The DCIT, Circle-5, Ahmedabad V. Net 4 Nuts Ltd., Ahmedabad

ITA 1186/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62945 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: S N DIVETIA
• Keywords: Depreciation; Earning of tax free income; Corroborative evidences; Valuation report
• Section: 14A; 32; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.1186,1261/AHD/2011,165/AHD/2012, 930 & 2393/ AHD/2010 AND 3037/AHD/2011 A. Y.: 2003-04,2004-05, 2005-06, 2006-07, 2007-08 A ND 2008-09, THE D. C. I. T., CIRCLE-5, 2 ND FLOOR, C. U. SHAH CHAMBERS, ASHRAM ROAD, AHMEDABAD 380 009 THE D. C. I. T., CIRCLE-5, 2 ND FLOOR, C. U. SHAH CHAMBERS, ASHRAM ROAD, AHMEDABAD 380 009 THE JCIT (OSD), CIRCLE -5, AHMEDABAD, B-409, PRATYAKASH KAR BHAVAN, AMBAWADI, AHMEDABAD THE D. C. I. T., CIRCLE-5, 2 ND FLOOR, C. U. SHAH CHAMBERS, ASHRAM ROAD, AHMEDABAD 380 009 THE D. C. I. T., CIRCLE-5, 2 ND FLOOR, C. U. SHAH CHAMBERS, ASHRAM ROAD, AHMEDABAD 380 009 THE JCIT (OSD), CIRCLE -5, AHMEDABAD, B-409, PRATYAKASH KAR BHAVAN, AMBAWADI, AHMEDABAD VS NET 4 NUTS LTD., 1008, ATLANTA TOWER, GULBAI TEKRA, ELLISBRIDGE, AHMEDABAD 380 006 P. A. NO. ABBCN 0643 E NET 4 NUTS LTD., 1008, ATLANTA TOWER, GULBAI TEKRA, ELLISBRIDGE, AHMEDABAD 380 006 P. A. NO. ABBCN 0643 E NET 4 NUTS LTD., 1008, ATLANTA TOWER, GULBAI TEKRA, ELLISBRIDGE, AHMEDABAD 380 006 P. A. NO. ABBCN 0643 E NET 4 NUTS LTD., 1008, ATLANTA TOWER, GULBAI TEKRA, ELLISBRIDGE, AHMEDABAD 380 006 P. A. NO. ABBCN 0643 E NET 4 NUTS LTD., 1008, ATLANTA TOWER, GULBAI TEKRA, ELLISBRIDGE, AHMEDABAD 380 006 P. A. NO. ABBCN 0643 E NET 4 NUTS LTD., 1008, ATLANTA TOWER, GULBAI TEKRA, ELLISBRIDGE, AHMEDABAD 380 006 P. A. NO. ABBCN 0643 E (APPELLANT) (RESPONDENT) ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 2 APPELLANT BY SHRI S. P. TALATI, DR RESPONDENT BY SHRI S. N. DIVETIA, AR DATE OF HEARING: 06-09-2012 DATE OF PRONOUNCEMENT: 21-09-2012 O R D E R PER BENCH: THESE APPEALS ARE FILED BY THE REVENUE AGGRIEVED BY THE DIFFERENT ORDERS OF THE LEARNED CI T-XI, AHMEDABAD DATED 25-02-2011 IN APPEAL NO. CIT(A)-XI/197/20-11, DATED 25-02- 2011 IN APPEAL NO. CIT(A)-XI/198/10-11, DATED 09-11 -2011 IN APPEAL NO.CIT(A)-XI/199/10-11, DATED 15-01-2010 IN APPEAL NO.CIT(A)- XI/504/2008-09, DATED 10-06-2010 IN APPEAL NO. CIT( A)- XI/1053/2009-10 AND DATED 23-09-2011 IN APPEAL NO. CIT(A)- XI/200/10-11 PASSED U/S 250 READ WITH SECTION 143(3 ) OF THE I. T. ACT FOR ASSESSMENT YEARS 2003-04, 2004-05, 2005-06, 200 6-07, 2007-08 AND 2008-09, RESPECTIVELY. THESE APPEALS WERE HEAR D TOGETHER AND THE SAME SHALL BE DISPOSED OF BY THIS COMMON CONSOL IDATED ORDER FOR THE SAKE OF CONVENIENCE AS UNDER. AY 2003-04 (ITA NO.1186/AHD.2011) 2. IN THIS APPEAL, THE REVENUE HAS RAISED FIVE GRO UNDS OF APPEAL WHEREIN GROUNDS NO. 4 AND 5 ARE GENERAL IN NATURE A ND DO NOT SURVIVE FOR ADJUDICATION. THE SURVIVING GROUNDS NO.1, 2 AND 3 OF THE APPEAL OF THE REVENUE ARE REPRODUCED HEREIN BELOW FOR REFEREN CE: 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPREC IATION OF RS.47,54,133/-. ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 3 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF EXPEND ITURE U/S 14A OF RS.11,098/- 3. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO VERIFY THE CONT ENTIONS OF THE ASSESSEE REGARDING FOREIGN EXPENSES AND TO D ELETE THE ADDITION OF RS.12,18,834/- IN CONTRAVENTION OF SEC. 251. 3. GROUND NO.1: DELETING THE DISALLOWANCE OF DEPRECIATION OF RS.47,54,133/-:- THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND NET APPLICATIONS, FILED ITS RETURN ON 1-09-2003 DECLARI NG TOTAL LOSS AT RS.75,16,130/- WHICH WAS INITIALLY PROCESSED U/S 14 3(1) OF THE ACT. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED DEPRECIA TION OF RS.64,18,218/- WHICH INCLUDED DEPRECIATION OF RS.47 ,54,133/- ON INTANGIBLE ASSETS. THE LEARNED AO OPINED THAT THE I NTANGIBLE ASSET SHOWN BY THE ASSESSEE DID NOT HAVE ANY VALUE. THE L EARNED AO, THEREFORE, REOPENED THE ASSESSMENT U/S 147 OF THE A CT AFTER GETTING NECESSARY APPROVAL BY ISSUING NOTICE U/S. 148 OF TH E ACT. IN RESPONSE THERETO, THE ASSESSEE VIDE ITS WRITTEN SUBMISSION D ATED 28-01-2010 REQUESTED THE LEARNED AO TO TREAT ITS ORIGINAL RETU RN AS COMPLIANCE TO THE SAID NOTICE. ON PERUSAL OF THE DEPRECIATION CHA RT ANNEXED BY THE ASSESSEE WITH THE COMPUTATION OF TOTAL INCOME, THE LEARNED AO NOTICED THAT THE ASSESSEE CLAIMED DEPRECIATION OF R S.47,54,133/- ON INTANGIBLE ASSETS SHOWN AT RS.1,90,16,533/- @ 25%. WHEN THE ASSESSEE WAS REQUIRED TO EXPLAIN THE ASSESSEE STATE D THAT INTANGIBLE ASSETS ARE DEFINES AS KNOW-HOW, PATENTS, COPY RIGHT S, TRADEMARKS, LICENSES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 4 SIMILAR NATURE AND THAT THE ASSESSEE HAD DEVELOPED AN INTANGIBLE ASSET IN THE FORM OF INTELLECTUAL PROPERTY COMPRISI NG OF SOFTWARE CODES AND THE ASSESSEE HAD ACQUIRED BUSINESS AND COMMERCI AL RIGHTS IN THE FORM OF PATENT TRADE MARK ON THE SAME I.E. PROP RIETARY INTEGRATION PLATFORM AVTAR, WHICH ALLOWS SEAMLESS FLOW OF INFORMATION BETWEEN CONSTELLATIONS OF DIGITAL RESOURCES AND DEV ICES AND THIS SOFTWARE WAS USED BY THE ASSESSEE FOR EARNING BUSIN ESS INCOME FOR WHICH THE ASSESSEE OBTAINED REGISTRATION UNDER TRAD E MARK ACT, 1999. SINCE, THE ASSESSEE FAILED TO ASCERTAIN THE V ALUE OF TRADE MARK, THE LEARNED AO DISALLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE RELYING ON THE ORDER OF LEARNED AO FOR ASSESSMENT Y EAR 2006-07 AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE L EARNED CIT(A) DELETED THE DISALLOWANCE MADE BY THE LEARNED AO BY OBSERVING IN PARA 3.2 AND 3.2.1 OF HIS ORDER AS UNDER: 3.2 IDENTICAL ISSUE AROSE IN APPELLANTS OWN CASE FOR AY 2006- 07 AND 2007-08. VIDE MY ORDER NO. CIT(A)-XI/504/200 8-09 DATED 15-01-2010 FOR A. Y. 2006-07 AND ORDER NO.CIT (A)- XI/1053/09-10 