the instant case, the Tribunal, in our considered view, rightly held that the assessee is eligible to claim depreciation at 60%. 11. In the dec....
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.... error in the decision arrived at by the Tribunal by taking note of the specific entry in contra distinction with the general entry. Therefore, the first substantial question of law has to be necessarily answered against the Revenue. As the issue is covered in favour of assessee, we direct the AO to allow depreciation @ 60% on the computer software. This issue of assessee's appeal is allowed. 12. The next issue in this appeal of assessee for the assessment year 2012-13 is as regards to disallowance of interest on delayed remittance of TDS u/s. 40(a)(ii) of the Act. 13. At the outset, we noted that the AO disallowed a sum of Rs. 24,178/- towards interest paid on account of delayed remittance of TDS u/s. 40(a)(ii) of the Act claimed by assessee by stating that this interest is TDS and is not in penal in nature but only consequential in nature and hence, allowable as deduction u/s. 37(1) of the At. The AO as well as the CIT (A) disallowed the claim of assessee by stating that interest paid u/s. 201 of the Act is penal in nature and not compensatory. According to the CIT(A), this interest paid is for statutory default and cannot be allowed as deduction u/s. 37(1) of the A....