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TMI Blog2021 (3) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... already held that the expenditure in question cannot be regarded as an expenditure of capital in nature. The aforesaid directions of the DRP has not been challenged either by the Assessee or the revenue and have become final. Therefore, the AO while giving effect to the order of the Tribunal, was not competent to go into the question as to whether the expenditure of software is capital or revenue in nature. In the light of the DRP s findings which we have already extracted above there cannot be any debate or doubt on the claim of the assessee and the AO s Order Giving Effect to the directions of the Tribunal suffer from an apparent mistake from the face of the record and therefore the proceedings under section 154 of the Act were justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that it followed the accounting treatment as per India GAAP. The assessee also maintained that there was no need to deduct tax on such software purchases. 3. In the final order of assessment dated 31.01.2014 passed under section 143(3) r.w.s. 144C of the Income Tax Act, 1961 ( the Act ) the AO disallowed the claim of the assessee for deduction of the aforesaid sums because the assessee did not deduct tax at source and payments made to nonresidents as required under section 195 of the Act. The following were the relevant observations of the AO: 6.8 Considering above, it was seen that the assessee failed to deduct tax on the amount of ₹ 17,1.1,41,734/-. Therefore, an amount ₹ 17,11,41,734/- is was proposed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO disallowed the software expenses of ₹ 17,11,41,734/- on the ground that no TDS was deducted at source. It is submitted before us that the AO had disallowed the same that inspite of the fact that the appellant-company had complied with TDS provisions. of the AO for due verification and if it is found that the assessee had complied with the TDS provisions the same may be allowed as deducted. 5. Pursuant to the order of the ITAT, the AO passed an order under section 143(3) r.w.s. 254 of the Act in which the AO agreed that the assessee has deducted tax at source on the payments made to non-residents. He, however, held that the expenses in question were capital in nature and therefore cannot be allowed as deduction. He further he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 143(3) of the Act, the assessee ought to have challenged that portion of the order also and since the assessee failed to do so, the AO was justified in treating the expenditure as capital and allowing only depreciation. The CIT(A) also expressed the view that the issue was debatable and therefore the proceedings under section 154 of the Act was not appropriate. 7. Aggrieved by the order of the CIT(A), the assessee is in appeal before the Tribunal. Learned Counsel for the assessee submitted before us that as against the original order of assessment passed under section 143(3) of the Act dated 31.01.2014 in which the AO also made observations by way of an alternative case to disallow the expenses in question that the expenditure in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29.11.2018 and the DRP has already held that the expenditure in question cannot be regarded as an expenditure of capital in nature. The aforesaid directions of the DRP has not been challenged either by the Assessee or the revenue and have become final. Therefore, the AO while giving effect to the order of the Tribunal, was not competent to go into the question as to whether the expenditure of software is capital or revenue in nature. 10. In our view, in the light of the DRP s findings which we have already extracted above there cannot be any debate or doubt on the claim of the assessee and the AO s Order Giving Effect to the directions of the Tribunal suffer from an apparent mistake from the face of the record and therefore the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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