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TMI Blog2015 (3) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... act that the assessee has only claimed depreciation and not the entire expenditure. The Tribunal Delhi Bench in the case of SMG Demag (P) (2010 (1) TMI 624 - ITAT, DELHI ) has held that provisions of section 40(a)are not applicable for claim of deduction of depreciation under section 32 of the Act. Payments for purchase of software without deduction tax will not be subject to the provisions of Section 40(a)(i) of the Act.Further, if a similar domestic transaction was made during the year under consideration, it would not have attracted the liability for TDS. Therefore, in the light of the non-discriminatory clause in the Treaty a similar international transaction would also not attract liability of the TDS. - Decided in favour of assessee. Addition on account of arbitration settlement claim - CIT(A) deleted addition - Held that:- It is an undisputed fact that the liability of ₹ 15 lacs Britain Pounds is based on arbitration award dated 10/3/2006. Only a time table has been given for making the payment but the liability has been crystallized during the year under consideration itself and, therefore, the assessee is entitlted for the claim of deduction of the full liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has decided the issue in favour of the assessee and against the Department and in subsequent order, assessment orders of A.Y 1998-99 and 1999-2000 were followed by the AO and the Tribunal followed its own order. The AO proceeded by following his own order for A.Y 1998-99 and 1999-2000. The AO further observed that in the present year the deduction under section 10A is disallowed for two additional ground; (a) 10A eligibility of three units which came into existence after A.Y.1999-2000. The major claim of deduction is in respect of two units which came into existence in A.Y 2005-06; (b) Treating business of the assessee as single integrated unit with complete inter dependence and inter-leasing of funds, resources, management and control. 2.2 Therefore, the present year is not covered by the orders of the Tribunal in earlier years as these issues were not there before the Appellate Authorities in earlier years. The AO further observed that three units which came into existence after 1999-2000, out of which deduction under section 10A has been claimed for two units at ₹ 41,78,00,213/-. These units came into existence in A.Y 2005-06 only and deduction under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo units the year of deduction is second year. Out of five units the assessee has claimed deduction in respect of three units only. It is the say of the Ld. Counsel that it is a settled proposition of law that without disturbing the claim of deduction in the initial year of claim the Revenue Authorities cannot deny the claim of deduction in subsequent years. Reliance has been placed on the decision of the Hon ble Gujarat High Court in the case of Saurashtra Cement Chemical Industries Ltd., 123 ITR 669 (Guj) and also on the decision of the Hon ble Bombay High Court in the case of CIT vs. Paul Brothers, 216 ITR 548 (Bom). 4. Per contra, Ld. DR strongly supported the findings of the lower authorities. It is the say of the Ld. DR that the AO has specifically pointed out the distinguishing facts. Ld. CIT(A) has also elaborately discussed the distinguishing facts and, therefore, findings of earlier years cannot be taken into consideration for the year under consideration. 5. We have carefully perused the orders of the authorities below and the decisions brought to our notice. Let us first see how the claim has been made by the assessee. Unit Name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of three units namely 3SW, 1SW and 5NW the year of deduction is 9th year, which makes initial year to be assessment year 1998-99. In the first year of claim of deduction i.e. A.Y 1998-99 the matter travelled upto the Hon ble Bombay High Court and the Hon ble Court in Income Tax Appeal No.311 of 2004 had an occasion to consider inter-alia the following question of law: (a) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the assessee was entitled to an exemption in respect of the profit derived from the STP undertaking on the basis of that the condition of section 10A(2) are fulfilled. And after considering the facts, Hon ble High Court at para-13 of its order held that the first question of law would have to be ansered in the affirmative in favour of the assessee and against the Revenue. In respect of claim of deduction for units BG3 HYD the year of deduction is second year which makes initial assessment year 2005-06. The claim of deduction in the initial assessment year was allowed by the Tribunal vide ITA No. 3514/Mum/2010. 5.2 Thus, it can be seen that the claim of deduction in respect of each unit where secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction as made by the assessee under section 10A of the Act. Ground No.1 is allowed. 6. Ground No.2 is against disallowance of ₹ 6,17,901/- under section 40(a)(i) of the Act During the course of the assessment proceedings the AO noticed that the assessee has claimed software purchases expenses of ₹ 4,28,65,714/- which includes purchases of ₹ 20,59,671/- claimed to be purchased by foreign branches of the assessee. The AO found that no TDS has been made on this amount on the ground that the purchases are outside India for outside India. In the light of the provisions of section 195(2) of the Act, the AO disallowed a sum of ₹ 20,59,671/- under section 40(a)(i) of the Act. 6.1 Aggrieved, assessee carried the matter before Ld. CIT(A). It was pointed out to the Ld. CIT(A) that the assessee has capitalized the said amount of ₹ 20,59,619/- and has claimed only depreciation of ₹ 6,17,901/-. Therefore, the provisions of section 40(a)(i) of the Act are not applicable for claiming of deduction under section 32 of the Act. After considering the facts and the submissions Ld. CIT(A) observed that the AO is incorrect in holding that the assessee has clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al grounds of appeal. Grievance raised vide ground No.1 relates to the claim of deduction under section 10A of the Act. This issue has been discussed by us in detail in assessee s appeal, qua ground No.1 of ITA No.3517/Mum/2012. For the detailed reasons given therein, Ground No.1 is accordingly dismissed. 11. Ground No.2 relates to the deletion of addition of ₹ 15,25,91,438/- on account of arbitration settlement claim. The AO has considered this issue at para-21 of his order. The AO observed that the assessee has made the claim on the basis of International Arbitration Award. The AO further observed that the arbitration award mention payment of ₹ 15 lacs Britain Pounds in respect of claim of M/s. New Water Consulting Ltd., including VAT and cost. The AO has further noticed that out of the said amount only 7,50,000 Britain Pounds were to be paid in F.Y. 2005-06 and the remaining amount was to be paid in F.Y. 2006- 07. However, the assessee has claimed the entire amount in A.Y 2006-07. The AO, accordingly, disallowed ₹ 15,25,91,238/-. Aggrieved, the assessee carried the matter before Ld. CIT(A). 11.1 Ld. CIT(A) has considered the grievance vide para-9 of his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. 2008-09 29,14,685 1,45,734 No disallowance made in assessment made u/s. 143(3) 6. 2009-10 6,10,892 3,91,355 No disallowance made in assessment made u/s. 143(3) as suo moto disallowance was as per Rule 8D. 7. 2010-11 24,24,940 4,81,316 No disallowance made in assessment made u/s. 143(3) as suo moto disallowance was as per Rule 8D. Considering the facts of the case in the light of the factual matrix mentioned herein above, we do not find any reason to interfere with the findings of Ld. CIT(A). Ground No.3, is dismissed. 17. Ground No.4 is in relation to the deletion of the addition of ₹ 8,15,75,087/- in respect of unbilled software income. 18. At the outset Ld. Counsel for the assessee pointed out that this issue is squarely covered in favour of the assessee and against the Revenue by the decision of the Tribunal for A.Y 2002-03. The AO has considered this issue at para 20 of his order. Ld. CIT(A) has considered ..... 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