DATED 10-06-2010 FOR A. Y. 2007-08, T HE SAME WAS ALLOWED WITH THE FOLLOWING OBSERVATIONS I HAVE CONSIDERED THE FACTS, A. O.S OBSERVATIONS AND WRITTEN SUBMISSION OF THE APPELLANT. THE FACTS OF T HE CASE RELIED ON BY THE A. O. WERE TOTALLY DIFFERENT. IN T HE INSTANT CASE, THE APPELLANT DEVELOPED SOFTWARE AVTAAR TM DURING THE PERIOD JUNE, 2000 TO MARCH, 2002 BY INCU RRING EXPENDITURE OF RS.1,87,81,830/-. THE SAID SOFTWARE WAS REGISTERED AS TRADE MARK UNDER THE TRADE MARKS ACT, 1999. INTANGIBLE ASSETS INCLUDE TRADE-MARK, WHICH I S ENTITLED TO 25% DEPRECIATION UNDER THE I. T. ACT. I N APPELLATE ORDER DATED 9-1-2004 FOR A. Y. 2001-02, M Y PREDECESSOR HELD THAT THE EXPENDITURE ON SOFTWARE W AS CAPITAL IN NATURE. DEPRECIATION WAS ALLOWED TO THE APPELLANT UP TO A. Y. 2005-06. IN VIEW OF THIS, A. O.S ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 5 ACTION IS NOT IN ACCORDANCE WITH LAW. DISALLOWANCE OF DEPRECIATION IS UNWARRANTED AND IT DELETED. THIS GR OUND OF APPEAL IS ALLOWED. 4. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARN ED AO. ON THE OTHER HAND THE LEARNED AR SUPPORTED THE ORDER OF TH E LEARNED CIT(A) AND PRAYED THAT HIS ORDER MAY BE SUSTAINED. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDE RS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL ON RE CORD. THE LEARNED CIT(A) HAS GIVEN CATEGORICAL FINDINGS THAT THE ASSE SSEE HAD INCURRED EXPENDITURE OF RS.1,87,81,830/- ON DEVELOPMENT OF AVTAAR AND THE SAID SOFTWARE WAS REGISTERED AS TRADE MARK UNDE R THE TRADE-MARK ACT,1999 IN THE NAME OF THE ASSESSEE AND THE SAME W AS UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS AND IN VIEW OF THIS FACT, DEPRECIATION ON THIS SOFTWARE SHOULD BE ALLOWED. FU RTHER, SECTION 32 OF THE ACT CLEARLY SPECIFIES THAT DEPRECIATION SHAL L BE ALLOWABLE ON ANY INTANGIBLE ASSETS. THE LEARNED AR HAS ALSO PLACED R ELIANCE IN THE DECISION OF ITAT AHMEDABAD A BENCH IN THE CASE OF DICT VS M/ S. BHAGAWATI BANGUETS AND HOTELS LTD. IN ITA NO.1312/A HD/2002 FOR AY 2007-08 ORDER DATED 28-02-2012. IN THIS CASE THE T RIBUNAL HAD DECIDED THE ISSUE OF CLAIM OF DEPRECIATION ON INTAN GIBLE ASSET IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT PORTION OF THE AFORESAID ORDER OF THE TRIBUNAL IS REPRODUCE D HEREIN BELOW: 5.7. IN A NUT-SHELL, THE ASSESSEE, WITHOUT INTANGIB LE ASSETS IN THE SHAPE OF RIGHTS AND ENTITLEMENT OF COMMERCIAL R IGHTS OF THE ERSTWHILE ENTITIES, WOULD NOT HAVE PROSPERED OR IN A POSITION TO CARRY ON THE CATERING BUSINESS ONLY BY ACQUIRING TA NGIBLE ASSETS. BY ACQUIRING TANGIBLE AND INTANGIBLE ASSET S OF THE ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 6 ERSTWHILE CONCERNS CITED SUPRA, THE ASSESSEE HAD PR OSPERED IN ITS BUSINESS BY POSTING SUBSTANTIAL TURNOVER AND PR OFITS WHICH IMPLICITLY EXHIBITS THAT THE ASSESSEE HAD, IN FACT, ACQUIRED INTANGIBLE ASSETS [BUSINESS AND COMMERCIAL RIGHTS] IN THE FORM OF GOODWILL. IN ESSENCE, THE INTANGIBLE ASSETS W ERE IN THE NATURE OF VALUABLE COMMERCIAL AND BUSINESS RIGHTS W HICH WERE TO BE USED IN EXPANDING THE ASSESSEES BUSINESS, RE SULTING IN, HUGE TURNOVER AND PROFITS AS POINTED OUT SUPRA. 