M/S. SCITECH CENTRE, MUMBAI V. DCIT CENTRAL CIRCLE-7(3), , MUMBAI

ITA 1226/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8389 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 05-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED RIZWAN
• Assessee Lawyers: NIYANTA MEHTA
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 1226/MUM/2019 (ASSESSMENT YEAR 2014-15 ) M/S SCITECH CENTRE 1001, DALAMAL HOUSE, NARIMAN POINT, MUMBAI. PAN: AAACS9282K VS. DCIT CC- 7(3) R.NO. 655, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. APPELLANT RESPONDE NT APPELLANT BY : MISS NIYANTA MEHTA AR RESPONDENT BY : MOHAMMED RIZWAN (SR.DR) DATE OF HEARING : 05.03.2020 DATE OF PRONOUNCEMEN T : 16.06.2020 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(A)-49, MUMBAI DATED 04.12.2018 FOR ASSESSMENT YEAR 2014-15 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: GROUND I: DISALLOWANCE OF PREPAID SOFTWARE EXPENSE S OF RS.3,03,372/-: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO ERRED IN DISALLOWING ANNUAL MAINTENANCE CHARGES FOR SOFTWARE AMOUNTING TO RS.3,03,372/ OUT OF TOTAL ANNUAL MAINTENANCE CHARG ES AMOUNTING TO RS. 3,37,080/- ON THE GROUND THAT THE SAME DO NOT PERTA IN TO THE ASSESSMENT YEAR UNDER CONSIDERATION WITHOUT APPRECIATING THAT THE A PPELLANT HAD REVERSED PRIOR PERIOD EXPENSES AMOUNTING TO RS. 252,81- AND CLAIME D ONLY THE NET EXPENDITURE. 2. THE APPELLANT HUMBLY PRAYS THAT THE AO BE DIRECT ED TO DELETE THE ADDITION OF RS. 3,03,372/- AND ALLOW THE ACTUAL CLAIM MADE B Y THE APPELLANT AMOUNTING ITA N O. 1226 MUM 2019-M/S SCITECH CENTRE. 2 TO RS. 50,562/- [3,37,080 (ACTUAL EXPENSE) - 2,52,8 10 (REVERSED) - 33,708 (ALLOWED DURING ASSESSMENT PROCEEDINGS)]. 2. BRIEF FACTS OF THE CASE AS EXTRACTED FROM THE ORDER OF THE LOWER AUTHORITIES ARE THAT THE ASSESSEE IS A COMPANY AND IS ENGAGED IN SCIENTIFIC & INDUSTRIAL RESEARCH, FILED ITS RETURN OF INCOME ON 03.11.2014 DECLARING NIL INCOME FOR ASSESSMENT YEAR 2014-15. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT W AS COMPLETED UNDER SECTION 143(3) ON 24/10/2016. THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER BESIDES THE OTHER ADDITIONS/ DISAL LOWANCE MADE DISALLOWANCE OF RS. SOFTWARE EXPENSES OF RS. 3,03,3 72/-, OUT OF TOTAL CLAIM OF RS.3,37,080/- BY TAKING VIEW THAT AS PER INVOICE DATED 10.03.2014 IT WAS PAID UP TO 31.12.2014, THUS IT WA S ONLY FOR ONE MONTH. ON APPEAL BEFORE LD CIT(A), THE DISALLOWANCE WAS CO NFIRMED BY TAKING VIEW THAT NO SUBMISSIONS WERE MADE BY THE LD AR FOR THE ASSESSEE ON THIS ISSUE. THUS, FURTHER AGGRIEVED THE ASSESSEE HA S FILED THIS APPEAL BEFORE THIS TRIBUNAL. 3. WE HAVE HEARD THE SUBMISSION OF LEARNED AUTHORISED REPRESENTATIVE (LD. AR) FOR THE ASSESSEE AND THE LEARNED DEPARTMENTAL R EPRESENTATIVE (LD. DR) FOR THE REVENUE AND PERUSED THE MATERIAL A VAILABLE ON RECORD. THE LD. AR FOR THE ASSESSEE SUBMITS THAT THE ASSESS EE INCURRED EXPENSES ON ANNUAL MAINTENANCE OF SOFTWARE AND ANNUAL LICENC E FEES FOR STRESS ANALYSIS OF COMPONENTS PRIOR TO MANUFACTURING. THE ASSESSEE INCURRED ITA N O. 1226 MUM 2019-M/S SCITECH CENTRE. 