M/S. REDIFF. COM INDIA LTD, MUMBAI V. THE ACIT RG 7(2), MUMBAI

ITA 1120/MUM/2008

• Counselvise Citation: 112019914 RSA 2008
• Duration Of Justice: 3 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 12-05-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 14-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MALATHI SHRIDHARAN
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Additional evidence; Non-deduction of tax; Bad and doubtful debts; Revenue expenditure; Set aside
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI BEFORE SHRI D. MANMOHAN, V.P. AND SHRI R.K. PANDA, A.M. ITA NO.905/MUM /2008 ASSESSMENT YEAR : 2002-03 DY. COMMISSIONER OF INCOME TAX 7(2), ROOM NO. 624, 6 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 20. VS. M/S REDIFF.COM INDIA PVT. LTD., IST FLOOR, MAHALAXMI ENGG. ESTATE, LADY JAMSHEDJI, IST CROSS ROAD, MAHIM (W), MUMBAI-400 016 P.A. NO.: AAACR 2762 F (APPELLANT) (RESPONDENT) ITA NO. 1120/MUM /2008 ASSESSMENT YEAR : 2002-03 M/S REDIFF.COM INDIA PVT. LTD., IST FLOOR, MAHALAXMI ENGG. ESTATE, LADY JAMSHEDJI, IST CROSS ROAD, MAHIM (W), MUMBAI-400 016 P.A. NO.: AAACR 2762 F VS. DY. COMMISSIONER OF INCOME TAX 7(2), ROOM NO. 624, 6 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 20. (APPELLANT) (RESPONDENT) ITA NO.906/MUM /2008 ASSESSMENT YEAR : 2003-04 DY. COMMISSIONER OF INCOME TAX 7(2), ROOM NO. 624, 6 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 20. VS. M/S REDIFF.COM INDIA PVT. LTD., IST FLOOR, MAHALAXMI ENGG. ESTATE, LADY JAMSHEDJI, IST CROSS ROAD, MAHIM (W), MUMBAI-400 016 P.A. NO.: AAACR 2762 F (APPELLANT) (RESPONDENT) ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 2 ASSESSEE BY : MR. JITENDRA JAIN & MR.PANKAJ JAIN DEPARTMENT BY : MS. MALATHI SHRIDHARAN O R D E R PER BENCH. ITA NO. 905/MUM/2008 & ITA NO. 1120/MUM/2008 ARE C ROSS APPEALS AND ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 14.11.2007 OF THE LD. CIT(A) - VII, MUMBAI RELATING TO A.Y. 2002-03. IT A NO. 906/MUM/2008 FILED BY REVENUE IS DIRECTED AGAINST THE ORDER DATED 14.1 1.2007 OF THE LD. CIT(A)- VII, MUMBAI RELATING TO A.Y. 2003-04. FOR THE SAKE OF CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER. ITA NO. 1120/MUM/20-08 (BY THE ASSESSEE FOR A.Y. 20 02-03) 2. IN GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE ORDER OF CIT(A) IN TREATING THE SOFTWARE AND PRODUCT DEVELOPMENT EXPEN SES OF ` 4,24,37,733/- AS CAPITAL IN NATURE AS AGAINST REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE. IN THE ALTERNATE CONTENTION, THE ASSESSEE HAS ALSO RAISED A GROUND THAT IN CASE THE SAME IS TREATED AS CAPITAL IN NATURE, DEPR ECIATION IS TO BE ALLOWED @ 60% AS AGAINST 25% HELD BY THE A.O. AND UPHELD BY T HE CIT(A). 3. BOTH THE PARTIES FAIRLY AGREED THAT THE ISSUE HA S TO GO BACK TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF AMWAY ENTERPRISES VS. DCIT 301 ITR [AT] 1 (DEL) (SB). IN VIEW OF THE ABOVE SUBMISSION MADE BY BOTH THE SIDES , WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE FILE OF TH E A.O. WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISIO N OF THE SPECIAL BENCH OF ITAT CITED SUPRA AND IN ACCORDANCE WITH LAW AFTER G IVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT AC CORDINGLY. GROUND NO. 1 OF ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 3 4. