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TMI Blog2022 (12) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable to the assessee. Thus we hold that the Assessing Officer is not justified in invoking the provisions of section 40(a)(ia) in respect of the payment made for purchase of software license in respect of which claim of depreciation was made. Accordingly, this ground of appeal no.2 stands allowed. Short credit for TDS - HELD THAT:- We restore this issue to the file of the Assessing Officer with direction to allow the credit for TDS made by MSEDCL on the interest income after due verification of Form 26AS and subject the provisions of section 199 of the Act. Thus, this ground of appeal no.3 stands allowed for statistical purposes. - ITA No.2675/PUN/2017 - - - Dated:- 17-6-2022 - SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ASSESSEE BY : SHRI MADHUR AGARWAL REVENUE BY : SHRI ARVIND DESAI ORDER PER INTURI RAMA RAO, AM : This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 13, Pune. [ the CIT(A) ] dated 11.08.2017 for the assessment year 2013-14. 2. Briefly, the facts of the case are that the appellant is a company incorporated under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparables, whose average profit margin was computed at 5.96% using 3 years weighted data :- Sr. No. Name of Companies PLI % 1 Ajel Ltd. 15.63 2 Akshay Software Technologies Ltd. 7.17 3 Cat Technologies Ltd. -14.72 4 CG-VAK Software Exports Ltd. 18.40 5 Cherrytec Intelisolve Limited 12.77 6 Cignity Technologies Ltd. 8.59 7 Infotech Enterprises Information Technology Services Pvt. Ltd. 15.61 8 Melstar Information Technologies Ltd. -10.45 9 Minvesta Infotech Ltd. 2.51 10 NUC Soft Limited 5.25 11 Softech Infinium Solution Ltd. 1.68 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ologies Ltd. 8.59 3 Exilant Technologies Pvt. Ltd. 10.48 4 E Zest Solutions Ltd. 9.30 5 Harbinger Software Pvt. Ltd 21.98 6 Infobeans Systems India Ltd./Infobeans Technologies 33.73 7 R. S. Software (India) Ltd. 17.35 8 Priya Softweb Solutions Pvt. Ltd. 21.02 9 Sasken Communication Technologies Ltd. 12.15 16.16 10 Saven Technologies Ltd. 26.96 26.54 11 Thirdware Solutions Ltd. 36.98 40.42 12 Vama Industries Ltd. 36.27 36.27 Average 21.10 23.94 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable entity and objected by the appellant on the ground that it is software product development company and also deal with hardware placing reliance on the company s revenue recognition policy as well as descriptive of nature of business of the company and no segmental results was available. However, the TPO rejected the above contention by stating that the said company is only into software development company. Even on appeal before the ld. CIT(A), the inclusion of this company in the set of comparables was upheld placing reliance on the information provided in Profit Loss Account which indicated that the income is mainly earned from software. 13. Being aggrieved the appellant is in appeal before us. 14. It is argued before us that this company is not functionally comparable with that of the assessee company, as it is engaged in sale of software product and earning income in the form of license fee. The ld. AR taking us through Profit Loss Account at page no.1225 of the Paper Book submitted that this company had purchased stock-in-trade of Rs.24.82 crores which indicate that the sale of the products and there is no bifurcation of revenue from sale of software develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in the absence of segmental results, a company which is engaged into dealing with software products as well as providing software services cannot be compared with a company which is engaged in software development services. Therefore, we direct the Assessing Officer/TPO to exclude this company, Thirdware Solutions Ltd. from the list of the comparables. 19. The other grounds of appeal raised before us seeking exclusion/inclusion of comparables was not pressed during the course of hearing before us by stating that in the event the comparable entity, Thirdware Solutions Ltd. is excluded from the list of comparables chosen by the TPO consideration received by the assessee shall be at arm s length price. Therefore, we dismiss the other grounds of appeal seeking the exclusion/inclusion of the comparables as other grounds of appeal become academic in nature. However, we grant liberty to the appellant to press these grounds of appeal in the event on further appeal this comparable, Thirdware Solutions Ltd. is held to be comparable. 20. Ground of appeal no.2 challenges the addition u/s 40(a)ia) on account of payment made for purchase of license on the ground that the tax wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The deduction under section 32 is not in respect of the amount paid or payable which is subjected to TDS; but is a statutory deduction on an asset which is otherwise eligible for deduction of depreciation. Section 40(a)(i) and (ia) of the Act provides for disallowance only in respect of expenditure, which is revenue in nature, therefore, the provision does not apply to a case of the assessee whose claim is for depreciation, which is not in the nature of expenditure but an allowance. The depreciation is not an outgoing expenditure and therefore, provisions of Section 40(a)(1) and (ia) of the Act are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under section 40(a)(i) and (ia) of the Act would be made. It is also pertinent to note that depreciation is a statutory deduction available to the assessee on a asset, which is wholly or partly owned by the assessee and used for business or profession. The depreciation is an allowance and not an expenditure, loss or trading liability. The Commissioner of Income Tax (Appeals) has held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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