5.9. IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS AND A LSO IN CONFORMITY WITH THE RULING OF VARIOUS JUDICIARIES, CHIEFLY, THE RULING OF THE HONBLE HIGH COURT OF KERALA REFERRED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE CIT (A) WAS JUS TIFIED IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEPRECIA TION ON INTANGIBLE ASSETS ACQUIRED BY IT. IT IS ORDERED AC CORDINGLY. WE MAKE IT VERY CLEAR THAT WE HAVE ARRIVED AT THIS ABO VE CONCLUSION FROM THE FACTS OF THIS CASE AS THE VALUATION REPORT SUBMITTED BY THE APPELLANT HAS NOT BEEN SUCCESSFULLY CHALLENGED BY THE REVENUE TO ESTABLISH THE TRANSACTION TO BE SHAM. TH EREFORE, WE CONSIDER THE PAYMENT MADE ON ACCOUNT OF GOODWILL IS GENUINE AND REASONABLE SINCE IT IS ARRIVED BASED ON A REASO NABLE VALUATION AND COMPUTATION. 5.2 IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIN D ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THEREFORE, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 6. GROUND NO.2: DELETING THE DISALLOWANCE OF EXPENDITURE U/S 14A OF RS.11,098/- :- THE ASSESSEE HAD SHOWN INVESTMENT OF RS.4,17,514/- IN SHARES, INCOME FROM WHICH DID NOT FORM PART OF ASSESSEES TOTAL INCOME. THE LEARNED AO REQUIRED TH E ASSESSEE TO EXPLAIN WHY EXPENSES RELATED TO THE EXEMPT INCOME S HOULD NOT BE DISALLOWED U/S 14A READ WITH RULE 8 D OF THE IT RUL ES. THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE PUNJAB & HARY ANA HIGH COURT IN ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 7 THE CASE OF CIT VS HERO CYCLES LTD., 189 TAXMAN 50 AND STATED THAT PROVISIONS OF SECTION 14A ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. HOWEVER, THE LEARNED AO IN VIEW OF THE PR OVISIONS OF SECTION 10(34) AND RELYING ON THE DECISION OF THE H ONBLE APEX COURT IN THE CASE OF MACDONNEL AND OTHER DECISIONS HELD T HAT PROVISIONS OF SECTION 14A READ WITH RULE 8D IS APPLICABLE TO THE CASE OF THE ASSESSEE & THEREBY COMPUTED THE EXPENDITURE IN RELA TION EXEMPT INCOME AT RS.11,098/- AND DISALLOWED THE SAME AND A DDED TO ASSESSEES INCOME. ON APPEAL, THE LEARNED CIT(A) AF TER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE OBSERVATIO NS OF THE LEARNED AO, DELETED THE ADDITION MADE BY THE LEARNED AO BY OBSERVING IN PARA 4.2 OF HIS ORDER AS UNDER: 4.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. I AM INCLINED TO AGREE WITH A PPELLANTS CONTENTION. AS SEEN FROM THE ASSESSMENT ORDER, THE DISALLOWANCE WAS MADE BY THE A. O. RELYING ON THE C ASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. AND BY INVOKING T HE PROVISIONS OF RULE 8D. HOWEVER, IN THE CASE OF GODR EJ & BOYCE MFG. CO. LTD. VS DCIT (234 CTR 1) (BOMBAY), THE DEC ISION RELIED ON BY THE A. O. WAS CONSIDERED AND OVER-RULE D. IT WAS HELD THAT RULE 8 D OPERATES PROSPECTIVELY FROM A. Y . 