Asera Software (India) Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 1179/BANG/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1564 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-02-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 14-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D PRABHAKAR REDDY
• Assessee Lawyers: H N KHINCHA
• Keywords: Capital asset; Depreciation; Business expenditure; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 1179/BANG/2009 ASSESSMENT YEAR : 2003 - 04 ASERA SOFTWARE (INDIA) PVT. LTD., NO.14, VIJETA, 2 ND FLOOR, 80 FT. MAIN ROAD, 4 TH BLOCK, KORAMANAGALA, BANGALORE 560 034. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. : RESPONDENT APPELLA NT BY : SHRI H.N. KHINCHA, C.A. RESPONDEN T BY : SHRI D. PRABHAKAR REDDY, ADDL. CIT(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) IN ITA NO.98/AC - 11(1)/AI/05 - 06 DATED 16.10.2009 FOR THE A.Y. 2003 - 04. 2. TH E APPELLANT IS A PRIVATE LIMITED COMPANY INCORPORATED ON 25.5.2001. ITS PRIMARY BUSINESS IS TO MANUFACTURE AND SELL S OFTWARE PACKAGE . FOR THE A.Y. 2003 - 04, THE ASSESSEE FILED ITS RETURN OF INCOME ON ITA NO.1179/BANG/09 PAGE 2 OF 10 28.11.2003 DECLARING A LOSS OF RS.85,25,752. THE RETU RN OF INCOME WAS PROCESSED INITIALLY U/S. 143(1) OF THE ACT ON 25.2.2004 AND SUBSEQUENTLY SELECTED FOR SCRUTINY AND ASSESSMENT COMPLETED ON 30.12.2005 ON 143(3) OF THE ACT. 3. IN THE ASSESSMENT , LD. AO MADE AN ADDITION OF RS.30 ,77,193 AND RS.3,34,850 WHICH WA S CLAIMED BY THE ASSESSEE AS EXPENDITURE ON ACCOUNT OF CANCELLATION OF LEASE AND IMPROVEMENT ON LEASE HOLD PREMISES RESPECTIVELY. THE ASSESSEE COMPANY HAD ENTERED INTO LEASE AGREEMENT WITH THE BUILDING OWNER FOR A PERIOD OF FOUR YEARS WITH AN OBLIGATION T O PAY TH E LEASE RENT FOR THE ENTIRE PERIOD OF THE LEASE EVEN IF VACATED BEFORE THE COMPLETION OF FOUR YEAR TERM OF THE LE ASE. THE ASSESSEE HAD LEASED OUT THE PREMISES ADJACENT TO ITS EXISTING OFFICE FOR EXPANSION OF ITS BUSINESS. HOWEVER, AS INTENDED EXP ANSION O F THE BUSINESS DID NOT HAPPEN , THEREFORE IT WAS COMPELLED TO SURRENDER THE PREMISES TO THE LANDLORD PRIOR TO FOUR YEARS OF THE AGREED TERM OF LEASE FOREGOING A PORTION OF THE SECURITY DEPOSIT HE LD BY THE LANDLORD WHICH AMOUNTED TO RS.30,77,193. LD . AO DISALLOWED THIS AMOUNT AS ALLOWABLE EXPENDITURE WITH THE FOLLOWING OBSERVATIONS: THE LEASE AGREEMENT IS PERTAINING TO AN ASSET WHICH IS IN THE NATURE OF CAPITAL I.E. BUILDING. IN THE HANDS OF THE ASSESSEE THE LEASE HOLD RIGHTS IN THE BUILDING ALSO CONSTITUTES A CAPITAL ASSET. IN OTHER WORDS, THE LEASE AGREEMENT