M/s. Nine Star Information Technologies Ltd., CHENNAI V. ACIT, CHENNAI

CO 186/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8222 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 19-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAN
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1842/MDS/2012 & C.O.NOS. 186 & 200/MDS/2012 (IN ITA NO.1842/MDS/2012) (ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-IV(4), AAYAKAR BHAVAN, IV FLOOR, 121, M.G.ROAD, CHENNAI-600 034. VS. M/S.NINE STAR INFORMATION TECHNOLOGIES LTD., ANURAG, 72, GREAMS ROAD, THOUSAND LIGHTS, CHENNAI-600 006. PAN:AABCN0949B (APPELLANT) (RESPONDENT/CROSS OBJECTOR) APPELLANT BY : MR. SHAJI P.JACOB, ADDL. CIT RESPONDENT BY : MR. K.VISWANATHAN, C.A. ADVOCATE DATE OF HEARING : 1 ST JANUARY, 2013 DATE OF PRONOUNCEMENT : 1 ST JANUARY, 2013 O R D E R PER BENCH: THE APPEAL HAS BEEN FILED BY THE REVENUE IMPUGN ING THE ORDER OF THE CIT(A)VI, CHENNAI DATED 31.07.201 2 RELEVANT TO THE ASSESSMENT YEAR 2007-08. 2. THE A.R HAS FILED AN APPLICATION FOR CLUBBING OF THE PRESENT APPEAL WITH ITA NO.1166/MDS/2012 RELEVANT TO THE ASSESSMENT YEAR 2005-06 PENDING BEFORE D BENCH. S INCE AN IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE TRI BUNAL IN ITA NO.1650/MDS/2011 RELEVANT TO THE ASSESSMENT YEA R ITA NO.1842/MDS/2012 & CO NOS. 186 & 200/MDS/2012 2 2006-07 IN THE CASE OF THE ASSESSEE, THE PETITION F OR CLUBBING FILED BY THE A.R. FOR THE ASSESSEE IS REJECTED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF ELECTRONIC PU BLISHING. THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2007-08 ON 15.12.2007 ADMITTING INCOME OF ` 26,84,160/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSES SEE ON 26.09.2008. THE ASSESSING OFFICER VIDE ASSESSMENT O RDER DATED 10.12.2009 INTER-ALIA, MADE ADDITION ON ACCO UNT OF EXPENSES CLAIMED TOWARDS SOFTWARE DEVELOPMENT. THE ASSESSEE HAD DEDUCTED A SUM OF ` 1,37,11,481/- FROM COMPUTATION OF INCOME AS EXPENSES NOT ELIGIBLE FOR CAPITALIZATION. THE SAID EXPENSES WERE TOWARDS DESI GN CONSULTANCY CHARGES, RENT, ELECTRICITY CHARGES AND SALARY TO DEVELOPERS.THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) ASSAILING ASSESSMENT ORDER. THE CIT(A) VIDE ORDER DATED 31.7.2012 HELD THAT EXPENDITURE TOWARDS RENT, ELECTRICITY CHARGES, DESIGN CHARGES ETC. CANNOT BE CONSIDERED A S CAPITAL EXPENDITURE AND ARE ESSENTIALLY PERIOD COSTS. THE CIT(A) ITA NO.1842/MDS/2012 & CO NOS. 186 & 200/MDS/2012 3 OBSERVED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE TO SHOW THAT BY INCURRING EXPENDITURE UNDE R THE HEAD RENT AND ELECTRICITY CHARGES, THE APPELLANT HAS DERIVED ENDURING BENEFITS. THE ONLY GROUND ON WHICH THE A SSESSING OFFICER TREATED THE EXPENDITURE AS CAPITAL IS THE TREATMENT OF EXPENDITURE IN BOOKS. THE CIT(A) ALLOWED THE SAID EXPENDITURE AS REVENUE EXPENDITURE. 