2008-09. OF COURSE, IT WAS HELD THAT A REASONABLE DISALLOWANCE CAN BE MADE IN THE EARLIER YEARS, SUBJECT TO ESTABLISHING NEXUS BETWEEN INTEREST-BEARING FUNDS AND INVESTMENTS EARN ING EXEMPT INCOME. SINCE NO SUCH NEXUS IS ESTABLISHED I N THE INSTANT CASE, IN THE LIGHT OF THE CONTENTIONS OF AN D DECISIONS RELIED ON BY THE LD. A. R., I HOLD THAT THE IMPUGNE D DISALLOWANCE IS UNWARRANTED. IT IS DELETED. THIS GROUND OF APPEA L IS ALLOWED. 7. THE LEARNED DR RELIED ON THE ORDER OF THE LEARNE D AO AND ON THE OTHER HAND THE LEARNED AR SUPPORTED THE ORDER O F THE LEARNED CIT(A). ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 8 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE LEARNED CIT(A) HAS RIGHTLY POINTED O UT THAT RULE 8D OF THE INCOME TAX RULES OPERATES PROSPECTIVELY FROM AS SESSMENT YEAR 2008-09 I.E. WITH EFFECT FROM 24-03-2008. THUS, UP TO THIS PERIOD, DISALLOWANCE CAN BE MADE ONLY ON A REASONABLE BASIS . FURTHER, ON PERUSING THE ORDER OF THE LEARNED AO, WE DO NOT FIN D ANY NEXUS BROUGHT OUT FOR THE INVESTMENTS IN SHARES TO BE MAD E FROM INTEREST BEARING FUNDS OF THE ASSESSEE COMPANY. TO THIS EFFE CT, THE LEARNED CIT(A) ALSO HAD MADE A CATEGORICAL FINDINGS. THEREF ORE, IN THESE CIRCUMSTANCES WE DO NOT FIND IT NECESSARY TO INTERF ERE WITH THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, THE APPEAL OF T HE REVENUE ON THIS ISSUE IS DISMISSED. 9. GROUND NO.3: DIRECTING THE AO TO VERIFY THE CONTENTIONS OF THE ASSESSEE REGARDING FOREIGN TRAVEL EXPENSES AND TO DELETE THE ADDITION OF RS.12,18,834/-, IN CONTRAVENTION OF SEC . 251:- ON PERUSAL OF THE PROFIT & LOSS ACCOUNT OF THE ASSESSE E, THE LEARNED AO NOTICED THAT THE ASSESSEE HAD DEBITED TRAVELING EXP ENSES OF RS.12,18,834/- IN AY 2003-04. SINCE THE ASSESSEE C OULD NOT EXPLAIN AND PROVE THAT THESE EXPENSES WERE INCURRED EXCLUSI VELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, THE LEARNE D AO DISALLOWED THE CLAIM OF THE ASSESSEE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LEARNED CIT(A) AFTER PERUSAL OF THE O RDER OF THE LEARNED AO AND CONSIDERING THE SUBMISSIONS OF THE L EARNED AR DELETED THE DISALLOWANCE BY OBSERVING IN PARA 5. 2 OF HIS ORDER AS UNDER: ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 9 5.2 I HAVE CONSIDERED THE SUBMISSION OF MADE BY TH E A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. DURING THE COURSE OF HEARING IT WAS CONTENDED BY THE LEARNED A. R. THAT THE A. O. DID N OT CALL FOR ANY SUPPORTING EVIDENCE DURING THE COURSE OF ASSESS MENT PROCEEDINGS. IN SUPPORT THEREOF HE FILED COPIES OF VARIOUS NOTICES ISSUED BY THE A. O. HE CONTENDED THAT ALL T HE NECESSARY SUPPORTING EVIDENCES ARE AVAILABLE. A. O. IS DIRECT ED TO VERIFY THE CONTENTIONS CONTAINED IN THE SUBMISSIONS RE-PRO DUCED ABOVE AND DELETE THE DISALLOWANCE. THUS SUBJECT TO VERIFICATION, THIS GROUND OF APPEAL IS ALLOWED. 11. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARN ED AO. ON THE OTHER HAND, THE LEARNED AR SUPPORTED THE ORDER OF T HE LEARNED CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSION, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL ON RE CORD. THE LEARNED CIT(A) HAD MADE A CATEGORICAL FINDING THAT THE ASSE SSEE HAD NOT PRODUCED ANY DETAILS BEFORE THE LEARNED AO TO ESTAB LISH THAT THE FOREIGN TRAVEL EXPENSES WERE GENUINELY INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS. EVEN BEFORE US, THE LEARNED AR HAS NOT PRODUCED ANY MATERIAL TO ESTABLISH THAT THE FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE ARE ACTUALLY INCURRED FOR THE PURPOSE OF ASSESSEES BUSINESS. FROM THE FACTS AND CIRCUMSTAN CES OF THE CASE , WE ARE OF THE CONSIDERED VIEW THAT IN THE INTEREST OF JUSTICE THE MATTER REQUIRES TO BE REMITTED BACK TO THE LEARNED AO FOR DE NOVO CONSIDERATION. IT IS ORDERED ACCORDINGLY. THE ASSE SSEE IS DIRECTED TO FURNISH ALL THE DETAILS REQUIRED BY THE LEARNED AO WITHOUT UNNECESSARILY SEEKING ADJOURNMENT IN ORDER TO EXPED ITE THE ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 10 PROCEEDINGS AND THE LEARNED AO IS DIRECTED TO CONSI DER ALL THE MATERIALS BROUGHT FORTH BY THE ASSESSEE JUDICIOUSLY AND PASS APPROPRIATE ORDER AS PER LAW AND MERIT. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 13. IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2003-04 IN ITA NO. 1186/AHD/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1261/AHD/2011 (REVENUES APPEAL FOR AY 2004-05) 14. THE REVENUE HAS RAISED FIVE GROUNDS IN THIS APPEAL WHEREIN GROUNDS NO. 4 AND 5 ARE GENERAL IN NATURE AND DO NO T SURVIVE FOR ADJUDICATION. THE SURVIVING GROUNDS NO.1, 2 AND 3 O F THE APPEAL OF THE REVENUE ARE REPRODUCED HEREIN BELOW FOR REFERENCE: 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPREC IATION OF RS.35,65,600/- MADE ON INTANGIBLE ASSETS. 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF EXPEND ITURE U/S 14A OF RS.3,153/- 3. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO VERIFY THE CONT ENTIONS OF THE ASSESSEE REGARDING FOREIGN EXPENSES AND TO D ELETE THE ADDITION OF RS.3,76,303/- SUBJECT TO VERIFICATI ON IN CONTRAVENTION OF SEC. 251. 15. AT THE BEGINNING OF THE HEARING THE LEARNED REP RESENTATIVES OF BOTH THE SIDES SUBMITTED THAT THE ISSUES AND FACTS OF THE PRESENT CASE BEING SIMILAR AND IDENTICAL TO THE ISSUES AND THE F ACTS OF THE CASE IN ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 11 AY 2003-04, THE ORDER PASSED BY THE TRIBUNAL IN AY 2003-04 MAY BE FOLLOWED IN DECIDING THE SAME IN AY 2004-05. ON PER USAL OF RECORDS, WE FIND THAT THE ISSUES ARE SIMILAR AND THE FACTS O F THE CASE IN THE YEAR UNDER CONSIDERATION ARE ALSO IDENTICAL WITH TH AT OF AY 2003-04, HENCE CONSIDERING THE SUBMISSIONS OF THE PARTIES AN D IN VIEW OF OUR DECISION IN THE REVENUES APPEAL FOR AY 2003-04, WE HEREBY DISMISS GROUNDS NO.1 AND 2 OF THE APPEAL OF THE REVENUE FOR AY 2004-05 AND ALLOW GROUND NO. 3 FOR STATISTICAL PURPOSE. 