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TMI Blog2010 (1) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... ce - Provisions of section 40(a)(i) are not applicable for claim for deduction u/s 32 of the Act - the appeal filed by the assessee is partly allowed - ITA No. 3636 /Del/2008 - - - Dated:- 29-1-2010 - A. D. JAIN JUDICIAL MEMBER J. K. D. RANJAN ACCOUNTANT MEMBER J. Appellant by : Shri Rajan Bhatia, Advocate Respondent by : Ms. Y. Kakkar, Sr. D.R. ORDER PER RANJAN. AM: This appeal by the assessee for Assessment Year 2000-01 arises out of order of ld.CIT(A)-XII. New Delhi. 2. The first issue for consideration relates to assumption of jurisdiction u/s 147. During the course of hearing, the assessee did not press this ground of appeal, hence, the same is dismissed as not pressed. 3. The next issue for consideration relates to upholding the disallowance of depreciation amounting to Rs.54,74,602/-. The facts of the case staled in brief are that the assessee M/s SMS Demag Pvt. Ltd. is a subsidiary of M/s SMA, Demag AG Germany. M/s SMS Demag India Pvt. Ltd. is engaged in the business of supply as assemblies/sub-assemblies of metallurgical equipment, profession of consultation and technical service in design and engineering lo ferrous and non-ferrous sectors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and used and payment for the same was made in 2006 and it was not chargeable to tax in the year under consideration. The assessee placed reliance on the decision of the I.T.A.T. in the case of Herbal Life International India Pvt. Ltd. v, ACIT 101 ITD 450. The Id. CIT(A), however, noted that nothing had been brought on record to establish that the said payment was not in the nature of interest/royally/fee for technical services. It has been claimed by the assessee that the said amount of Rs. 1,82,48,673/- was an expenditure towards installation/maintenance of software named SAP. Ld. CIT(A) relied on the decision of Hon'ble Madras High Court in the case of Corea Brothers (CR) v. CIT 49 ITR 188 wherein it has been held that it was not largeness of the payments which were considered for capitalizing. It was the actual nature of payment which was to be examined. Since the expenditure was incurred towards installation of software, namely, SAP, the said payment was in the nature of royalty/fee for technical services/interest. This being so, there was no issue left for its being capitalized and subsequent claim of depreciation on the same. She accordingly held that the payment was in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to state that the said payments to its parent company was outside the purview of royalty or fee for technical services. Since he assessee company has not been in a position to submit the copy of agreement between sub-contractor and has also not given the basis of amount paid to the contractor, such services were chargeable to tax in India as the amount has been paid on genuine basis and the provisions of sec. 195 were clearly attracted. It has also been submitted that assessee has made payment in the year under consideration to its parent company which is an admitted fact. Subsequent to its payment the treatment as capital expenditure has no nexus to the deduction of tax on said payments to Ihe payee and burden to deduct TDS is not determined in the nature of outgo whether it was capital or revenue. Further, it was also submitted that the payment was royalty and, therefore, provisions of sec. 40(a) (i) were applicable. Ld. Sr. D.R. relying on the decision of l.T.A.T. in the case of Credit Llyonnais v. DCIT (2005) TIOL 102 I.T.A.T..MM submitted that in applying the non-discriminatory clause what is really to be seen is whether two persons were residents of the same state and wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India as interest or royalty or fee for technical services. The Id. A.R. of the assessee has also contended that even if the income is chargeable to tax in India because of non-discrimination clause 24(1) of DTAA between Republic of India and Federal Republic of Germany, the nationals of a contracting state shall not be subjected in other contracting state to any taxation or any requirement connected therewith which is more burdensome than the taxation and connected requirement to which nationals of that other state in the same circumstances and under the same conditions are/or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to the persons who are the residents of one or of both the contracting states. In our considered opinion the payment made for acquisition of an asset whether it is a revenue expenditure or capital, provisions of section 40(a)(i) of the Act will not be applicable in case of resident assessee for assessment year 2000-01. Therefore, as per decision of ITAT in the case of Millennium Infocom Tech Ltd. (supra) and also in the case of Herbal Life International India Pvt. Ltd. v. ACIT (supra) because of non-discrimina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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