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION OF NON-COMPETE FEE OF ` 16,00,000/- PAID TO FOOT FORWARD COMMUNICATIONS PVT. LIMITED. 5. FACTS OF THE CASE, IN BRIEF, ARE THAT THE A.O. D URING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE HAS CLAIMED NON-COMPETE EXPENSES OF ` 16 LACS AFTER REDUCING THE AMORTISED AMOUNT CLAIMED DURING THE YEAR 2000-01. ON BEING QUESTIONED BY THE A.O. TO EXPLAIN AND GIVE THE DETAILS OF NON-COM PETE EXPENSES OF ` 19,59,667/-, THE ASSESSEE FILED CERTAIN DETAILS ONL Y. SUBSEQUENTLY, THE A.O. ASKED THE ASSESSEE TO EXPLAIN AND JUSTIFY THE ALLOW ABILITY OF NON-COMPETE EXPENSES AND UNDER WHICH PROVISIONS THESE EXPENSES HAVE BEEN CLAIMED AS ALLOWABLE EXPENDITURE. HOWEVER, NO REPLY WAS FILED BY THE ASSESSEE. FROM THE DETAILS FURNISHED BY THE ASSESSEE, THE A.O. NOT ED THAT THE ASSESSEE COMPANY HAS ENTERED INTO AN AGREEMENT DATED 30.06.2 000 FOR A PERIOD OF 4 YEARS AND THE EXPENDITURE OF ` 32 LACS IS TO BE EQUALLY DISTRIBUTED IN THE 4 YEARS. THIS BEING THE SECOND YEAR, THE A.O. HELD T HAT ONLY ` 8 LACS CAN BE ALLOWED AND THE BALANCE AMOUNT OF ` 16 LACS WILL BE DISALLOWED. HE, ACCORDINGLY, DISALLOWED AN AMOUNT OF ` 16 LACS. 6. IN APPEAL, THE CIT(A) CONFIRMED THE ACTION OF TH E A.O. BY HOLDING THAT THE FEE HAS BEEN PAID TO RESTRICT THE PROMOTER TO C OMPETE IN THE LINE OF INTERNET PORTAL, WHICH IS THE MAIN BUSINESS OF THE ASSESSEE. THE PAYMENT OF ` 32 LACS PAID AS NON-COMPETE FEE DOES LEAD TO ENDURI NG BENEFIT AS BY MAKING THE PAYMENT THE COMPANY HAS OBTAINED AN ADVANTAGE I N TERMS OF A BETTER COMPETITIVE POSITIONING BY ELIMINATING ONE COMPETIT OR AMONGST VARIOUS OTHERS. AGGRIEVED BY SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECEDING A. Y. HAS RESTORED THE MATTER TO THE FILE OF THE CIT(A) FOR PASSING A SPEAKING OR DER. SINCE THE CIT(A) HAS NOT GIVEN ANY FINDING ON THE CLAIM OF THE ASSESSEE THAT NON-COMPETE FEE PAID BY ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 4 THE ASSESSEE TO M/S FOOTFORWARD COMMUNICATIONS PVT. LTD. WAS A REVENUE EXPENDITURE AND SINCE DURING THE IMPUGNED A.Y., THE ASSESSEE HAS NOT AT ALL CLAIMED ANY EXPENDITURE IN THE P&L ACCOUNT, AND, SI NCE THE LOWER AUTHORITIES HAVE NOT DECIDED THE ISSUE PROPERLY, THEREFORE, THE MATTER SHOULD GO BACK TO THE A.O. OR CIT(A) AS THE BENCH DECIDES, FOR FRESH ADJUDICATION. THE LD. D.R. FAIRLY CONCEDED THAT SHE HAS NO OBJECTION IF THE MA TTER IS SENT BACK TO THE FILE OF A.O. OR CIT(A) FOR FRESH ADJUDICATION. 7. AFTER HEARING BOTH THE SIDES, WE FIND MERIT IN T HE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE MATTER SHOULD GO BACK TO THE FILE OF A.O. FOR FRESH ADJUDICATION. ADMITTEDLY, THE ASSESSEE HAS N OT CLAIMED ANY EXPENDITURE ON ACCOUNT OF NON-COMPETE FEE DURING THE YEAR SINCE AMORTISATION OF MISCELLANEOUS EXPENDITURE OF ` 1,87,15,371/- CLAIMED IN THE P&L ACCOUNT HAS BEEN DISALLOWED IN THE COMPUTATION OF TOTAL INCOME. THE A.O. SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVIN G DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 2 OF ASSESSEES APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 8. IN GROUND NO. 3 & 4, THE ASSESSEE HAS CHALLENGED THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF ` 75,31,489/- AND ` 6,43,07,700/- ON THE GROUND THAT THE ASSESSEE HAD NOT DEDUCTED TAX AS RE QUIRED U/S 40(A)(I) OF THE ACT. 9. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT OF ` 75,31,489/- HAS BEEN PAID TOWARDS LEGAL AND PROFES SIONAL FEES AND EDITORIAL FEES PAID TO RESIDENTS OF USA AND UK. SIMILARLY, THE PAYMENT OF ` 6,43,07,700/- HAS BEEN PAID TO REDIFF.COM INC. FOR OBTAINING CERTAIN SERVICES IN CONNECTION WITH THE NORTH AMERICAN EDIT ION OF THE REDIFF.COM.WEBSITE. HE SUBMITTED THAT BEFORE THE A .O. NO DETAILS COULD BE FILED BECAUSE THE ACCOUNTS DEPARTMENT OF THE ASSESS EE COMPANY WAS NOT WELL ORGANISED. BEFORE THE CIT(A), ALL DETAILS WERE FILE D BUT UNFORTUNATELY THE CIT(A) HAS NOT AT ALL DISCUSSED THE VARIOUS SUBMISSIONS GI VEN BY THE ASSESSEE. HE SUBMITTED THAT ALTHOUGH THE DETAILS WERE FILED BEFO RE THE CIT(A), THE ASSESSEE, AS A PRECAUTION, HAS ALSO FILED APPLICATION FOR ADM ISSION OF ADDITIONAL ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 5 EVIDENCE SINCE THOSE DETAILS WERE NOT FILED BEFORE THE A.O. HE SUBMITTED THAT THE MATTER SHOULD BE RESTORED TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE DOCUMENTS FILED BEFORE HI M AND IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF G. E. TECHNOLOGY CENTRE (P) LTD. VS. CIT & ANOTHER 327 ITR 456 (SC). 10. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE DECISION IN THE CASE OF G.E. TECHNOLOGY CENTRE (P) LTD. (SUPRA) IS NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE. SINCE THE ASSESSEE HAS NOT FILED THE REQUISITE DETAILS BEFORE THE A.O., THE A.O. DISALLOWED THE AMOUNT WHICH HAS BEEN UPHELD BY THE CIT(A). SHE SUBMITTED THAT THE ADDITIONAL EVIDENCES SHOULD NOT BE ADMITTED AT THIS STAGE SINCE THE ASSESSEE HAS NOT GIVEN ANY VALID JU STIFICATION AS TO WHY THOSE DETAILS COULD NOT BE FILED BEFORE THE A.O. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF A.O. AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. THERE IS NO DISPUTE TO TH E FACT THAT THE ASSESSEE HAS NOT FILED ANY DETAILS BEFORE THE A.O. FOR JUSTIFYIN G NON-DEDUCTION OF TAX ON ACCOUNT OF PAYMENT TO RESIDENTS OF USA AND UK. WE F IND THAT ALTHOUGH VARIOUS DETAILS WERE FURNISHED BEFORE THE CIT(A), I T IS NOT CLEAR FROM HIS ORDER AS TO WHETHER HE HAS ACCEPTED OR REJECTED THOSE ADD ITIONAL EVIDENCES FILED BEFORE HIM. HE HAS NOT AT ALL CONSIDERED THE DETAI LS FILED BEFORE HIM. THEREFORE, IN THE INTERESTS OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE ABOVE ISSUES TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION . THE CIT(A) SHALL DECIDE THE ISSUE IN THE LIGHT OF THE DOCUMENTS SUBMITTED BY TH E ASSESSEE AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUNDS O F APPEAL NO. 3 & 4 ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 12. IN GROUNDS OF APPEAL NO. 5(A) AND 5(B) THE ASSE SSEE HAS CHALLENGED THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION OF ` 64,60,337/- MADE BY THE A.O. AS PRIOR PERIOD EXPENSES. ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 6 13. FACTS OF THE CASE, IN BRIEF, ARE THAT THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED FROM THE DETAILS FURNI SHED BEFORE HIM THAT THE ASSESSEE HAS PAID EXPENSES PERTAINING TO EARLIER YE AR TO THE EXTENT OF ` 64,60,337/- AND ALSO RECEIVED INCOME RELATING TO EA RLIER YEAR TO THE EXTENT OF ` 9,35,780/- AND HAS DEBITED THE NET AMOUNT OF ` 55,24,557/- IN THE P&L ACCOUNT AS PRIOR PERIOD EXPENSES. ACCORDING TO THE A.O., THE LEGAL POSITION IS THAT INCOME PERTAINING TO EARLIER YEARS IS TAXABLE ON RECEIPT BASIS U/S 41 OF THE ACT BUT EXPENSES PERTAINING TO EARLIER YEAR ARE NOT ALLOWABLE AS THEY ARE NOT PERTAINING TO THE YEAR UNDER CONSIDERATION. HE FURTHER NOTED THAT THE ASSESSEE COMPANY HAS NOT FILED ANY DOCUMENTARY PROO F IN SUPPORT OF ITS CLAIM THAT THE PRIOR PERIOD EXPENSES ACTUALLY CRYSTALLISE D DURING THE YEAR UNDER CONSIDERATION. REJECTING THE VARIOUS EXPLANATION G IVEN BY THE ASSESSEE AND RELYING ON A COUPLE OF DECISIONS, THE A.O. TREATED THE RECEIPT OF ` 9,35,780/- AS INCOME OF THE YEAR. HE, HOWEVER, DISALLOWED THE CLAIM OF ` 64,60,337/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 14. IN APPEAL, THE CIT(A) CONFIRMED THE ADDITION MA DE BY THE A.O. BY HOLDING AS UNDER:- THE ARGUMENT OF THE APPELLANT FACT OF THE CASE HAVE BEEN CONSIDERED. IN THE ASSESSMENT ORDER IT HAS BEEN ME NTIONED THAT THE APPELLANT HAS CLAIMED THE EXPENSES PERTAINING T O EARLIER YEAR TO THE EXTENT OF ` 64,60,337/- AND THE APPELLANT HAS ALSO RECEIVED INCOME RELATING TO EARLIER YEAR TO THE EXTENT OF ` 9,35,780/- . THE APPELLANT HAS ADJUSTED THESE TWO AMOUNTS, WHICH HAS NOT BEEN ALLOWED BY THE A.O. THE INCOME PERTAINING TO THE E ARLIER YEAR IS TAXABLE U/S 41 OF THE ACT. WHILE THE EXPENSES INCU RRED FOR THE PRIOR PERIOD IS NOT ALLOWABLE UNLESS IT IS ESTABLIS HED THAT THE LIABILITY TO PAY THE AMOUNT ACTUALLY CRYSTALLIZED D URING THE YEAR. THE AO HAD PROVIDED THE APPELLANT AN OPPORTUNITY TO EXPLAIN THE POSITION. HOWEVER, THE APPELLANT HAD NOT FILED ANY DOCUMENTARY PROOF IN SUPPORT OF ITS CLAIM THAT THE PRIOR PERIOD EXPENSES HAVE CRYSTALLISED DURING THE YEAR. EVEN DURING THE APPEL LATE PROCEEDING THE APPELLANT HAS MENTIONED A NUMBER OF THE CASE LA WS, HOWEVER, NO EFFORT IS MADE TO PRODUCE ANY DOCUMENTARY EVIDEN CE TO SHOW THAT THE EXPENSES ACTUALLY CRYSTALLISED DURING THE YEAR. HENCE THE DISALLOWANCE MADE BY THE A.O. ON THIS ACCOUNT IS QU ITE JUSTIFIED. THE DISALLOWANCE IS, THEREFORE CONFIRMED. 15. AGGRIEVED BY SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 7 16. A FTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INF IRMITY IN THE ORDER OF THE CIT(A). IT IS THE SETTLED PROPOSITION OF LAW TH AT FOR CLAIMING ANY EXPENDITURE AS ALLOWABLE DEDUCTION, THE ONUS IS ALW AYS ON THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF T HE A.O. THAT THE SAME IS GENUINE BUSINESS EXPENDITURE. UNDOUBTEDLY, THE ASSE SSEE IN THE INSTANT CASE HAS FAILED TO JUSTIFY THE ALLOWABILITY OF CLAIM OF PRIOR PERIOD EXPENSES OF ` 64,60,337/- DURING THE YEAR BEFORE THE A.O. & CIT(A ) BY SHOWING THAT THE EXPENDITURE HAS CRYSTALLISED DURING THE YEAR. EVEN BEFORE US ALSO THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE EXPENSES HAVE CRYST ALLISED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE ADDITION OF ` 64,60,337/- MADE BY THE A.O. AND SUSTAINED BY THE