Dy. CIT v. State Street Services (India) (P) Ltd.
[IT(TP)A No. 2193/Bang/2019, CO No. 1/Bang/2020 (in IT(TP)A No.
2193/Bang/2019), dt. 31-8-2020] : 2020 TaxPub(DT) 3536 (Bang.-Trib.)
Disallowance under section 40(a)(i)/(ia) on depreciation
claimed
Facts:
Assessee had purchased software during the year on which no
TDS was done thus the depreciation claimed was disallowed by assessing officer
and sustained by Commissioner (Appeals). On higher appeal --
Held in favour of the assessee that depreciation since being
a statutory deduction as per Explanation 5 to section 32 cannot be disallowed
under section 40(a)(i)/(ia).
Applied: SKOL
Breweries Ltd. v. DCIT (2013) 29 taxmann.com 111 (Mum-Trib) : 2013 TaxPub(DT)
0973 (Mum-Trib), Mark Auto Industries Ltd., (2013) 358 ITR 43 (P&H)
: 2013 TaxPub(DT) 2663 (P&H-HC).
Editorial Note: Is
Depreciation first an expense to be hit by section 40(a)(i)/(ia) or is it a
deduction this is no longer res integra as it has been held to be a
deduction. Section 40(a)(i)/(ia) in its scope which refers to certain expenses
cannot be extended to depreciation on any asset for want of deduction of TDS.
Section 32 Explanation 5 introduction itself was due to the debate which arose
in CIT v. Mahendra Mills (2000) 243 ITR 56 (SC) : 2000 TaxPub(DT)
1304 (SC) where the question which arose was whether depreciation is a
compulsory statutory deduction or one which was optional to the assessee. The
SC held it against the department that it was optional to the assessee to plug
which this explanation was introduced. Now depreciation is a statutory
deduction so section 40(a)(i)/(ia) cannot stretch to lay its arms on a
statutory deduction is what was held in this verdict.