IS FOR ENDURING BENEFIT ON THE BUILDING FOR OVER THE PERIOD OF YEARS . IF THE LEASE HAD NOT BEEN CANCELLED THEN THE ASSESSEE WOULD HAVE GOT AN ENDURING BENEFIT OVER THE YEARS OF LEASE AGREE MENT. THEREFORE IN THE LIGHT OF THE ABOVE DISCUSSION THE SUM OF RS.30,77,193 DEBITED BY THE ASSESSEE IN THE P&L A/C. AS LEASE CANCELLATION CHARGES IS TREATED AS CAPITAL EXPENDITURE AND THE SAME IS BEING DISALLOWED. ITA NO.1179/BANG/09 PAGE 3 OF 10 4. WITH RESPECT TO THE EXPENDITURE ON I MPROVEMENT ON LEASE HOLD BUILDING FOR RS.3,52,473, IT WAS SUBMITTED THAT THE AMOUNT WAS SPENT FOR CONSTRUCTION OF A ROOM WITH DOOR FOR PUTTING UP A CAFETERIA AREA AND UPS ROOM IN THE LEASE HOLD PREMISES WHICH WAS VACATED PREMATURELY DURING THE YEAR. THE L D. AO DISALLOWED THIS EXPENDITURE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREINBELOW FOR REFERENCE: IF ANY PROPERTY IS TAKEN ON LEASE THEN IT SHALL BE TREATED AS CAPITAL ASSET AND IF ANY IMPROVEMENT OVER THE PROPERTY SHALL ALSO BE TREATED AS C APITAL ASSET AND APPLICABLE DEPRECIATION CAN BE ALLOWED AS THE COST OF IMPROVEMENT TO THE LEASE HOLD ASSET. MOREOVER, THE ASSESSEE HAS CONSTRUCTED A SEPARATE ROOM WITH DOOR FOR THE PURPOSE OF PUTTING UP A CAFETERIA AND UPS ROOM, WHICH CANNOT BE TREATED AS COST OF MAINTENANCE OF PURPOSE. IF THE EXPENDITURE SAID TO BE THE COST OF MAINTENANCE THEN IT IS SUPPOSED TO BE THE EXPENDITURE TOWARDS, MINOR REPAIRS, ALTERATION WITHOUT ALTERING THE STRUCTURE OF THE BUILDING AND WHITE WASHING, ETC. THE CHANGES AND ALT ERATIONS ARE DONE WITH A VIEW TO GET LONG TERM AND ENDURING BENEFITS. THEREFORE, THE COST OF CONSTRUCTION OF THE ROOM FOR PUTTING UP A CAFETERIA AND UPS IS TREATED AS CAPITAL EXPENDITURE AND THE ASSESSEE S CLAIM THAT IT IS A REVENUE EXPENDITURE IS DISALLO WED. THEREFORE A SUM OF RS.3,34,850/ - IS BEING DISALLOWED AFTER ALLOWING THE DEPRECIATION . . 5. ON APPEAL BEFORE THE LD. CIT(A), IT WAS EXAMINED WHETHER THE FOLLOWING INGREDIENTS WERE PRESENT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE FOR CLAIMING DED UCTION U/S. 28(1) OF THE ACT: (A) THERE SHOULD BE BUSINESS OR PROFESSION. (B) THE BUSINESS OR PROFESSION SHOULD BE CARRIED ON BY THE ASSESSEE. (C) THE BUSINESS OR PROFESSION SHOULD BE CARRIED ON FOR SOME TIME DURING THE PREVIOUS YEAR. (D) THE CHARGE IS IN RESPECT OF THE PROFITS AND GAINS OF THE PREVIOUS YEAR OF THE BUSINESS AND PROFESSION. (E) THE CHARGE EXTENDS TO ANY BUSINESS OR PROFESSION CARRIED ON. ITA NO.1179/BANG/09 PAGE 4 OF 10 6. LD. CIT(A) AFTER CONSIDERING SUCH EXAMINATION TO BE NECESSARY CAME TO THE CONCLUSION THAT MERE LY TAKING TWO