16. IN THE RESULT, REVENUES APPEAL IN ITA NO.1261/ AHD/2011 FOR AY 2004-05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.165/AHD/2012 (REVENUES APPEAL FOR AY 2005-06) 17. IN THIS APPEAL, THE REVENUE HAS RAISED THREE GR OUNDS WHEREIN GROUNDS NO.2 AND 3 ARE GENERAL IN NATURE. THE ONLY SURVIVING GROUND NO.1 OF THE APPEAL IS REPRODUCED HEREIN BELOW FOR D ISPOSAL: 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.26,74,200/- BEING DEPRECIATION CLAIMED ON INTANG IBLE ASSETS. 18. BOTH THE SIDES SUBMITTED THAT THE ISSUE AND FAC TS OF THE PRESENT CASE BEING SIMILAR AND IDENTICAL TO THE ISSUE AND T HE FACTS OF THE CASE IN AY 2003-04 AND THE ORDER PASSED BY THE TRIBUNAL IN AY 2003-04 MAY BE FOLLOWED IN DECIDING THE SAME IN AY 2005-06 ALSO. ON PERUSAL OF RECORDS, WE FIND THAT THE ISSUE IS SIMILAR AND T HE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERATION ARE ALSO IDENTICAL WIT H THAT OF AY 2003- ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 12 04. THEREFORE, CONSIDERING THE SUBMISSIONS OF THE P ARTIES AND IN VIEW OF OUR DECISION IN THE REVENUES APPEAL FOR AY 2003 -04, WE HEREBY DISMISS GROUND NO.1 OF THE APPEAL OF THE REVENUE FO R AY 2005-06. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.165/AHD/2012 FOR AY 2005-06 IS DISMISSED. ITA NO.930/AHD/2010 (REVENUES APPEAL FOR AY 2006-07) 20. THE REVENUE IN ITS APPEAL HAS RAISED THREE GROU NDS WHEREIN GROUNDS NO.2 AND 3 ARE GENERAL IN NATURE AND REQUIR ES NO ADJUDICATION. THE ONLY SURVIVING GROUND NO.1 OF THE REVENUES APPEAL IS REPRODUCED HEREIN BELOW FOR DISPOSAL. 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION MADE ON ACCOUNT OF DEPRECIATION ON INTANGIBLE ASSET S OF RS.19,91,723/-. 21. BOTH THE SIDES SUBMITTED THAT THE ISSUE AND FAC TS OF THE PRESENT CASE BEING SIMILAR AND IDENTICAL TO THE ISSUE AND T HE FACTS OF THE CASE IN AY 2003-04 AND THE ORDER PASSED BY THE TRIBUNAL IN AY 2003-04 MAY BE FOLLOWED IN DECIDING THE SAME IN AY 2006-07 ALSO. ON PERUSAL OF RECORDS, WE FIND THAT THE ISSUE IS SIMILAR AND T HE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERATION ARE ALSO IDENTICAL WIT H THAT OF AY 2003- 04. THEREFORE, CONSIDERING THE SUBMISSIONS OF THE P ARTIES AND IN VIEW OF OUR DECISION IN THE REVENUES APPEAL FOR AY 2003 -04, WE HEREBY DISMISS GROUND NO.1 OF THE APPEAL OF THE REVENUE FO R AY 2006-07. ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 13 22. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.930/AHD/2010 FOR AY 2006-07 IS DISMISSED. ITA NO.2393/AHD/2010 (REVENUES APPEAL FOR AY 2007-08) 23. IN THIS APPEAL THE REVENUE HAS RAISED THREE GRO UNDS WHEREIN GROUNDS NO.2 AND 3 ARE GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION. THE LONE SURVIVING GROUND NO.1 OF THE APPEAL IS REPRODUCED HEREIN BELOW. 