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TMI Blog2020 (5) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ame, being the decision of the Hon ble Jurisdictional High Court. In the result, the ground of appeal is allowed. Disallowance of additional depreciation u/s 32(1)(iia) - plant machinery which were used for less than 180 days in the Previous Year 2013-14 - case of the Revenue is that such additional depreciation can be claimed only in the first year in which the asset is acquired and installed, and cannot be carried forward to be claimed in the subsequent year - HELD THAT:- Statutorily provides for carry forward of the balance 50% of the additional depreciation in the immediately succeeding previous year in which the plant machinery is acquired and installed and though the said provisions have been introduced with effect from 1.4.2016, the Courts in case of Shri T.P Textiles and Rittal India [ 2017 (3) TMI 739 - MADRAS HIGH COURT] have held the same to be clarificatory in nature and thus have a retrospective application. Therefore claim of remaining additional depreciation is hereby allowed and the matter is decided in favour of the assessee and against the Revenue. In the result, the ground of appeal is allowed. TDS u/s 195 - Disallowance of commission paid to non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/- claimed u/s 32(1)(iia) of IT Act, 1961 4. The Ld. CIT(A) has erred on facts and in law in confirming the disallowance of commission of ₹ 19,56,000/- paid to non residents u/s 40(a)(ia) of IT Act, 1961. 2. In ground no. 1, the assessee has challenged the confirmation of the disallowance of ₹ 2,44,530/- u/s 14A read with Rule 8D. 3. The ld AR submitted that during the year, the assessee has shown total investment of ₹ 242.03 lacs on which dividend of ₹ 27,225/- was earned which was claimed exempt u/s 10 of the Act. The assessee explained that it has not incurred any expenditure in earning the dividend income, thus, no disallowance is called for. The AO observed that assessee has debited interest expense of ₹ 1213.31 lacs in its profit loss account. There is a nexus between expenditure incurred and investment made by the assessee. Additionally, managerial/ administrative cost for making the investment cannot be denied. Accordingly, by invoking the provision of section 14A r.w. rule 8D of the IT Rules, he made disallowance of ₹ 2,44,530/-, being 1% of the average investment of ₹ 2,44,53,000/-. 4. It was further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30/-. This is illogical and irrational. Even if the amount of ₹ 27,225/- is taxed, the burden of tax would be lower than that imposed by the AO by disallowing the expenditure of ₹ 2,44,530/-. 8. Per contra, the ld. DR is heard who has relied on the order of the lower authorities. 9. We have considered the rival contentions and perused the material available on record. We find that the disallowance of expenditure u/s 14A exceeds the dividend income claimed as exempt by the assessee. The Therefore, disallowance on account of administrative expenses under Rule 8D(iii) is hereby restricted to the extent of exempt income so claimed by the assessee. In the result, the ground of appeal is partly allowed. 10. In ground no. 2, the assessee has challenged the disallowance of depreciation of ₹ 46,630/- on windmill by treating the civil work foundation as building on which depreciation is allowed @ 10% and electrical items/ components as plant machinery on which depreciation is allowed @ 15% instead of rate of 80% claimed by the assessee. 11. It was submitted that during the year, assessee has claimed depreciation of ₹ 28,55,49,555/- in the P L a/c. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f K.K. Enterprises and Mehru Electricals (supra) and we fail to understand that where the said decisions were brought to the notice of ld CIT(A), what stopped him in following the same, being the decision of the Hon ble Jurisdictional High Court. In the result, the ground of appeal is allowed. 15. In Ground no. 3, the assessee has challenged the disallowance of additional depreciation of ₹ 2,02,91,277/- claimed u/s 32(1)(iia) of IT Act, 1961. 16. In this regard, the ld AR submitted that the assessee claimed additional depreciation of ₹ 2,02,91,277/- on those plant machinery which were used for less than 180 days in the Previous Year 2013-14. The AO observed that additional depreciation claim pertains to plant machinery installed and put to use in AY 2014-15, therefore, same is not allowable in current AY 2015-16. Section 32(1)(ii)(a) allows additional depreciation @ 20% of the cost of new plant machinery which has been acquired and installed. There is no provision in the law which allows the assessee s claim for carry forward of additional depreciation. Accordingly, he disallowed the claim of additional depreciation. The Ld. CIT(A) held that the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the year may motivate the assessee to defer such investment to the next year for availing full 100% of additional depreciation in the next year. To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more, it is proposed to provide that the balance 50% of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery, shall be allowed in the immediately succeeding previous year. The amendment being a beneficial amendment, only to remove ambiguity and hardship has retrospective effect as held in the following cases:- CIT Vs. Shri T.P. Textiles (P.) Ltd. (2017) 246 Taxman 324 (Mad.) (HC): In view of section 32(1)(iia), there is no limitation placed on assessee in claiming balance additional depreciation in assessment year which follows assessment year in which machinery has been bought and used for less than 180 days. As a matter of fact, with effect from 01.04.2016, the ambiguity if any, in this regard in the mind of the AO stands removed by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of ₹ 2,02,91,277/- confirmed by Ld. CIT(A) is uncalled for and same be directed to be deleted. 