FLOORS OF A BU ILDING ON RENT CANNOT BE EQUATED WITH SETTING UP OF A BUSINESS, THEREFORE THE CON DITION SPECIFIED IN CLAUSE (A) ABOVE WAS ABSENT. HE WAS ALSO OF THE VIEW THAT THE BUSINESS WAS NEITHER SET UP NOR COMMENCED OR CARRIED ON DURING THE A.Y. 2003 - 04 EVEN THOUGH T HE COMPANY WAS INCORPORATED ON 25.1.2001. FINALLY, THE LD. CIT(A) CAME TO THE FOLLOWING CONCLUSION: 6.4 ON THE FACTS OF THE CASE, I HAVE DECIDED SUPRA THAT THE EXPENDITURE INCURRED FOR IMPROVEMENT OF THE LEASED PROPERTY AND CHARGES PAID FOR CANCELLATION IN 2 ND YEAR SHOWS THE BUSINESS DID NOT TAKE OFF AT ALL OR WAS NOT SET UP AT ALL. THAT THE BUSINESS DID NOT TAKE OFF AT ALL IS EVIDENCED BY THE FACT THAT THE APPELLANT HAS FILED AN APPLICATION BEFORE THE ROC. HENCE THE LOSS CANNOT BE EVEN TREATED AS CAPIT AL EXPENDITURE OR LOSS EVEN BUSINESS LOSS. IN FACT THE LOSS IS DEAD AND INADMISSIBLE. SIMILAR IS THE VIEW OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. BIHAR SPINNING AND WEAVING MILLS LTD. (1953) 24 ITR 108 (CAL.). IN THAT CASE, THE HIGH COURT HELD THAT EVEN IN THE SECOND YEAR OF ITS INCORPORATION, THE A.O. HAD FOUND THAT THE BUSINESS OF THE ASSESSEE HAD NOT BEEN SET UP OR COMMENCED. THE RESULT WAS THE INCOME EARNED DURING THAT PERIOD WAS TREATED AS INCOME FROM OTHER SOURCES WHILE THE EXPENDITURE IN CURRED WERE TREATED AS ADMISSIBLE, THE ASSESSEE SUFFERING BOTH WAYS. IN TOTO, THE LOSS CLAIMED BY THE APPELLANT IS TREATED AS DEAD AND INADMISSIBLE AND THUS INCAPABLE OF BEING CARRIED FORWARD FOR SET OFF IN LATER YEARS IF ANY. THE A.O. IS DIRECTED TO AME ND THE ORDER ACCORDINGLY. 7. THE ASSESSEE IS NOW IN APPEAL BEFORE US WITH FIVE ELABORATE GROUNDS. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION. THE OTHER GROUNDS ARE SUMMARIZED AS FOLLOWS: 2. THE LD. AO HAD ERRED IN NOT ALLO WING THE EXPENSE INCURRED ON ACCOUNT OF TERMINATION OF LEASE AGREEMENT. ITA NO.1179/BANG/09 PAGE 5 OF 10 3. THE LD. ACIT HAS ERRED IN DISALLOWING THE EXPENDITURE INCURRED ON TEMPORARY CONSTRUCTION ON THE LEASE HOLD PREMISES. 4. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF TERMINATION OF LEASE AGREEMENT AND TEMPORARY CONSTRUCTION ON THE LEASE HOLD PREMISES BY HOLDING THAT THESE EXPENDITURE WERE INCURRED BEFORE SETTING UP OF THE BUSINESS OF THE SOFTWARE DEVELOPMENT. 8. LD. AR FORCEFULLY ARGUED BEFORE US STATING THAT THE APPELLANT H AD COMMENCED ITS OPERATIONS ON THE SAID PREMISES AND THE PAYMENT OF RENT WAS ALLOWED AS DE DUCTION FOR THE EARLIER YEARS . IN ORDER TO EXPAND ITS BUSINESS ADDIT IONAL SPACE WAS RENTED OUT BY EXECUTING A LEASE AGREEMENT FOR FOUR YEARS. THE LAN DLORD INSISTED THAT THE PREMISES SHOULD NOT BE VACATED BEFORE THE SAID TERM. SINCE THE APPELLANT COULD NOT EXPAND ITS BUSINESS, WAS COMPELLED TO TERMINATE THE LEASE AGREEMENT, DUE TO WHICH DISPUTE AROSE WITH THE LANDLORD AND AFTER NEGOTIATION, A SETTLEMEN T WAS REACHED WHEREBY THE APPELLANT HAD TO FOREGO A SUM OF RS.30,77,193. THE APPELLANT HAD NO OTHER OPTION BECAUSE IT HAD DEPOSITED CERTAIN AMOUNT AS SECURITY DEPOSIT WITH THE LAND LORD TO PROTECT HIS INTEREST IN THE EVENT OF DEFAULT OF PAYMENT OF RENT. LD AR SUBMITTED, SECTION 269UA (F) OF THE ACT SPECIFIES THAT THE LEASE OF AN IMMOVABLE PROPERTY IS TO BE REGARDED AS TRANSFER ONLY IF THE LEASE IS FOR A PERIOD OF TWELVE YEARS OR MORE. THEREFORE THE LEASE IN ONLY SUCH CIRCUMSTANCES WOULD CONSTITUTE A CAPIT AL ASSET IN THE HANDS OF THE LESSEE WHO ENJOYS BENEFIT OF AN ENDURING NATURE. SIMILAR PROVISIONS ARE ALSO INCORPORATED IN SECTION 27 OF THE ACT. HOWEVER, IN THE PRESENT CASE THE LEASE PERIOD WAS ONLY FOR FOUR YEARS AND THEREFORE IT CANNOT BE HELD THAT ITA NO.1179/BANG/09 PAGE 6 OF 10 TH E LEASE CONSTITUTES A CAPITAL ASSET. IT WAS SUBMITTED THAT THE APPELLANT HAD INCURRED THE CANCELLATION CHARGES FOR TERMINATION OF LEASE WITH A VIEW TO SAVE ON EXPENDITURE IN THE ACCOUNTING PERIOD AS WELL AS FOR THE SUBSEQUENT PERIOD WITH RESPECT TO PAYMEN T OF RENT. THE EXPENDITURE WAS INCURRED NOT WITH AN INTENTION FOR ACQUIRING ANY ENDURING BENEFIT OR AN ASSET. THE EXPENDITURE WAS INCURRED ONLY TO GET RID OF AN ONEROUS OBLIGATION. THE PAYMENT UNDER THE OBLIGATION WOULD CONSTITUTE ONLY REVENUE EXPENDIT URE. THE LEASE TERMINATION CHARGES WERE IN SUBSTITUTION OF A PAYMENT THAT WOULD HAVE BEEN MADE ON REVENUE ACCOUNT. THEREFORE IT WAS PRAYED THAT THE LEASE CANCELLATION CHARGES SHOULD ALSO BE REGARDED AS REVENUE EXPENDITURE AND ALLOWED. LD. AR RELIED ON TH E FOLLOWING CASE LAWS : (1) CIT V. ASHOK LEYLAND LTD. (SC) 86 ITR 549 (MAD) (2) CIT V. PEPSICO (SIC) PEICO ELECTRONICS & ELECTRICALS LTD. 107 CTR 40 (CAL) (3) LIFE INSURANCE CORPORATION OF INDIA V. CIT, BOMBAY CITY - II, 119 ITR 900 (BOM). 9. FURTHER LD. AR DEFENDED THE APPELLANT WITH RESPECT TO PAYMENT MADE FOR RS.3,34,850 TOWARDS TEMPORARY CONSTRUCTION OF A CAFETERIA AND UPS ROOM STATING THAT IT WILL BE ONLY IN THE NATURE OF REVENUE EXPENDITURE SINCE TH E SE EXPENDITURE WERE INCURRED ON THE TENANTED PREMISES, FURTHER THE ASSESSEE DID NOT ACQUIRE ANY CAPITAL ASSET AND ALSO DID NOT DERIVE ANY BENEFIT OF ANY ENDURING NATURE. IT WAS ALSO ARGUED THAT T HESE EXPENDITURE SHOULD BE CONSTRUED IN THE NATURE OF REPAIRS TO THE BUILDING AND SHOULD BE ALLOWED U/S. 30 OF THE ACT, IF NOT U/S. 37 OF THE ACT WHICH PROVIDES THAT AN EXPENDITURE WHICH IS NOT IN CAPITAL NATURE OR PERSONAL AND IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE SHALL BE ITA NO.1179/BANG/09 PAGE 7 OF 10 ALLOWED AS DEDUCTION WHEN COMPUTING INCOME FROM THE BUSINESS OF THE ASSESSEE. IN THE INSTANT CASE, THE EXPENDITURE WAS INCURRED FOR MAKING SOME ALTERATIONS IN THE PREMISES TO SUIT THE APPELLANT AND FURTHER THESE ALTERATIONS BECOME AN INTEGRAL PART OF THE EXISTING STRUCTURE WHICH CANNOT BE DETACHED, CONSEQ UENTLY IT WILL NOT BELONG TO THE ASSESSEE. LD. AR RELIED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT V. HARIDAS BHAGATH & CO. PVT. LTD. REPORTED IN 240 ITR 169. LD. AR PRAYED THAT FROM THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE ADDITI ON MADE BY THE AO AND FURTHER CONFIRMED BY THE LD. CIT(A) MAY BE DELETED. 10. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD. AO AND THE LD. CIT(A) AND FOR THE REASON S STATED THEREIN PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE UPHELD. 11. WE HAVE HEARD TH E RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIAL ON RECORD. THERE IS NO MENTION ABOUT THE NON - EXISTENCE OF THE BUSINESS DURING THE RELEVANT ASSESSMENT YEAR IN THE ORDER OF THE LD.AO . THERE WERE CARRIED FORWARD LOSSES FOR THE A.Y. 2003 - 04 AND SHORT T ERM CAPITAL LOSS FOR RS.17,41,221 AND RS.33,72,498 RESPECTIVELY TAKEN NOTE OF BY THE LD. AO WHILE PASSING THE ASSESSMENT ORDER FOR THE RELEVANT ASSESSMENT YEAR. HE HAS ALSO ARRIVED AT A LOSS FROM BUSINESS FOR RS.17,85,020 FOR THE RELEVANT ASSESSMENT YEAR AFTER MAKING THE DISALLOWANCES MENTIONED SUPRA. THERE IS NO CATEGORICAL FINDING BY THE LD. CIT(A) TO EXPLAIN THAT THE BUSINESS OF THE ASSESSEE HAS NOT COMMENCED. NO OTHER FRESH MATERIALS WERE BROUGHT TO OUR NOTICE BY THE REVENUE TO HOLD THAT THE BUSINESS OF THE ASSESSEE HAD NOT COMMENCED. THEREFORE WE DISMISS THIS STAND OF THE REVENUE. WITH RESPECT TO THE DISALLOWANCE OF ITA NO.1179/BANG/09 PAGE 8 OF 10 LEASE CANCELLATION CHARGES IT IS EVIDENT THAT THIS LOSS TO THE ASSESSEE WAS INCURRED DUE TO APPROPRIATION OF SECURITY DEPOSIT STANDING W ITH THE LANDLORD IN LIEU OF THE LOSS OF LEASE RENT TO THE LANDLORD. AS FAR AS THE ASSESSEE IS CONCERNED, IT IS A PAYMENT MADE FOR THE PORTION OF THE RENT PAYABLE FOR THE BALANCE TERM OF THE LEASE AGREEMENT. THIS EXPENSE HAS CRYSTALLIZED DURING THE RELEVA NT ASSESSMENT YEAR DUE TO THE DECISION TAKEN FOR TERMINATION OF THE LEASE AGREEMENT. THE ARGUMENT OF THE REVENUE THAT THIS PAYMENT PERTAINS TO THE SURRENDER OF A LEASE HOLD RIGHT AND LEASE HOLD