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION MADE FOR DEPRECIATION ON INTANGIBLE ASSETS OF RS.14,93,793/-. 24. BOTH THE SIDES SUBMITTED THAT THE ISSUE AND FAC TS OF THE PRESENT CASE BEING SIMILAR AND IDENTICAL TO THE ISSUE AND T HE FACTS OF THE CASE IN AY 2003-04 AND THE ORDER PASSED BY THE TRIBUNAL IN AY 2003-04 MAY BE FOLLOWED IN DECIDING THE SAME IN AY 2007-08 ALSO. ON PERUSAL OF RECORDS, WE FIND THAT THE ISSUE IS SIMILAR AND T HE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERATION ARE ALSO IDENTICAL WIT H THAT OF AY 2003- 04. THEREFORE, CONSIDERING THE SUBMISSIONS OF THE P ARTIES AND IN VIEW OF OUR DECISION IN THE REVENUES APPEAL FOR AY 2003 -04, WE HEREBY DISMISS GROUND NO.1 OF THE APPEAL OF THE REVENUE FO R AY 2007-08. 25. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.2393/AHD/2010 FOR AY 2007-08 IS DISMISSED. ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 14 ITA NO.3037/AHD/2011 (REVENUES APPEAL FOR AY 2008-09) 26. THE REVENUE HAS IN THIS APPEAL RAISED THREE GRO UNDS WHEREIN GROUNDS NO.2 AND 3 ARE GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATION. THE LONE SURVIVING GROUND NO.1 OF THE APPEAL IS REPRODUCED HEREIN BELOW. 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.11,20,344/- BEING DEPRECIATION ON INTANGIBLE ASS ET. 27. BOTH THE SIDES SUBMITTED THAT THE ISSUE AND FAC TS OF THE PRESENT CASE BEING SIMILAR AND IDENTICAL TO THE ISSUE AND T HE FACTS OF THE CASE IN AY 2003-04 AND THE ORDER PASSED BY THE TRIBUNAL IN AY 2003-04 MAY BE FOLLOWED IN DECIDING THE SAME IN AY 2008-09 ALSO. ON PERUSAL OF RECORDS, WE FIND THAT THE ISSUE IS SIMILAR AND T HE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERATION ARE ALSO IDENTICAL WIT H THAT OF AY 2003- 04. THEREFORE, CONSIDERING THE SUBMISSIONS OF THE P ARTIES AND IN VIEW OF OUR DECISION IN THE REVENUES APPEAL FOR AY 2003 -04, WE HEREBY DISMISS GROUND NO.1 OF THE APPEAL OF THE REVENUE FO R AY 2008-09. 28. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.3037/AHD/20101 FOR AY 2008-09 IS DISMISSED. ITA NO.1186, 1261/AHD/2011, 165/AHD/2012, 930 & 239 3/AHD/2010 AND 3037/AHD/2011 (AY: 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 AND 200 8-09) NET 4 NUTS LTD. 15 29. IN THE RESULT, REVENUES APPEAL IN ITA NO.1186/ AHD/2010 FOR AY 2003-04 AND IN ITA NO.1261/AHD/2011 FOR AY 2004-05 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE OTHER APPEALS OF THE REVENUE IN ITA NO.165/2012 FOR AY 2005-06, ITA NO.930/AHD/2010 FOR AY 2006- 07, ITA NO.2393/AHD/2010 FOR AY 2007-08 AND ITA NO.3037/AHD/2011 FOR AY 2008-09 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-09-2012 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 07-09-2012/14-09-12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: -09-2012 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: