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TMI Blog2016 (7) TMI 1333X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act. As such, the provisions of the section 195 is applicable and since the assessee has not deducted TDS and the payment is disallowed u/s.40(a)(i) of the Act is justified. See Verizon Communications Singapore Pte Ltd. [2013 (11) TMI 1058 - MADRAS HIGH COURT]. This ground raised by the assessee is dismissed. Disallowance of fees for technical services made u/s.40(a)(i) - Held that:- The assessee is liable to deduct TDS u/s.195 of the Act and the assessee failed to deduct the TDS and the same is disallowed u/s.40(a)(i) of the Act. Hence, this ground raised by the assessee is rejected. Disallowance of Repairs and Maintenance - revenue or capital - Held that:- This issue came up for consideration before this Tribunal in the case of M/s. K.R.Bakes Pvt. Ltd. [2015 (5) TMI 1035 - ITAT CHENNAI ] wherein held in order to find out the nature of expenditure, it is necessary to find out the nature of construction put up, the purpose of construction/renovation and the use to which the construction put up and also if it is a case of repair, replacement, addition or improvement has to be gone into. It is only on the aforesaid material, keeping in mind the principles enun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces in the return filed by the assessee and issued a notice u/s.148 of the Act. Thereafter, the AO completed the reassessment proceedings by the order u/s.143(3) r.w.s.147 dated 29.12.2010 for the both the assessment years with certain additions. 4. On appeal, the CIT(A) observed that just because the assessment was completed u/s.143(3) vide order dated 10.03.2006, it does not mean that AO has considered all the issues and relevant to the provisions of the Act. He further placed reliance on the following judgments. a) In the case of Siemens Info. Systems Ltd. Vs. ACIT in 343 ITR 188 (Bom.) b) In the case of CIT Vs. S C Finance Ltd., in 207 Taxmann 136(Karnataka) c) In the case of Indian Humepipe Co. Ltd Vs. ACIT in 207 Taxmann 136 (Bom.) d) In the case of Samiti Ltd. UOI in 204 Taxmann 373. e) In the case of CIT Vs.Sunata Bai in 344 ITR 271 (Kerala) f) In the case of CIT Vs.Ratchand Naher in 295 ITR 403 (Rajasthan) Accordingly, Ld.CIT(A) confirmed the reopening of assessment. Aggrieved, the assessee is in appeal before us. 5. ld.A.R reiterated the submissions what he made before the lower authorities. 6. On the other hand, ld.D.R relied on the orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not disclosed all the material facts fully and truly necessary for the assessment at the time of scrutiny. It is to be further noted that as per Explanation 1 to sec.147, production of books at the time of scrutiny will not amount to disclosure of all facts necessary for assessment. As such in our opinion, there is no infirmity in the order of Ld.CIT(A) and the same is confirmed. This ground of assessee is rejected in all these three appeals on same reason. 8. The next ground in ITA Nos.1330,1331 1333/Mds./15 is with regard to disallowance of Bandwidth Connectivity charges for non deduction of TDS from the said payment u/s.195 of the Act. 8.1 The facts of the issue are that the assessee company in India hires certain specified bandwidth capacity from a non-resident service provider for the purpose of data transmission. This bandwidth capacity is available for the customer in a dedicated manner during the contract period whether it is used or not. Thus, the right to transmission process through the network of the service provider is granted to the customer. So, the assessee company gets a dedicated service from the Foreign Service provider for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers to assessee in respect of aforesaid bandwidth services were in nature of royalty taxable under section 9(1)(vi) as also under Article 12(3)(b) of DTAA with Singapore - Tribunal upheld order of Assessing Officer - Whether in view of insertion of Explanations 4 and 5 to section 9(1)(vi) by Finance Act, 2012 with retrospective effect from 1- 6-1976, payment in question made to assessee was taxable in India under section 9(1)(vi) read with Explanation 2(iva) and correspondingly Article12(3) of India-Singapore DTAA-Held, yes (in favour of Revenue] Hence, in our opinion the payment is nothing but a royalty as defined under clause (i) of Explanation 2 to section 9(1)(vi) read with Explanation 6 to section 9(1)(vi) of the Income Tax Act. As such, the provisions of the section 195 is applicable and since the assessee has not deducted TDS and the payment is disallowed u/s.40(a)(i) of the Act is justified. This ground raised by the assessee is dismissed. 9. The next ground in ITA No.1330 1331 /Mds./15 is with regard to disallowance of fees for technical services made u/s.40(a)(i) of the Act. 9.1 The facts of the case are that the assessee made payments to Technip It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in India for deducting tax on fees for technical services. Hence, the payments made to be disallowed u/s 40(a)(ia) of the Act. 9.3 The Ld.CIT(A) further observed that in the present case, the transaction is between the appellant and the Technip Italy. It is important to point out as mentioned in the assessment order, the assessee had applied for a Certificate for non-deduction of tax at source u/s 195(2) of the Act before the Authorities for International Taxation for payments to be made in the year 2002-03. However, for the year under consideration, no such application was made as per the order of the AO. It is an important point to note that the appellant himself was aware of the provisions of Chapter-XVIIB that it was liable to deduct tax at source. There is no reason as to why the appellant chose not to do so, for the current year before making the payments. According to Ld.CIT(A), in the present case, in the earlier years, the assessee had applied for Certificate and got permission of the Department before the payments being made. Whereas, for the year under appeal, no such application was made reasons given during the course of appeal proceedings as to why this was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation admissible to the assessee is 100% and not 10% as assumed by the AO, as the expenditure was incurred on pure temporary wooden structures like wooden partitions, false ceilings etc. and such assets are eligible for a depreciation @ 100% of their cost as per IT Rules, 1962. According to him, on perusing the details of nature of expenditure furnished by the assessee, the claim of the assessee that the same is revenue expenditure seem misplaced. For an expenditure to be treated as revenue normally the same is incurred periodically. According to CIT(A), the quantum of money spent on repairs to building, cannot be the basis for treating the expenditure as revenue or capital. Further, he observed that the claim of expenditure spent on repairs to building taken on lease and the nature of improvements made like A/C ducting etc. as revenue expenditure is difficult to accept. Hence, CIT(A) confirmed that the expenditure is in nature of capital expenditure and allowed depreciation. Aggrieved with the order of Ld.CIT(A), the assessee is in appeal before us. 10.3 We have heard both the parties and perused the material on record. This issue came up for consideration before this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the assessee if put on to the test of Explanation 1 would show that the construction made by the assessee on the leased out premises would amount to capital expenditure. The assessee in order to support his case has relied on the judgment of the Madras High Court in the case of TVS Lean Logistics Ltd. (supra). In the said case, the assessee had constructed a building on the leased land for the business advantage. The Court held that the entire cost of construction is admissible as revenue expenditure. Explanation 1 categorically states that the business or profession is carried on in a leased building and not on land. The High Court in para 4.4 of the judgment further held as under:- 4.4 What constitutes a capital expenditure and what does not, to attract Expln. 1 to section 32(1) of the Act depends upon the construction of any structure or doing any work or in relation to and by way of renovation, extension or improvement to the building which is put up in a building taken on lease by him for carrying on his business and profession of the assessee, but not in a case of construction of any structure or doing any work or relation to where such building is put up/constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.All these cases have looked upon expenditure which did bring about some kind of an enduring benefit to the company as a revenue expenditure when the expenditure did not bring into existence any capital asset for the company. The asset which was created belonged to somebody else and the company derived an enduring business advantage by expending the amount. In all these cases, the expenses have been looked upon as having been made for the purpose of conducting the business of the assessee more profitably or more successfully. In the present case also since the asset created by spending the said amounts did not belong to the assessee but the assessee got the business advantage of using modern premises at a low rent, thus saving considerable revenue expenditure for the next 39 years, both the Tribunal as well as the high Court have rightly come to the conclusion that the expenditure should be looked upon as revenue expenditure. 14. From the above judgment, we can conclude that it is essential that the expenditure incurred on the construction of any structure on the leased premises should result in enduring benefit. That any expenditure incurred for civil work by a lessee in ..... 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