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2017 (12) TMI 917 - AT - Income TaxTDS u/s 195 - non deduction of tds in respect of the purchase of crude oil by invoking the provisions of Sec.40(a)(i) - Held that - The claim of the assessee that the decision of the Hon ble Supreme Court in the case of M/s.GE India Technology Cen.(P) Ltd. 2010 (9) TMI 7 - SUPREME COURT OF INDIA would apply and TDS is liable to be made when the remittances is on sum chargeable under the Act would come into play. Now, M/s.HEPI having income chargeable under the Act in India and having been assessed to such tax under the Act in India and the assessee having not obtained the necessary Certificate u/s.197(2), we are of the view that the disallowance made by the AO on account of non-deduction of TDS in respect of the purchase of the crude oil from M/s.HEPI by the assessee, which has also been upheld by the Ld.CIT(A) is on a right footing and does not call for any interference. - Decided against assessee. Nature of expenses - software license fees and maintenance fees - revenue or capital - Held that - The assessee had paid software license fees and maintenance fees to M/s.Aspen Tech for the systems which is used by the refinery for making decision support solutions for optimizing production. These payments are made on yearly basis and towards maintenance of the software. The expenditure is in nature of recurring one - Decided in favour of assessee.
Issues Involved:
1. Re-opening of assessment. 2. Disallowance under Section 40(a)(i) for non-deduction of TDS. 3. Nature of expenditure on software purchase. Issue-wise Detailed Analysis: 1. Re-opening of Assessment: The assessee argued that the Commissioner of Income Tax (Appeals) erred in re-opening the assessment as all materials and particulars were fully disclosed during the initial assessment under Section 143(3). The assessee claimed that the re-assessment was based on a change of opinion without any concealment of particulars, thus lacking jurisdiction. This argument was supported by the Supreme Court decision in CIT v. Kelvinator of India Limited. However, during the hearing, the assessee chose not to press these grounds, leading to their dismissal as not pressed. 2. Disallowance under Section 40(a)(i) for Non-Deduction of TDS: The main contention in the assessee's appeal was the disallowance of ?95,07,58,118 under Section 40(a)(i) due to non-deduction of TDS on payments made to Hardy Exploration and Production India Inc (HEPI) under Section 195. The assessee argued that the payment was for the purchase of crude oil, which is not subject to tax in India, referencing the Supreme Court decision in G.E. Technology Center vs. CIT. The assessee also cited a CBDT Circular clarifying that disallowance under Section 40(a)(i) should be based on the portion of the sum chargeable to tax. The Revenue countered that the assessee did not obtain the necessary certificate under Section 195(2) and was thus liable to deduct TDS. The Tribunal, considering the Supreme Court decisions and the assessment order of HEPI, concluded that since HEPI had taxable income in India, the assessee was required to deduct TDS. Therefore, the disallowance by the AO and CIT(A) was upheld, and the assessee's appeal was dismissed. 3. Nature of Expenditure on Software Purchase: The Revenue's appeal contested the CIT(A)'s decision that expenditure on software purchase was revenue in nature. The Revenue argued that the software provided an enduring benefit, making the expenditure capital in nature, and referenced the Special Bench decision in M/s. Amway India Enterprises. The assessee, however, relied on the Jurisdictional High Court decision in M/s. Southern Roadways Ltd., which held that software expenditure is revenue in nature as it enhances operational efficiency without resulting in the acquisition of a capital asset. The Tribunal upheld the CIT(A)'s decision, noting that the software payments were recurring and for maintenance, aligning with the Jurisdictional High Court's ruling. Thus, the Revenue's appeal was dismissed. Final Orders: Both the assessee's appeal (ITA No.687/Mds/2013) and the Revenue's appeal (ITA No.853/Mds/2013) were dismissed. The Tribunal pronounced the order in the open court on December 07, 2017, at Chennai.
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