3 EXPENSES OF RS. 3,37,080/-. THE ASSESSEE ENTERED IN AGREEMENT WITH ANYSCAD SOLUTION AMC. THE CONTRACT WAS FOR 12 MONTH S FROM 31 ST DECEMBER 2013 TO 31 ST DECEMBER 2014. THE ASSESSING OFFICER CONSIDERED THE INVOICE DATE 10 TH MARCH 2014 AS BEGINNING OF THE CONTRACT AND ALLOWED EXPENSES OF ONE MONTH ONLY. THE LD AR F OR THE ASSESSEE SUBMITS THAT NO DETAILS WERE REQUIRED BY ASSESSING OFFICER BEFORE MAKING DISALLOWANCE. COMPLETE DETAILS WERE FURNISHED TO LD CIT(A) FOR EXPENSES INCURRED BY THE ASSESSEE. IT WAS EXPLAINED THAT THE ASSESSEE REVERSED THE AMOUNT WHICH WAS PREPAID I.E. FOR THE PERIOD 1 ST APRIL 2014 TO 31 ST DECEMBER 2014 FOR NINE MONTHS OF RS. 2,52,810/- ( BEING 3,37,080/12*9). THE LD CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER WITHOUT VERIFYING THE FACTS BY HOLDING THAT NO SUBM ISSIONS WAS MADE BY THE ASSESSEE, THOUGH COMPLETE DETAILS WERE FURNISHE D AND WRITTEN SUBMISSIONS WERE ALSO FILED BY THE ASSESSEE. THE LD AR FOR THE ASSESSEE ALSO SUBMITTED THAT COPY OF TAX INVOICE / RECEIPT O F MAINTENANCE CONTRACT IS ALSO PLACED ON RECORD ALONG WITH THE COPY WRITTE N SUBMISSIONS, FILED BEFORE THE LD CIT(A) IS ALSO PLACED ON RECORD. 4. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. THE LD DR FURTHER SUBMI TS THAT THE ASSESSEE HAS NOT EXPLAINED THE FACTS LD CIT(A) AS RECORDED I N PARA 7.1 OF THE IMPUGNED ORDER. ITA N O. 1226 MUM 2019-M/S SCITECH CENTRE. 4 5. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. REPRESENT ATIVE OF THE PARTIES AND PERUSED THE RECORD. AS NOTED ABOVE THE ASSESSIN G OFFICER DISALLOWED THE SOFTWARE EXPENSES OF RS. 303,372/- BY TAKING VI EW THAT AS PER INVOICE DATED 10.03.2014 IT WAS PAID UP TO 31.12.20 14, THUS IT WAS ONLY FOR ONE MONTH. THE LD. CIT (A) CONFIRMED THE ACTION OF ASSESSING OFFICER BY TAKING VIEW THAT NO SUBMISSIONS WERE MADE BY THE LD AR FOR THE ASSESSEE ON THIS ISSUE. WE HAVE NOTED THAT THE ASSE SSEE HAS PLACED ON RECORD COPY OF SUBMISSION WITH REGARD TO THE SOFTWA RE EXPENSES BEFORE ASSESSING OFFICER AND THE COPY OF WRITTEN SUBMISSIO N FILED BEFORE LD CIT(A) ON THE ISSUE OF SOFTWARE EXPENSES. WE HAVE F URTHER NOTED THAT THE ASSESSEE ALSO FILED APPLICATION DATED 24.01.201 8, FOR ADMITTING ADDITIONAL EVIDENCES ON THE IMPUGNED ISSUE. ON THE ADMISSION OF ADDITIONAL EVIDENCE THE LD CIT(A) SOUGHT THE REMAND REPORT OF THE ASSESSING OFFICER, COPY OF SUCH APPLICATION IS ALSO ON RECORD. THE COPY OF REMAND REPORT DATED 23.08.2018, FURNISHED BY ASSESS ING OFFICER FOR OBJECTING THE ADMISSION OF ADDITIONAL IS ALSO AVAIL ABLE ON RECORD. DESPITE SUFFICIENT MATERIAL ON RECORD, INCLUDING THE COPY O F TAX INVOICE WITH REGARD TO ANNUAL MAINTENANCE OF SOFTWARE AND WRITTE N SUBMISSION, THE LD CIT(A) AFFIRMED THE ACTION OF ASSESSING OFFICER WIT HOUT EXAMINING THE FACTS BY HOLDING THAT NO SUBMISSIONS WERE MADE BY A R OF THE ASSESSEE. 6. WE HAVE FURTHER NOTED THAT THE ASSESSING OFFICER IN PARA 6.1 OF HIS REMAND REPORT DATED 23.08.2018 ACCEPTED THAT THE BI LLS AND VOUCHERS ITA N O. 1226 MUM 2019-M/S SCITECH CENTRE. 5 SUBMITTED BY THE ASSESSEE ARE IN ORDER. THE RELEVAN T PART OF REMAND REPORT IS EXTRACTED BELOW. 6.1 ON PERUSAL OF THE SUBMISSIONS OF THE ASSESSEE FILED DURING THE APPELLATE PROCEEDINGS, IT IS SEEN THAT THE SUBM ISSION AS SUBMITTED BY THE ASSESSEE ARE BILLS AND VOUCHERS AR E FOUND TO BE IN ORDER . 7. CONSIDERING THE ASSESSING OFFICER IN HIS REMAND REP ORT HAS ALREADY ACCEPTED THAT THE SUBMISSIONS OF THE ASSESSEE ARE I N ORDER, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENSES. EVEN OTHERWISE, WE HAVE SEEN THAT ON THE TAX INVOICE IT IS CLEARLY MEN TIONED THAT PURCHASE ORDER WAS PLACED ON 10.02.2014, INVOICE WAS GENERAT ED ON 10.03.2014 AND MAINTENANCE CONTRACT WAS VALID TILL 31 ST DECEMBER 2014. IN THE RESULT THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED AS PER RULE 34(5) ON 16/06/2020. SD/- SD/- R.C.SHARMA PAWA N SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 16.06.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI