JOINT COMMISSIONER OF INCOME TAX(OSD), CIRCLE- 4(1)(2), BANGALORE vs. M/S. MSOURCE (INDIA) PRIVATE LIMITED, BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL “A’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER Assessment Year: 2012-13 The Asst. Commissioner of M/s. Msource (India) Pvt. Ltd. 1st Floor, WTC 3 Block, B Bagmane World Income Tax, Circle - 4(1)(2), Room No.230, 2nd Technology Centre, Floor, BMTC Building, 80 Feet Road, Vs. K. R. Puram, Marathahalli, 6th Block, Koramangala, Outer Ring Road, Doddenekundi, Bangalore – 560 095. Bangalore-560 024. PAN NO : AACCM 2097 G APPELLANT RESPONDENT C.O. No.57/Bang/2019 (in M/s. Msource (India) Pvt. Ltd. Vs. The Asst. Commissioner of Bangalore-560 024. Income Tax, PAN NO : AACCM 2097 G Bangalore – 560 095. APPELLANT RESPONDENT Assessee by : Shri. K. R. Girish, CA Revenue by : Shri. Kannan Narayanan, D.R. Date of Hearing : 01.12.2020 Date of Pronouncement : 03.12.2020 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal is by the Revenue directed against the order of CIT(A) dated 27.03.2019 and C.O. by assessee.

C.O. No.57/Bang/2019 2 2. In the appeal, the Revenue has raised the following grounds:

3. In C.O. the assessee has challenged that the order has been passed in violation of the principles of natural justice. However, at the time of hearing, this C.O. was not pressed by the assessee. Accordingly, we dismiss C.O. as not pressed. Coming to the Revenue’s appeal, the facts are that the Assessment Order under section 143(3) was passed on 22.04.2016 determining the total income of the assessee at Rs.68,20,52,160/-. The assessee said to be claimed depreciation on plat and machinery @ 60% against the applicable rate of 10%. However, the AO disallowed the claim under section 14A of the Income Tax Act, 1961 (hereafter called ‘the Act’). In addition to this, there was a disallowance with regard to interest on belated TDS claimed. On appeal, CIT(A) observed that these issues cannot be taken up under section 154 of the Act as these issues are highly debatable. Against this, Revenue is in appeal before us. Learned AR submitted that the assessee made a disallowance under section 14A of the Act amounting to Rs.6,79,829/-. However, under section 14A r.w.r. 8D, it would be at Rs.83,10,213/-. This was recomputed by AO under section 154 of the Act. Regarding depreciation on Plant and Machinery, it was submitted that the assessee claimed depreciation at 60% though the entitlement is @ 10%. Regarding interest on belated TDS, it was submitted that it is in panel in nature and it cannot be deductible while computing the income of the assessee. On the other, AR submitted that the disallowance under section 14A of the Act is very much debatable and for computing the disallowance under section 14A of the Act, various factors has to be considered with regard to applicability of Rule 8D and such debatable issue cannot be entertained in proceeding under section 154 of the Act. Regarding depreciation it was submitted that assessee has clearing mentioned in the block of assets what are the assets entitled for depreciation @ 10% and 60% under the head Plant and Machinery. The head shown under Plant and Machinery also includes

C.O. No.57/Bang/2019 3 various computer and computer parts which was shown separately by assessee to schedule to accounts as these are computer and computer parts entitled to depreciation at 60% and there is no error in claiming the depreciation @ 60% which is being computer and computer peripherals. Regarding interest on delayed payment of TDS, it was submitted that interest on delayed payment of Service Tax and TDS which was in the nature of compensatory and not int he nature of penalty and being a compensatory nature, it is allowable expenditure.

4.1 With regard to disallowance under section 14A r.w.r. 8D, the assessee itself disallowed Rs.6,79,829/- under section 14A r.w.r. 8D. The AO has to go

C.O. No.57/Bang/2019 4 through various components like interest bearing funds, average value of investment, average value of total assets as appeared in the Balance Sheet of the assessee on the day and last day of the previous year, amount of expenditure directly relating to income which does not form a part of the total income. Being so, the issue is very debatable, the disallowance cannot be proceeded under section 154 of the Act. As rightly pointed out by CIT(A) that rectification under section 154 of the Act can only be made with regard to mistake of fact or law committed by the officer passing the order becomes apparent from the record, rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record.

4.2 With regard to disallowance of interest on delayed payment of TDS, in our opinion, it is compensatory in nature and not penal in nature as held by Co-ordinate Bench in the case of M/s. IDS Next Business Solutions Pvt. Ltd., in vide order dated 15.06.2018. Accordingly, it is an allowable expenditure. In this issue, CIT(A) has taken correct view and no interference is called for.

Pronounced in the open court on the date mentioned on the caption page.