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Tax Publishers 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.

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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.