CIT(A) IS JUSTIFIED. WE D O NOT FIND MUCH FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME SHOULD HAVE BEEN NETTED OFF AND THE BALANCE ONLY COULD HAVE BEE N DISALLOWED AS A DEDUCTION DURING THE RELEVANT PREVIOUS YEAR. IN OUR OPINION, THE ADDITION OF PRIOR PERIOD INCOME OF ` 9,35,780/- IS GOVERNED BY PROVISIONS OF SECTION 41 (1) WHEREAS THE ALLOWABILITY OF PRIOR PERIOD EXPENSES O F ` 64,60,337/- IS GOVERNED BY THE PROVISIONS OF SECTION 37(1) OF THE ACT. FURT HER, THE A.O. HAD ALSO GIVEN A FINDING THAT THE PRIOR PERIOD EXPENSES HAVE NOT B EEN INCURRED FOR EARNING THE PRIOR PERIOD INCOME. NOTHING HAS BEEN BROUGHT O N RECORD TO CONTROVERT THE FINDING GIVEN BY THE A.O. IN THIS VIEW OF THE MATT ER WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND UPHOLD THE SAME. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY DISMISSED. ITA 905/MUM/2008 (BY THE REVENUE FOR A.Y. 2002-03) 17. GROUNDS OF APPEAL NO. 1 & 2 READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LA, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO VERIFY WHETHER SOFTWARE USAGE EXPENSES OF ` 68,45,718/- HAD BEEN INCLUDED IN DISALLOWANCE OF SOFTWARE & PRODUCT DEVELOPMENT EXP ENSES OF ` 4,24,37,733/- AND IF SO, RECTIFY THE ASSESSMENT ORD ER WITHOUT APPRECIATING THE FACT THAT UNDER SEC. 251(1) OF THE I.T. ACT THE CIT(A) HIMSELF OUGHT TO HAVE VERIFIED AND QUANTIFIE D THE RELIEF AND OUGHT TO HAVE GIVEN DIRECTION ACCORDINGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LA, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO VERIFY WHETHER FIXED ASSETS PURCHASED BY THE ASSESSEE OF ` 23,00,000/- HAS BEEN ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 8 ALREADY CAPITALISED BY THE ASSESSEE AS FIXED ASSET S AND IF SO, RECTIFY THE ASSESSMENT ORDER WITHOUT APPRECIATING THE FACT THAT UNDER SEC. 251(1)OF THE I.T. ACT THE CIT(A) HIMSELF OUGHT TO H AVE VERIFIED AND QUANTIFIED THE RELIEF AND OUGHT TO HAVE GIVEN DIREC TION ACCORDINGLY. 18. AS CAN BE SEEN FROM THE ABOVE GROUNDS, THE GRIE VANCE OF THE REVENUE IS THAT THE CIT(A) HAS NO POWER U/S 251(1) TO SET ASID E THE MATTER TO THE FILE OF THE A.O. FOR VERIFICATION. 19. BOTH THE SIDES HAVE FAIRLY AGREED THAT ALTHOUGH THE CIT(A) HAS NO POWER TO SET ASIDE THE ISSUE, HOWEVER, THE TRIBUNAL HAS T HE POWER TO SET ASIDE THE ISSUE TO THE FILE OF THE A.O. FOR VERIFICATION AND ADJUDICATION OF THE ISSUE IN ACCORDANCE WITH LAW. WE, THEREFORE, RESTORE THE AB OVE TWO ISSUES TO THE FILE OF THE A.O. FOR VERIFICATION AND FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS OF APPEAL NO. 1 & 2 ARE A CCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 20. GROUNDS OF APPEAL NO. 3 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE ASSESSEES CLAIM OF BAD DEBTS OF ` 3,54,984/- WITHOUT APPRECIATING THE FACT THAT BAD DEBT PERTAINED TO THE CURRENT YEA R UNDER CONSIDERATION AND THE ASSESSEE COULD NOT FULFIL THE BASIC CONDITIONS LAID DOWN U/S 36(1)(VII) R.W.S. 3692) OF THE I.T. A CT, 1961. 20.