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TMI Blog2013 (9) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 14A of the Act. The Assessing Officer, however, was of the opinion that the provisions of Rule 8D of the Income Tax Rules, 1962 (in short the Rules ) read with Section 14A of the Act was attracted and therefore he disallowed a sum of ₹ 1,15,20,158/- being 0.5% of average investments as amount disallowable in terms of Rule 8D of the Rules out of the indirect expenses. The CIT(A) noted that application of Rule 8D of the Rules was contrary to the judgement of the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT (2010) 328 ITR 81 (Bom.) wherein it was opined that Rule 8D of the Rules was applicable only with effect from assessment year 2008-09. The CIT(A) further noticed that in the course of assessment proceedings, assessee had suo motto offered for disallowance a sum of ₹ 20,96,382/- out of specific finance and accounts personnel salaries and other costs, which were allocable to the earning of exempt dividend income. After negating the action of the Assessing Officer to apply Rule 8D of the Rules following the judgement of the Hon ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra), the CIT(A) setaside the matter b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 14A of the Act as the same is applicable from assessment year 2008-09 onwards. Therefore, invoking of Rule 8D of the Rules by the Assessing Officer has been rightly set-aside by the CIT(A). 6. Further, in our view, having regard to the discussion made by the Assessing Officer in para 6.3 of the assessment order, it is found that he was not satisfied with the plea of the assessee that no expenditure has been incurred in relation to earning of the exempt income. The satisfaction so recorded by the Assessing Officer, in our view, deserves to be upheld and no cogent arguments to the contrary have been advanced by the appellant before us. In so far as the amount of disallowance under Section 14A of the Act is concerned in this assessment year, in the absence of Rule 8D of the Rules, the same is required to be calculated on a reasonable basis; and, in the course of assessment proceedings, assessee itself computed such disallowance at ₹ 20,96,382/- out of the salaries and general expenses. Notably, in so far as the interest cost is concerned, assessee offered an explanation to the effect that the investments in question were made out of the GDRs which did not carry an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnologies Pro Engineering Foundation 3,00,196 4 DESIGNTECH Systems 21 Hyperworks- Hypermesh 3,60,000 5 Ansys Software Ansys Mechanical 7.0 1,68,059 10. The Assessing Officer had disallowed of ₹ 37,72,107/- out of Computer Software Expenses treating the same to be capital expenditure, out of which the CIT(A) allowed ₹ 3,86,545/- as revenue expenditure and the balance of ₹ 33,85,562/- was treated as Capital expenditure ; as detailed above. Before us, the learned counsel has made a solitary plea based on the judgement of the Hon ble Bombay High Court in the case of CIT vs. Raychem RPG Ltd. (2011) 64 DTR 57 (Bom) to point out that where the software acquired by the assessee did not form part of the profit-making apparatus, the same was liable to be allowed as revenue expenditure . Considering the aforesaid judgement of the Hon ble Bombay High Court in the case of Raychem RPG Ltd. (supra), we find that the expenditure incurred by the assessee of ₹ 23,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be deducted under Section 194J of the Act, being payments for professional services whereas the assessee had deducted the tax in terms of Section 194C of the Act treating the same to be contractual payments. Since as per the Assessing Officer, there was a shortfall in deduction of tax at source, he, therefore, disallowed the corresponding expenditure of ₹ 86,948/- by invoking Section 40(a)(ia) of the Act. 14. Before us, the learned counsel pointed out that the Tribunal in its order dated 31.01.2013 (supra) in the assessee s own case, held that the action of the assessee in deducting the tax under Section 194C in relation to the payments by way of Testing Inspection Fee was justified. Following the aforesaid decision, therefore, it has to be held that there was no default on the part of the assessee in deducting the tax at source under Section 194C of the Act in the present case and therefore, the Assessing Officer wrongly invoked Section 40(a)(ia) of the Act to make the disallowance, which is hereby deleted. 15. The third limb of the disallowance is an amount of ₹ 20,68,111/- representing crane hire charges. In this regard also, the only difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice the crucial expression in Section 40(a)(ia) of the Act which prescribes that the expenditure specified therein shall be disallowed on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in subsection (1) of Section 139. Clearly, the phraseology to Section 40(a)(ia) of the Act seeks to disallow an expenditure only in situations where the tax is deductible at source and such tax has not been deducted or after deduction has not been paid as per the period prescribed therein. The phraseology used in Section 40(a)(ia) of the Act clearly removes from its purview cases where tax has been short-deducted. Therefore, the inference drawn by the CIT(A) is borne out of a plain reading of Section 40(a)(ia) of the Act. Moreover, the decisions of the Pune Bench of the Tribunal in the case of Sandvik Asia Ltd. vs. JCIT 146 TTJ 644 (Pune); and, also the Mumbai Bench of the Tribunal in the case of Chandabhoy Jassobhoy vide ITA No.20/Mum/2010 dated 08.07.2011 support the aforesaid premise. Thus, in the present case the provisions of Section 40(a)(ia) of the Act are not attracted a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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