J Ray McDermott Engineering Services Pvt. Ltd. Vs DCIT (ITAT Chennai)
ITAT Chennai held that reopening of assessment u/s. 148 of the Income Tax Act on mere change of opinion without satisfying necessary ingredients for initiating reassessment is invalid and liable to be quashed. Accordingly, reassessment set aside.
Facts- The assessee is a private limited company engaged in the business of providing design and drawing services for engineering industry. The assessment of the assessee was reopened and notice u/s.148 of the Act was issued on 28.02.2019. The reason for issuance of notice for reopening the assessment was that assessee had claimed as revenue expenditure a sum of Rs.6,29,67,347/-towards software expenses. AO noted that the expenditure claimed as revenue expenditure pertains to software and license fee paid and the assessee company had deducted TDS only in respect of payment of Rs.50,50,223/-. Hence, the AO was of view that balance amount of Rs.5,79,19,094/- is to be treated as capital expenditure.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held assessee had disclosed in the original proceedings, the relevant details and the AO has merely issued notice u/s.148 of the Act on presumption that for the amount for which payment has been made where there is no TDS made (wrong assumption), the said expenditure is to be termed as capital expenditure instead of revenue expenditure. Moreover, on perusal of the invoices / purchase orders and agreement entered between the vendors and the assessee company, we find that software license fee expenses incurred are valid for one year and may be renewed annually if required.