4. NOW, THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL IMPUGNING THE FINDINGS OF THE CIT(A) ON TH E ISSUE. THE LEARNED D.R. AT THE OUTSET SUBMITTED THAT SIMIL AR ISSUE IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 20 06-07 HAD COME BEFORE THE TRIBUNAL IN ITA NO.1650/MDS/201 1. THE TRIBUNAL VIDE ORDER DATED 2.4.2012 HAD REMITTED TH E ISSUE BACK TO THE ASSESSING OFFICER. THE DR PLACED ON REC ORD A COPY OF THE ORDER DATED 2.4.2012 IN ITA NO.1650/MDS /2011 IN THE ASSESSEES OWN CASE. THE LEARNED A.R. FAIRLY AD MITTED THE AFORESAID ORDER IN ASSESSEES OWN CASE. 5. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIE S. A PERUSAL OF THE ORDER DATED 2.4.2012 PASSED BY THE TRIBUNAL ITA NO.1842/MDS/2012 & CO NOS. 186 & 200/MDS/2012 4 SHOWS THAT SIMILAR ISSUE FOR THE ASSESSMENT YEAR 20 06-07 IN THE CASE OF THE ASSESSEE WAS RAISED BEFORE THE TRIB UNAL. THE TRIBUNAL HAD REMITTED THE ISSUE BACK TO THE ASSESSI NG OFFICER WITH THE FOLLOWING OBSERVATIONS:- IT IS CLEAR FROM THE ABOVE DECISION OF HONBLE APE X COURT THAT TREATMENT IN THE BOOKS OF ACCOUNTS HAS A STRONG BEARING ON DETERMINING WHETHER AN AMOUNT IS ALLOWABLE OR NOT. WE ARE OF THE OPINION THAT NONE OF THE AUTHORITIES BELOW CONSIDERED THE RELEVANT ACCOUNTIN G STANDARDS AND NATURE OF BUSINESS OF THE ASSESSEE WH ILE DECIDING THE ISSUE. LD. CIT(APPEALS) FELL IN ERROR IN GIVING ALLOWANCE TO THE ASSESSEE WITHOUT VERIFYING SUCH ASPECTS. IN OUR OPINION, THE MATTER REQUIRES A RE- VISIT BY THE A.O. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE REGARDING ALLOWABILITY OF CLAIM OF THE ASSESSEE BACK TO THE F ILE OF THE A.O. FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW AND AFTER CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE. THE CONTROVERSY IN THE PRESENT APPEAL IS IDENTICAL TO THE ONE DECIDED EARLIER BY THE TRIBUNAL. IN THE INTEREST OF JUSTICE AND TO MAINTAIN CONSISTENCY, WE FOLLOW THE EARLIER ORDER O F THE TRIBUNAL AND REMIT THE FILE BACK TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN ACCORDANCE WITH THE EARLIER DIRECTION OF ITA NO.1842/MDS/2012 & CO NOS. 186 & 200/MDS/2012 5 THE TRIBUNAL IN ITA NO.1650/MDS/2011. THUS, THE APP EAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE ASSESSEE HAS FILED CROSS OBJECTION NO.186/MDS/2012 IN SUPPORT OF THE ORDER OF THE CIT( A). THE REGISTRY HAD POINTED OUT CERTAIN DEFECTS IN CROSS O BJECTION. THE ASSESSEE AFTER COMPLYING WITH THE DEFECTS FILED FRESH FORM NO.36A. THE REGISTRY INADVERTENTLY RENUMBERED THE SAME AS CROSS OBJECTION NO.200/MDS/2012 TREATING TH E SAME TO BE FRESH CROSS OBJECTIONS. THUS, THERE ARE TWO CROSS OBJECTIONS CORRESPONDING TO ITA NO.1842/MDS/2012. S INCE CROSS OBJECTION NO.200/MDS/2012 IS CONSEQUENT TO TH E RECTIFICATION OF DEFECTS IN C.O.NO.186/MDS/2012, T HE SAME IS DISMISSED AS INFRUCTUOUS. 7. AS REGARDS C.O.NO.186/MDS/2012 IS CONCERNED, SIN CE THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICA L PURPOSES, THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES. THE CROSS OBJECTION NO.186/MD S/2012 IS ITA NO.1842/MDS/2012 & CO NOS. 186 & 200/MDS/2012 6 DISMISSED ON MERITS, WHEREAS C.O.NO.200/MDS/2012 IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON TUESDAY, THE 1 ST DAY OF JANUARY, 2013 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 1 ST JANUARY, 2013. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.