2023 (8) TMI 967 - HC - Income Tax

Deduction u/s 35 - claim denied as this was not part of the Return of Income ROI - stand of the assessee is, thus, that the document which is appended to the affidavit-in-reply is the copy of the original ROI ? - whether Annexure-II/Annexure-A, which is appended to the PCIT s affidavit, was the ROI said to have been filed by the respondent/assessee? - HELD THAT - A careful perusal of Annexure-II which is appended to the appeal, and Annexure-A which is appended on the affidavit of the PCIT dated 21.10.2018, shows that the documents are titled Computation of Income and Tax Thereon (ITR-6) .Clearly, this is not the ROI filed by the petitioner. As noticed both by the Tribunal and CIT(A), this a computation of income concerning the respondent/assessee which was carried out by the Central Processing Centre (CPC), Bangaluru. The weight of the evidence is also in favour of the respondent/assessee, which is also evident from, what is noted by the AO in paragraph 1 and 2 of the assessment order dated 25.02.2013. Thus, having regard to the record, and the affidavit of the PCIT dated 31.10.2018, we are of the opinion, as noted above, that the weight of the evidence which was placed before the CIT(A) and the Tribunal is clearly in favour of the respondent/assessee. We find no reason to interfere with the impugned order. TDS u/s 195 - commission paid to a non-resident foreign agent - whether accrued or deemed to have accrued in India? - HELD THAT - As no material was brought on record by the appellant/revenue, which could have established that the commission paid to a non-resident foreign agent had accrued or deemed to have accrued in India.Therefore, since no income chargeable to tax arose in the hands of the non-resident, as per the provisions of the Act, there was no obligation to deduct tax at source u/s 195 of the Act. Given this position, in our view, the Tribunal rightly sustained the deletion of disallowance u/s 40(a)(i). Disallowance u/s 37 - Assessee has not discharged its initial onus - HELD THAT - Tribunal sustained the deletion of disallowance as it was made by the AO solely based on the information available in the Annual Information Return AIR . According to the Tribunal, since there was a mismatch between the books of accounts of the assessee and the information available in AIR, the AO should have conducted an enquiry before deleting the expenditure claimed by the assessee.We find nothing wrong in the approach adopted by the Tribunal. Higher rate of depreciation on electrical fittings by holding the same as the plant - HELD THAT - Tribunal, in our opinion for good reason, has concluded that electric fittings were amenable to higher rate of depreciation, as they were part of plant and machinery, and not furniture and fixtures. This view was backed by a decision of the coordinate bench of this court BSES Rajdhani Powers Ltd 2010 (8) TMI 58 - DELHI HIGH COURT .

Summary

Issues Involved:
1. Deduction for capital expenditure on scientific equipment under Section 35 of the Income Tax Act.
2. Disallowance under Section 40(a)(i) of the Act.
3. Disallowance of expenditure based on Annual Information Return (AIR).
4. Classification of electrical fittings and computer peripherals for depreciation purposes.

Summary of Judgment:

1. Deduction for Capital Expenditure on Scientific Equipment:
The primary issue was whether the assessee claimed a deduction for capital expenditure on scientific equipment under Section 35 of the Income Tax Act for AY 2010-11. The Assessing Officer (AO) disallowed the claim, stating it was not part of the Return of Income (ROI) filed by the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] reversed this view, allowing the deduction, which was sustained by the Tribunal. The Tribunal found that the assessee had indeed filed the ROI showing the claimed deduction. The High Court upheld this view, concluding that the weight of evidence favored the respondent/assessee.

2. Disallowance under Section 40(a)(i):
The Tribunal sustained the deletion of disallowance of Rs. 1,35,03,868 under Section 40(a)(i) of the Act, concluding that no material was brought on record by the revenue to show that the commission paid to a non-resident foreign agent had accrued or deemed to have accrued in India. Consequently, there was no obligation to deduct tax at source under Section 195 of the Act. The High Court agreed with this conclusion.

3. Disallowance of Expenditure Based on AIR:
The Tribunal sustained the deletion of disallowance of Rs. 2,68,222, which was made by the AO based solely on information available in the AIR. The Tribunal noted that the AO should have conducted an enquiry to verify the mismatch between the books of accounts and the AIR information before making the disallowance. The High Court found no fault in this approach.

4. Classification of Electrical Fittings and Computer Peripherals:
The Tribunal concluded that electrical fittings were part of plant and machinery, and not furniture and fixtures, thus eligible for a higher rate of depreciation. This view was supported by a decision of a coordinate bench of the High Court. The Tribunal also allowed higher depreciation for computer peripherals, considering them integral parts of computers. The High Court found no reason to interfere with these conclusions.

Conclusion:
The High Court found no substantial question of law arising from the Tribunal's order and thus, dismissed the appeal. The decision of the Tribunal on all issues was upheld.