RIGHT BEING IN THE NATURE OF AN ASSET CAN BE CONSTRUED ONLY A S A CAPITAL LOSS TO THE ASSESSEE IS NOT APPRECIABLE. IN THE CASE OF CIT V. ASHOK LEYLAND RELIED UPON BY THE LD. AR, IT WAS HELD THAT THE COMPENSATION PAID FOR TERMINATION OF THE SERVICES OF THE MANAGING AGENTS WAS A PAYMENT MADE WITH A VIEW TO SAVE BUSIN ESS EXPENDITURE IN THE ACCOUNTING PERIOD AS WELL AS A FEW SUBSEQUENT YEARS; IT WAS NOT MADE FOR ACQUIRING ANY ENDURING BENEFIT OR INCOME - YIELDING ASSET. BY AVOIDING CERTAIN BUSINESS EXPENDITURE THE COMPANY COULD NOT BE SAID TO HAVE ACQUIRED ENDURING BENEF ITS OR ANY INCOME - YIELDING ASSET. THE EXPENDITURE WAS OF A REVENUE NATURE AND WAS AN ALLOWABLE DEDUCTION IN COMPUTING THE PROFITS OF THE ASSESSEE - COMPANY. LD. AR S RELIANCE IN THE CASE CIT V. PEICO ELECTRONICS & ELECTRICALS LTD. SUPRA IS ALSO OF QUITE RELEVANCE WHEREIN IT WAS HELD THAT THE COMPENSATION PAID FOR PREMATURE TERMINATION OF TRADE AGREEMENT TO AVOID FUTURE COMMERCIAL INCONVENIENCE DID NOT BRING INTO EXISTENCE ANY CAPITAL ASSET OF ENDURING NATURE AND, THEREFORE IS REVENUE EXPENDITURE. DRAWIN G STRENGTH FROM THESE CASE LAWS, WE ARE OF THE CONSIDERED OPINION THAT THE EXPENSE INCURRED BY THE ASSESSEE DUE TO CANCELLATION CHARGES OF ITA NO.1179/BANG/09 PAGE 9 OF 10 LEASE AGREEMENT FOR RS.30,77,193 CAN BE ONLY HELD TO BE REVENUE EXPENDITURE. IT IS ORDERED ACCORDINGLY. 12. NOW GOING TO THE ISSUE OF DISALLOWANCE OF EXPENDITURE INCURRED DUE TO TEMPORARY CONSTRUCTION ON THE LEASE HOLD PREMISES, IT IS APPARENT THAT THE ASSESSEE HAS NOT ACQUIRED ANY ASSET OF ENDURING NATURE. IT WAS AN EXPENDITURE INCURRED ON THE LEASE HOLD PREMISES TO SUI T THE CONVENIENCE OF THE APPELLANT. MORE OVER THE PREMISES HAD TO BE VACATED DUE TO COMMERCIAL EXPEDIENCY. THE DECISION CITED BY THE LD. AR IN THE CASE OF CIT V. HARIDAS BHAGATH & CO. PVT. LTD. REPORTED IN 240 ITR 169 IS DRAWN FOR ATTENTION WHEREIN IT W AS HELD THAT THE EXPENDITURE ON THE BUILDING TAKEN ON LEASE WAS REVENUE IN NATURE. FOLLOWING THE RATIO OF THIS DECISION, WE HOLD THAT THE IMPROVEMENT COST ON LEASE HOLD BUILDING INCURRED BY THE APPELLANT FOR RS.3,52,473 IS TO BE ALLOWED AS A REVENUE EXPEN DITURE. IT IS ORDERED ACCORDINGLY. THEREBY WE HAVE ALLOWED ALL THE THREE GROUNDS RAISED BY THE ASSESSEE IN ITS FAVOUR. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF FEBRUARY, 2011 . SD/ - S D/ - ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH FEBRUARY, 2011. DS/ - ITA NO.1179/BANG/09 PAGE 10 OF 10 COPY TO: BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE. 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE