The Delhi High Court has held that no Tax Deductible at Source (TDS ) under section 195 of the Income Tax Act when no income chargeable to tax arose on non-resident and upheld the order of the Income Tax Appellate Tribunal (ITAT).
The appellant/revenue challenged the order passed by the Income Tax Appellate Tribunal [Tribunal]. Mr Sunil Agarwal appeared on behalf of the appellant/revenue and submitted that the only issue that arises for consideration is: whether Minda Stoneridge Instruments Ltd., the respondent/assessee had claimed, in point of fact, deduction for capital expenditure incurred on the scientific equipment, during the relevant period?
The Assessing Officer (AO), via assessment order dated 25.02.2013, has disallowed the claim made by the petitioner under Section 35 of the Income Tax Act, 1961 [Act], as according to him, this was not part of the Return of Income [ROI] filed by the petitioner.
The deduction claimed by the petitioner under Section 35 of the Act, was Rs. 3,46,32,280/-. The Commissioner of Income Tax (Appeals),[CIT(A)] reversed the view of the AO and allowed the deduction under Section 35 of the Act.
It was evident that ROI declaring taxable income of Rs. 4,18,70,038/- was filed on 06.10.2010 by the assessee company. The assessee company is engaged in the business of Manufacture of Auto Panel instruments including Speedometer, Temperature Gauges, Fuel Gaugge, Tank Units, etc. The Auto Panel Instruments comprise Electrical and Mechanical Movements.
The assessee has claimed deduction under section 35 of the Income Tax Act, 961 on account of capital expenditure on scientific research amounting to Rs. 3,46,32,280/-. It was pointed out to the assessee during assessment proceedings that the assessee company had not claimed deduction under section 35 of the Act in the return of income. It was also pointed out vide this letter that the assessee company had shown total income at Rs. 7,65,02,320/- which has been accepted u/s 43(1) of the Income Tax Act vide order dated 07.07.2011.
It was observed that since the assessee had not claimed a deduction under section 35 of the Income Tax Act in the return of income, the deduction under section 35 is not allowed. since no income chargeable to tax arose in the hands of the non-resident, as per the provisions of the Act, there was no obligation to deduct tax at source under Section 195 of the Act.
A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia observed that the CIT(A) has correctly deleted the disallowance on account of depreciation on electrical fittings holding them part of the plant and machinery and not furniture and fixtures as claimed by the AO. Further, depreciation on the computer peripherals was also allowed at @60 %relying upon the decision of the Delhi High Court in the case of BSEC Rajdhani Power Ltd.
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