Disallowance u/s 40(a)(i) for non deduction of tax on payment made towards purchase of software

This Income Tax Appellate Tribunal case concerns a software company, Progress Software Solutions India Private Limited, appealing a disallowance under Section 40(a)(i) of the Income Tax Act. The disallowance was made due to the non-deduction of tax on payments for software purchases. The Tribunal has restored the issues to the assessing officer for fresh adjudication after the Commissioner (Appeals) granted partial relief on another disallowance.

IN THE INCOME TAX APPELLATE TRIBUNAL
“SMC” BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER)
I.T.A. No.3011/Mum/2019
(Assessment Year : 2009-10)

M/s Progress Software Solutions
India Private Limited, No.18, 4th
Floor, 1 Labs Centre, No.8 Software
Unit Layout, Madhapur, Hyderabad
Telangana – 500 081
PAN : AAACT7450Q

APPELLANT

vs

DCIT-13(1)(2), Mumbai

RESPONDENT

Appellant by Shri Mahaveer Jain , AR
Respondent by Shri. Ujjawal Kumar , DR
Date of hearing 16-06-2021
Date of pronouncement 30-08-2021
O R D E R

Before I proceed to deal with the disputed issues, it is necessary to recapitulate the relevant facts leading to the filing of the present appeal.

2. Briefly stated, the assessee is a resident company stated to be engaged in business of computer software development, sale of product license on commission and trading in product software license.

3. As a result of the aforesaid disallowances, the total loss was determined at Rs.10,55,380/-. Against the assessment order so passed, assessee preferred appeal before learned Commissioner (Appeals). While disposing of assessee’s appeal, learned Commissioner (Appeals) granted partial relief by deleting the disallowance oRs,.6,69,035/- made under section 36(1)(va) of the Income Tax Act, 1961. Against the order passed by learned Commissioner (Appeals), the assessee went in further appeal before the Tribunal. The Tribunal, while deciding assessee’s appeal in ITA No.3151/Mum/2013 dated 28/09/2016 restored the issues back to the assessing officer for fresh adjudication. Pursuant to the order passed by the Tribunal, the assessing officer passed a fresh assessment order repeating the additions made earlier.

4. I have considered rival submissions and perused materials on record. It is the claim of the assessee that separate books of account are maintained for EOU and non EOU units. In fact, the assessing officer himself has stated that segmental profit and loss account along with certificate of the auditor has been furnished before him. The dispute is only with regard to the apportionment of salary paid to the staff.

5. In the result, appeal is partly allowed.
Order pronounced on 30/08/2021.

Please find attached the enclosed file for the full judgement