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ASSE SSEE COMPANY HAD DEBITED BAD DEBTS WRITTEN OFF AMOUNTING TO ` 3,54,984/-. WE FIND AFTER GOING THROUGH THE FULL DETAILS FILED BY THE ASSESSEE, THE A.O. DI SALLOWED THE CLAIM OF BAD DEBTS ON THE GROUND THAT THE TRANSACTIONS PERTAIN T O THE CURRENT YEAR AND THE SAME WAS WRITTEN OFF BY THE ASSESSEE IN THE SAME YE AR ITSELF. ACCORDING TO THE A.O. THE BAD DEBT CLAIMED BY THE ASSESSEE HAS IN FA CT NOT YET MATURED TO CLAIM IT AS BAD AND IRRECOVERABLE. WE FIND THE CIT (A) ALLOWED THE CLAIM OF BAD DEBTS ON THE GROUND THAT THE ASSESSEE FULFILLED THE CONDITIONS OF SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT. WE FIND THIS I SSUE HAS NOW BEEN DECIDED IN ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 9 FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TRF LTD. VS. CIT 323 ITR 397 WHEREIN IT HAS BEEN HE LD THAT AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I.T. ACT, 19 61 W.E.F. APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBT S, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE. SINCE THE ASSESSEE HAS WRITTEN OFF THE AMOUNT OF BAD DEBT S IN THE BOOKS OF ACCOUNT, THEREFORE, IN VIEW OF THE DECISION CITED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING THE CLAIM BAD D EBTS WRITTEN OFF. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 21. GROUNDS OF APPEAL NO. 4 BEING GENERAL IN NATURE IS DISMISSED. ITA NO. 906/MUM/2009 (BY THE REVENUE FOR A.Y. 2003- 04) 22. THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REVISED THE DEPRECIATION ON ` 33,57,040/- REPRESENTING VARIOUS SOFTWARE ACQUIRED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION @ 60% AS AGAINST 25% ALLOWED AS PER I.T. RULES BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT RATE OF 60% IS EFFECTIVE ONLY FROM A.Y. 2004-05. 23. AFTER HEARING BOTH THE SIDES, WE ARE OF THE CONSIDE RED OPINION THAT THE ISSUE HAS TO GO BACK TO THE FILE OF THE A.O. FOR FR ESH ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE RATIO OF THE DECISION OF THE SP ECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AMWAY ENTERPRISES VS. DCIT REPORTED IN 301 ITR (AT) 1 (DEL SB) ACCORDINGLY, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION CIT ED ABOVE AND IN ACCORDANCE WITH LAW AFTER PROVIDING DUE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. THE GROUND OF APPEAL RAISED BY THE REVENUE IS ACCORDING LY ALLOWED FOR STATISTICAL PURPOSE. ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 10 24. IN THE RESULT, THE APPEAL IN ITA NO. 1120/M/200 8 FOR A.Y. 2002-03 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND APPEALS IN ITA NO. 905 & 906/MUM/2008 FOR A.YRS. 2002-03 & 2003-04 ARE ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF MAY, 2011. SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 25.5.11. COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. (A) CONCERNED, MUMBAI 4. CIT CONCERNED, MUMBAI 5. THE DR, L - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI R.K. ITA 1120 /M/08,905 & 906/M/2008, REDIFF.COM INDIA LIMITED 11 DATE INITIALS DRAFT DICTATED ON 12.5.11,23.5.11 DRAFT PLACED BEFORE THE AUTHOR 13.5.11, 23.5.11 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER AM/JM DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM APPROVED DRAFT COMES TO THE SR. PS KEPT FOR PRONOUNCEMENT ON. FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE ON WHICH FILE GOES TO THE AR DATE OF DISPATCH