Income Tax Appellate Tribunal Bangalore Deputy Commissioner Of Income Tax ... vs M/S Allegis Services India Pvt Ltd , ... on 13 June, 2018 ITA.325/Bang/2018 Page 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'B', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A No.325/Bang/2018 (Assessment Year : 201112) Deputy Commissioner of Incometax, Circle 1(1)(1), Bengaluru .. Appellant v. M/s. Allegis Services India Ltd, Commerce @ Mantri Level 3, Bannerghatta Road, Bengaluru 560 076 .. Respondent PAN : AAFCA0825M Assessee by : Shri. Chavali Narayan, CA Revenue by : Ms. Neera Malhotra, CIT DR Heard on : 30.05.2018 Pronounced on : 13.06.2018 ORDER PER LALIET KUMAR, JUDICIAL MEMBER : The present appeal is filed by the Revenue against the order of the CIT (A) I, Bengaluru, dt.12.12.2017, for the assessment year 201112 on the following effective grounds : 2. The Ld. CIT (A) erred in allowing the assessee company's appeal on the issue of disallowance u/s.40a(i) of the Act in respect of nondeduction of TDS on software ITA.325/Bang/2018 Page 2 expenses and not following the judgment of Karnataka High Court in the case of CIT v. Samsung Electronics Co. Ltd., 320 ITR 209. 3. The Ld. CIT (A) erred in deleting the addition of Rs.3,66,020/ made by the Assessing Officer on account of delayed payment of employees contribution to PF and ESI under section 43B and 2(24) read with Section 36(1)(va) as the matter has not reached its finality and an SLP of the Revenue in the case of CIT v. Samsung India Electronics Ltd. is pending for consideration before the Hon'ble Apex Court. 02. Brief facts of the case are as follows. The assessee had filed the original return of income on 30.11.2011 and subsequently revised return was filed on 27.02.2012 declaring total taxable income as nil as per the normal provisions of the Act. The assessee has declared business income of Rs.3,36,50,563/ and income from other sources of Rs.80,569/. The assessee computed the book profit u/s.115 JB for an amount of Rs.6,63,574/ and the taxable liability shown at Rs.1,23,026/ under the MAT provision. The assessee has also claimed the refund of Rs.5,08,11,992/. Case of the assessee was selected for scrutiny. While going through the details furnished by the assessee it was noted by the AO that the assessee has debited an amount of Rs.8,82,74,266/ towards purchase of software licence resold and Rs.2,36,87,914/, as software maintenance /licences under Schedule 12 and general and administration expenses. It was informed by the assessee that it has deducted the TDS on domestic purchase of software and however the assessee has not deducted the TDS on the software purchased in foreign currency. As such, the AO disallowed an amount totalling ITA.325/Bang/2018 Page 3 to Rs.10,07,64,509/, u/s.40(a)(i) of the Act for nondeduction of tax at source. The AO in the assessment order after relying upon the decision of the Hon'ble jurisdictional High Court in the matter of Samsung Electronics Co. Ltd [16 taxmann.com 141], wherein it was held that the consideration paid by the assessee for importing of software was in the nature of royalty payment and therefore constitute income chargeable under the Incometax Act, in terms of Section 9(1)(vi) of the Act r.w. the relevant articles of DTAA. It was further noticed by the AO that as the assessee has deducted TDS on payment made on purchase of domestic software. Therefore applying the same ratio the assessee was duty bound to deduct TDS relating to purchase of imported software. As the assessee has not done the needful therefore, the provisions of Section 40(a)(i) is attracted and hence disallowed the amount of Rs.10,07,64,509/. Feeling aggrieved by the order passed by the AO, the assessee filed appeal before the CIT (A). 03. The CIT (A) had allowed the appeal of the assessee by recording the following finding : Having considered the submissions made by the appellant, it is that the Ground No. 3 to 6, 15 & 16 are regarding disallowance of Rs. 10,07,64,509 u/s 40a(i) for non deduction of tax at source. The Assessing officer has discussed this issue in para 4.23 of the assessment order at length and I am in complete agreement with the findings of the Assessing officer made in the Assessment order. The issue is squarely covered by the judgement of the jurisdictional High Court of Karnataka in the case of CIT vs. Samsung El