THE PR COMMISSIONER OF INCOME TAX-7, vs. M/S TALLY SOLUTIONS PVT. LTD.

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ITA/599/2019HC KarnatakaKAHC01028359201909 June 2021Bench: SATISH CHANDRA SHARMA,R. NATARAJ5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in setting aside the disallowance of depreciation on intellectual property rights. The Court followed its previous decisions on identical issues for earlier assessment years, which were in favor of the assessee.

What were the facts?

The assessee claimed depreciation on intellectual property rights, which the Assessing Officer disallowed for failure to deduct TDS. The CIT(A) allowed the claim, and the ITAT initially dismissed the Revenue's appeal but later recalled its order. Subsequently, the ITAT dismissed the Revenue's appeal again, affirming the CIT(A)'s order.

What were the issues?

Whether depreciation on intellectual property rights is allowable when TDS was not deducted on payments. Whether the Tribunal's decision was justified in light of previous High Court judgments on the same issue.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 9TH DAY OF JUNE, 2021

PRESENT

THE HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA

AND

THE HON'BLE MR. JUSTICE NATARAJ RANGASWAMY

I.T.A. NO.599 OF 2019

BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME TAX-7, BMTC COMPLEX, KORAMANGALA, BANGALORE.

2 . THE DY.COMMISSIONER OF INCOME-TAX, CIRCLE-7(1)(1), BANGALORE. ...APPELLANTS

(BY SRI. SANMATHI E.I., ADVOCATE)

AND:

M/S. TALLY SOLUTIONS PVT. LTD. NO.331-336, RAHEJA ARCADE, 3RD FLOOR, KORMANGALA, BENGALURU-560095. PAN: AAACP7879D

…RESPONDENT

(BY SRI. SURYANARAYANA T., ADVOCATE)

THIS APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, ARISING OUT OF THE ORDER DATED: 15.03.2019 PASSED IN ITA NO.834/BANG/2017, FOR THE

ASSESSMENT YEAR 2013-2014 PRAYING THIS HON`BLE COURT TO DECIDE THE FOREGOING QUESTION OF LAW AND / OR SUCH OTHER QUESTION OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 15.03.2019 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, BENGALURU IN APPEAL PROCEEDINGS IN ITA NO.834/BANG/2017 FOR THE ASSESSMENT YEAR 2013-2014 AS SOUGHT FOR IN THIS APPEAL.

THIS APPEAL COMING ON FOR ORDERS THIS DAY, NATARAJ RANGASWAMY J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’ for short) is filed by the Revenue challenging the order dated 15.03.2019 passed by the Income Tax Appellate Tribunal in I.T.A. No.834/BANG/2017 for the assessment year 2013-14.

2.

The respondent – assessee filed its return of income for the assessment year 2013-14, declaring a loss of Rs.8,92,70,723/- and claimed depreciation of a sum of Rs.4,95,34,297/- on the intellectual property rights. The return of income was taken up for assessment and the Assessing Officer passed an assessment order dated

29.11.2016 and re-computed the total income of the assessee inter alia by disallowing the claim for depreciation in respect of the intellectual property rights as tax was not deducted at source. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who allowed it in terms of the order dated 17.01.2017. Feeling aggrieved by the aforesaid order Revenue filed an appeal before the Income Tax Appellate Tribunal. The Tribunal disposed of the appeal in terms of the order dated 31.10.2017. However, the Tribunal did not adjudicate the issue of disallowance of depreciation of the intellectual property rights under Section 40 (a)(i) of the Act. Therefore, the Revenue filed a Miscellaneous Petition to recall the order of the Tribunal which was allowed. Thereafter in terms of an order dated 15.03.2019 the Tribunal dismissed the appeal and affirmed the order of the Commissioner of Income Tax (Appeals) by following the order passed by a Co-ordinate Bench of the Tribunal in case of the assessee for the assessment year 2009-2010. The Revenue, has therefore filed the present appeal.

3.

This appeal was admitted to consider the following substantial question of law :

“Whether on the facts and in the circumstances of the case, the Tribunal is justified in setting aside the disallowance of claim of depreciation on purchase of Intellectual Property Rights made by assessing authority under Section 40(a)(ia) of the Act as they had failed to deduct TDS on payments made in respect of purchase of intellectual property rights by following its earlier order which has not reached finality and even when the ingredients of Section 40(a)(ia) of the Act are satisfied in case of assessee?”

4.

It is not in dispute that in respect of the respondent – assessee for the assessment years 2009-10, 2010-11 and 2011-12, this Court had considered the very same questions of law and had answered the same questions in favour of the assessee and against the Revenue in I.T.A. No.199/2017 and connected appeals.

5.

In that view of the matter, the substantial question of law framed by this Court in the present appeal

is answered on the same terms as in I.T.A. No.199/2017, in favour of the assessee and against the Revenue. In that view of the matter, the appeal fails and is dismissed.

Sd/- JUDGE

Sd/- JUDGE

hnm

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