Facts of the case
The assessee is engaged in the business of manufacture and sale of beer under the brand names “Haywards & RCPL”. The Assessee-company had paid a sum to a foreign associate towards expenditure incurred on account of Syspro Software license fees and Report Generation charges in Syspro and claimed same to be reimbursement of expenses, which were supported by third party invoices.
The assessee purchased “Foster’s Brand” and “Intellectual Property”, “Foster’s Brewing Intellectual Property” and Foster’s Trademarks from Foster’s Australia Ltd.
The assessee capitalized the said amount in its fixed assets schedule under the head “Trade Marks/Brands” and claimed depreciation thereon @ 25%.
Decision of the Tribunal
The Appellate Tribunal held that the where assessee company reimbursed its foreign associate licence fees and charges for software used for report generation as said expenditure was incurred by foreign associate, there could be no TDS liability on assessee.
It was further held that the depreciation being not an outgoing expenditure, provisions of section 40(a)(i) of the Income Tax Act are not attracted on such deduction. The Tribunal while referring to the decision of the Skol Breweries Ltd. v. ACIT observed that the deduction u/s 32 is not in respect of the amount paid or payable which is subjected to TDS.
but is a statutory deduction on an asset which is otherwise eligible for deduction of depreciation. Depreciation is not an outgoing expenditure and therefore, the provisions of sec. 40(a) (i) of the Act are not attracted on such deduction.
Law on Disallowance under Section-40AI
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: singh@carajput.com or call at 9555555480
New cheque clearing process in India starting from October 4, 2025 Existing System (Until Oct 3, 2025) : Clearing Method:… Read More
Overview on Tax Treatment on Gratuity in India What is Gratuity? Gratuity is a lump sum paid by an employer… Read More
Taxation Comparison: Gold Coin vs Gold Jewellery Tax Aspect Gold Coin Gold Jewellery ITR Reporting Treated as a capital asset.… Read More
Crypto Taxation & ITR Reporting Guide Tax on Profits from Crypto (Virtual Digital Assets)- Taxation U/s 115BBH Applicability on Virtual… Read More
Savings Account – Rules for Transactions to Avoid Income Tax Scrutiny The Income Tax Department monitors high-value transactions through banks’… Read More
Quick Guide on GST Marginal Scheme What is GST Marginal Scheme Meaning : The GST Margin Scheme is applicable primarily… Read More