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2020 (3) TMI 1070 - AT - Income TaxTDS u/s 195 - failure on the part of the assessee to deduct tax on payments made to foreign entities in connection with Bandwidth charges, Legal Professional charges and Direct cost and Networking Communication charges - AO levied tax u/s.201(1) and 201(1A) - HELD THAT - As decided in own case 2018 (12) TMI 1805 - ITAT CHENNAI the issue on which the Revenue has raised the levy u/s.201(1) and interest u/s.201(1A) has already been held to be not liable for deduction of TDS under the relevant provisions of the Income Tax Act, 1961. This being so, as there is no liability of the assessee to deduct TDS on the said payments, there can be liability on the assessee for the levy u/s.201(1) and consequently 201(1A) of the Income Tax Act, 1961. In the circumstances, we find no error in the order of the learned Commissioner of Income Tax, 1961 which calls for any interference. Set off of brought forward unabsorbed depreciation - HELD THAT - As decided in own case . 2018 (12) TMI 1805 - ITAT CHENNAI unabsorbed depreciation that was carried forward up to assessment year 2001-02 would be carried forward to assessment year 2002-03 and become part thereof and it would be governed by provisions of section 32(2) as amended by Finance Act, 2001 and would be available for carry forward and set off against profits and gains of subsequent years without any limit whatsoever. Addition u/s 14A - Since, the assessee has not earned any exempt income, in accordance with the Jurisdictional High Court decisions, supra, no disallowance can be made u/s. 14A
Issues Involved:
1. Liability to deduct TDS on payments made to foreign entities for bandwidth charges, legal & professional charges, and direct cost and networking & communication charges. 2. Granting the benefit of set off of unabsorbed depreciation. Detailed Analysis: 1. Liability to Deduct TDS on Payments to Foreign Entities: The Revenue's appeal contested the deletion of the levy under sections 201(1) and 201(1A) of the Income Tax Act, 1961, asserting that the assessee failed to deduct tax on payments made to foreign entities for bandwidth charges, legal & professional charges, and direct cost and networking & communication charges. The Revenue argued that these proceedings are independent of assessment proceedings and that the assessee should have filed an application under section 195 before making or crediting the payment to these foreign entities. The Tribunal referred to its earlier decision in the assessee’s own case for the Assessment Years 2009-10, 2010-11, and 2011-12, where it was adjudicated that the payments in question are not liable for TDS under the relevant provisions of the Income Tax Act, 1961. The Tribunal noted that the payments for bandwidth charges were for services and did not involve the transfer of the right to use any equipment, thus not qualifying as royalty. Consequently, there was no liability for the assessee to deduct TDS on these payments. Regarding legal and professional charges, the Tribunal upheld the decision that these charges did not attract TDS provisions. The Tribunal emphasized that the payments made by the assessee cannot be subjected to TDS provisions, and thus, the order of the learned Commissioner of Income Tax (Appeals) cancelling the levy under sections 201(1) and 201(1A) was sustained. The appeal of the Revenue on this issue was dismissed. 2. Granting the Benefit of Set Off of Unabsorbed Depreciation: The second issue involved the action of the learned Commissioner of Income Tax (Appeals) in granting the assessee the benefit of set off of unabsorbed depreciation. Both sides agreed that this issue was covered by the decision of the Co-ordinate Bench of the Tribunal in the assessee’s own case for the Assessment Year 2010-11. The Tribunal referred to the Delhi High Court decision in the case of PCIT vs. British Motor Car Co. (1934) Ltd., which held that unabsorbed depreciation carried forward up to the Assessment Year 2001-02 would become part of the depreciation for the Assessment Year 2002-03 and could be carried forward and set off against profits and gains of subsequent years without any limit. Since the issue was already decided by the Hon’ble Delhi High Court in favor of the assessee, the Tribunal found no merit in the Revenue’s appeal. The appeal of the Revenue on this issue was also dismissed. Conclusion: The appeals of the Revenue in I.T.A. No.304/Chny/2018 and I.T.A. No.305/Chny/2018 were dismissed. The Tribunal upheld the decisions of the Commissioner of Income Tax (Appeals) regarding the non-liability of the assessee to deduct TDS on certain payments and the benefit of set off of unabsorbed depreciation. The order was pronounced in the open Court on 25th February 2020 in Chennai.
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