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Income Tax Appellate Tribunal, “C” BENCH, PUNE
Before: SHRI R.S.SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आयकर अपीलीय अधधकरण “सी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, PUNE (Through Virtual Court) BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM आयकर अपील सं. / ITA No. 664/PUN/2018 धनधाारण वषा / Assessment Year : 2005-06 The Deputy Commissioner of Income Tax, Circle 1(1), Pune. .......अपीलाथी / Appellant बनाम / V/s. M/s. Ansys Software Pvt. Ltd. Kabra Excelsior, 3rd Floor, #6A, 7th Main, 1st Block, Kormangala, Bengaluru-560 034 PAN : AADCA1658E ……प्रत्यथी / Respondent Revenue by : Shri Divya Bajpai Assessee by : Shri V. Narendra Sharma
सुनवाई की तारीख / Date of Hearing : 26.10.2021 घोषणा की तारीख / Date of Pronouncement : 26.10.2021 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM:
This appeal preferred by the Revenue emanates from the order of the Ld. CIT(Appeals)-1, Bengaluru passed u/s.154 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) dated 01.02.2018 for the assessment year 2005-06 as per the grounds of appeal on record.
The brief facts in this case are that the appellate order was passed u/s.250 of the Act dated 31.08.2017 for the assessment year 2005-06 as against the assessment order passed u/s.143(3) r.w.s.147 of the Act dated
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07.02.2013. That subsequent to the order passed dated 31.08.2017 i.e. the appellate order, the assessee moved rectification petition u/s.154 of the Act stating that at Para No.3.6 of the appellate order requires modification as the relief sought vide grounds No. 8 & 9 were not fully adjudicated. The assessee had relied on the judgment of the Hon‟ble Karnataka High Court in the case of CIT Vs. Santosh Kumar Sheety, 49 taxmann.com 47 wherein it was held the amendment to the provisions of section 40(a)(ia) of the Act by the Finance Act, 2010 will operate retrospectively with effect from 01.04.2005. As per the aforesaid amendment, tax deducted at source, if it is paid on or before the due date for filing return of income, then no disallowance u/s.40(a)(ia) of the Act can be made, the expenditure claimed by the assessee on which TDS was remitted before the due date for filing the return should be allowed.
Since the assessee remitted TDS of Rs.1,22,33,677/- on the total payment made by it of Rs.8,15,57,840/- which was remitted within the due date for filing return of income i.e.31.10.2005 for the assessment year 2005- 06. Hence, the assessee prayed that sum of Rs.8,15,57,840/- to be allowed as expenditure in assessment year 2005-06 as per the first proviso to section 40(a)(i) of the Act which was inserted with effect from 01.04.2015. The balance TDS of Rs.6,84,327/- as against payment of Rs.45,62,182/- was paid in the subsequent year i.e. 2006-07 after due date for filing return i.e. after 31.10.2005. The assessee further requested to allow expenditure of Rs.45,62,182/- in the subsequent assessment year 2006-07.
Thereafter, the Ld. CIT(Appeals) in partial modification of his order dated 31.08.2017 by placing reliance on the decision of the Hon‟ble Karnataka High Court (supra.) which was referred to by the assessee, allowed the expenditure of Rs.8,15,57,840/- for the assessment year 2005-06 and
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Rs.65,88,718/- for the assessment year 2006-07 and the Assessing Officer was directed accordingly after verification of payment of TDS in this regard.
At the time of hearing, the Ld. DR fairly submitted that the main issue whether TDS to be deducted or not by the assessee, was on the fact that on the payment made by the assessee company to non-resident whether it is in nature of royalty and if it is so, then the assessee was required to deduct TDS as per provisions of Section 195 of the Act. That explaining the background, the Ld. DR submitted that in assessee‟s own case, the Bengaluru Bench of the Tribunal had held the payment to be royalty, thus, attracting the provision of TDS and if failure to deduct TDS, the provision of Section 40(a)(i) was attracted and the Tribunal had confirmed the disallowance made under provision of section 40(a)(ia) of the Act for the assessment years 2005-06 and 2006-07. The assessee thereafter preferred an appeal before the Hon‟ble Karnataka High Court in ITA No.113/2021 dated 9th April, 2021 against the order of Bengaluru Bench of the Tribunal for the assessment year 2005- 06 and 2006-07 in ITA Nos.2897 & 2898/Bang/2019 dated 29.11.2019 wherein the Hon‟ble High Court has held as follows :
“4. Learned Counsel for the assessee submitted that the issue involved in this appeal has been put to rest in view of the decision rendered by the Supreme Court in Civil Appeal Nos.8733-8734/2018 between Engineering Analysis Centre of Excellence Private Limited Vs. The Commissioner of Income Tax & Another vide order dated 02.03.2021 and the issue involved in this appeal has been answered against the Revenue and in favour of the assessee. 5. For the reasons assigned in the aforesaid judgment rendered by the Supreme Court in Civil Appeal Nos.8733-8734/2018 vide order dated 02.03.2021, the substantial questions of law involved in this appeal are answered in favour of the assessee and against the Revenue. In the result, the order dated 29.11.2019 passed by the Income Tax Appellate Tribunal is hereby quashed. In the result, the appeal is allowed.”
Therefore, the core issue has been decided by the Hon‟ble High Court placing reliance on the decision of the Hon‟ble Supreme Court in the case of
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Engineering Analysis Centre of Excellence Private Limited Vs. The Commissioner of Income Tax & Another (supra.) that the payment made by the assessee company to non-resident are not in nature of royalty and therefore the assessee was not required to deduct TDS as per provisions of the Act. When the core issue is decided in favour of the assessee and against the Revenue, there ceased to be any obligation on the part of the assessee for deduction of TDS. The entire area of the appeal before us by the Revenue against the rectification order u/s.154 of the Act passed by the Ld. CIT(Appeals) is in pursuance to the order of TDS deduction. That when it has been decided that the assessee was under no obligation to deduct TDS for payment to non-resident as it was not in nature of royalty, therefore, the said appeal filed by the Revenue before us becomes infructuous and hence, dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced on 26th day of October, 2021.
Sd/- Sd/- R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 26th October, 2021. SB आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : अपीलाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(Appeals)-1, Bengaluru. 4. The Pr. CIT, Bengaluru-1, Bengaluru. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “सी” बेंच, 5. पुणे / DR, ITAT, “C” Bench, Pune. गार्ा फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // धनजी सधचव / Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune.
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Date 1 Draft dictated on 26.10.2021 Sr.PS/PS 2 Draft placed before author 26.10.2021 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order