19. Per contra, the ld. DR is heard who has relied on the lower authorities. 20. We have considered the rival contentions and perused the material available on record. There is no dispute that the assessee is eligible for additional depreciation on new plant and machinery as per the provisions of section 32(1)(iia) of the Act. The case of the Revenue is that such additional depreciation can be claimed only in the first year in which the asset is acquired and installed, and cannot be carried forward to be claimed in the subsequent year. The case of the assessee is that since new plant and machinery was used for less than 180 days in the first year and thus, it has claimed half of the additional depreciation, it is eligible for carried forward of unclaimed remaining half of additional depreciation and the same should be allowed in the second year and in support has relied on the amendment brought in by the Finance Act, 2015 whereby third proviso to section 32(1)(ii) has been inserted with effect from 1.4.2016 which reads as under: Provided also that where an asset referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 195, he disallowed commission payment of ₹ 19,56,000/- u/s 40(a)(ia) of IT Act. The Ld. CIT(A) confirmed the order of AO stating that as per Explanation 2 to section 195, assessee is required to deduct tax at source on payment made to non-residents whether or not he has a residence or place of business or business connection or any other presence in any manner whatsoever in India. Further, assessee has not brought any evidence on record to show that the sum received by the non-resident in form of selling commission was not chargeable to tax under the Income tax Act. 25. The ld. AR submitted that Section 195 casts an obligation on any person responsible for paying to a non-resident any sum chargeable under the provisions of this Act to deduct tax at source thereon at the rates enforce. Explanation 2 to this section further clarifies that obligation to deduct tax at source is there irrespective of whether or not the non-resident has a residence or place of business or business connection in India or any other presence in any manner whatsoever in India. Thus, the obligation to deduct tax at source arises only when the payment made to the non-resident is chargeable to tax un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gents is not liable for deduction of tax u/s 195 of the Act. Reliance was placed on the following decisions:-. PCIT Vs. Nova Technocast Pvt. Ltd.(2018) 166 DTR 0426 (Guj.) (HC) M/s JLC Electromet Pvt. Ltd. Vs. ACIT ITA No.1494/JP/18 order dt. 04.09.2019 (Jaipur) Satyam Polyplast vs. DCIT ITA No.158/JP/19 order dt. 14.05.2019 (Jaipur) DCIT vs. Mc Fills Enterprise (P.) Ltd. (2019) 174 ITD 667 (Ahd) Evolv Clothing Co. (P) Ltd. vs. ACIT (2018) 168 DTR 1 (Mad) In view of above, disallowance of commission expenses of ₹ 19,56,000/- confirmed by Ld. CIT(A) is uncalled for and same be directed to be deleted. 27. Per contra, the ld. DR submitted that the A.O. has given a finding that the payments made by the assessee are in the nature of fee for technical services and therefore, as per the provisions of Section 9(1)(vii) of the Act, the said payments are chargeable to tax in India and consequently the assessee was under obligation to deduct tax at source failing which the said payment was not allowable as deduction as per the provisions of Section 40(a)(i) of the Act. Thus, the ld DR has submitted that once the payment in question is held to be fee for te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on account of 'fee for technical services', which in turn, has been defined to include any payment for rendering of any managerial or consultancy services rendered by the non-resident agent. In the instant case, since the assessee was not able to sell his goods on his own offshore, he has to engage the managerial acumen and expertise of the non-resident in lieu of a consideration, termed as 'Commission'. This is to say that the payment by the resident assessee in connection with his business in India to a person outside India making use of his expertise in sale of similar goods in a particular country is nothing but a fee which has been paid by the resident assessee to the non-resident for the technical services rendered by him. 6.7 This being the stated position and the factum of the case, the payment made by the assessee to a non-resident is squarely covered by the provisions of Section 195 of the Income Tax Act, 1961 which call for deduction of tax at appropriate rate at the time of payment to a non-resident. In view of these provisions which find place in the statute, the provisions of Section 40(a)(ia) are also attracted wherever TDS on payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or business connection in India, therefore, the appellant was not required to deduct tax at source on the above referred payments, is not correct. Regarding the second argument of the appellant that the income of the recipients of the above referred expenses was not sum chargeable under the provisions of Income Tax Act, 1961 therefore the provisions of section 195(1) are not applicable to these payments , the A/R of the appellant was specifically requested to clarify whether any ruling was obtained from the Authority for Advance Ruling u/s 245R(2), regarding non taxability of the income of the recipient in India under the Income Tax Act. The A/R submitted that no such ruling was obtained from AAR by the recipients of the above referred expenses. There is no other evidence on record to show that the sum received by the non-residents in the form of selling commission (₹ 19,56,000) was not chargeable to tax under the Income Tax Act. There is no order or finding by any Income Tax Authority that the above referred sum of ₹ 19,56,000/- was not chargeable to tax under I.T. Act, 1961. Therefore, I am of the considered view that the appellant was required to deduct tax at so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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