ANANTH G MAHADEVAN, MUMBAI V. ACIT 11(1), MUMBAI

ITA 141/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3419 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 23-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Assessee Lawyers: INDIRA G ANAND
• Keywords: Capital expenditure
• Section: 143(3); 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI PAWAN SINGH , J M ./ ITA NO . 141 /MUM /20 1 2 ( / ASSESSMENT YEAR : 20 0 8 - 20 0 9 ) SHRI AN ANTH G MAHADEVAN, M/S NEELKAMAL JEWELLERS, 302, AMBER APARTMENTS, GANDHI GRAM ROAD, JUHU, MUMBAI - 400049 VS. ACIT - 11(1), MUMBAI ./ ./ PAN/GIR NO. : A FWPM 8850 K ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : MS. INDIRA G. ANAND /REVENUE BY : MS. VINITA MENON / DATE OF HEARING : 23 / 1 2 / 201 5 / DATE OF PRONOUNCEMENT 28/03 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPE AL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 3, MUMBAI, DATED 25 - 10 - 2011, FOR THE ASSESSMENT YEAR 200 8 - 0 9 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T.ACT , ON THE FOLLOWING GROUNDS : - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN TREATING ADVANCE OF RS.26,50,000/ - AS INCOME EXIGIBLE TO TAX BASED ON A BELIEF THAT UNDER CASH SYSTEM OF ACCOUNTING, INCOME IS ASSESSABLE THE MOMENT IT IS RECEIVED AND IGNORED THE FACT THAT THE ADVANCE RECE IVED WAS NOT IN NATURE OF REAL INCOME. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ORDER OF ASSESSING OFFICER WHEREBY SOFTWARE EXPENSES RS.3,12,000/ - WERE TREATED AS CAPITAL EXPENDITURE. 2 . RIVAL CONTENTIONS HAVE BEEN H EARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN ARTIST ENGAGED IN HIS PROFESSIONAL ITA NO. 141 /1 2 2 CAPACITY WORKING AS AN ACTOR, DIRECTOR IN THE PRODUCTION OF CINEMATOGRAPH, TELE - SERIALS, STAGE SHOWN PRODUCED OR ORGANIZED BY ANY OTHER PERSON OR ANY OTH ER PRODUCTION COMPANY. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO NOTED THAT THE ASSESSEE HAS SHOWN RS.26,50,000 AS ADVANCES FROM VARIOUS PERSONS UNDER THE HEAD CURRENT LIABILITIES IN THE BALANCE SHEET AS ON 31/3/08. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY SAID ADVANCE AMOUNT WHICH HAS BEEN RECEIVED DURING THE YEAR HAS NOT BEEN CONSIDERED AS INCOME IN SPITE OF THE FACT THAT THE ASSESSEE FOLLOWS CASH SYSTEM OF ACCOUNTING. 3. IT WAS SUBMITTED BY THE ASSESSEE THAT ASSESSEE WAS OFFERING ADV ANCE RECEIVED AS INCOME IN THE SUBSEQUENT YEAR ON THE CIRCUMSTANCES OF EACH CASE. HOWEVER, THE AO DID NOT AGREE WITH ASSESSEES CONTENTION AND ADDED THE AMOUNT IN ASSESSEES INCOME ON THE PLEA THAT ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. BY THE I MPUGNED ORDER THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4. IT WAS ALSO ARGUED BY LD. AR THAT AMOUNT SO RECEIVED WAS PURELY IN THE NATURE OF ADVANCE AND THE ASSESSEE HAS T O RENDER SERVICE IN RESPECT OF AMOUNT SO RECEIVED. SHE RELIED ON THE DECISION IN THE CASE OF NANA G. PATEKAR 27 SOT 8 AND S. PRIYADARSAN,73 TTJ 738 IN SUPPORT OF THE PROPOSITION THAT ADVANCE RECEIVED BY THE ASSESSEE, A FILM DIRECTOR FROM TWO PRODUCERS FOR DIRECTING THEIR PROSPECTIVE FILMS, COULD NOT BE TREATED AS INCOME AS NO WORK WAS DON E BY THE ASSESSEE FOR THESE TWO PRODUCERS AND THE ASSESSEE HAS SHOWN AMOUNT IN LIST OF SUNDRY CREDITORS IN THE BALANCE SHEET. ITA NO. 141 /1 2 3 5 . OUR ATTENTION WAS ALSO INVITED TO THE LIST OF ADVANCE RECEIVED BY THE ASSESSEE IN DIFFERENT YEARS, WHICH WERE EITHER RETURNED O R OFFERED AS INCOME. 6 . ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES. 7 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING. THE JUDICIAL PRONOUNCEMENT REFERRED BY LD. AR ARE DISTINGU ISHABLE ON FACTS INSOFAR AS THERE IS NO FINDING WITH REGARD TO METHOD OF ACCOUNTING I.E. CASH OR MERCANTILE BEING FOLLOWED BY THOSE ASSESSEE. IN THE INSTANT CASE A DVANCE OF RS.26.50 LAKHS WAS RECEIVED DURING THE YEAR, WHICH WAS SHOWN AS ADVANCE AND IN THE LIABILITY SIDE SHOWN AS CREDITOR. HOWEVER, IT IS NOT BROUGHT ON RECORD AS TO IN WHICH YEAR SERVICES WERE RENDERED BY ASSESSEE AND THE ADVANCE WAS OFFERED FOR TAX NOR IT WAS BROUGHT ON RECORD AS TO WHEN THE ADVANCE WAS RETURNED. INCOME RECEIVED IN ADVANCE CANNO T BE BROUGHT TO TAX NET IF THE SAME IS REFUNDED. RENDERING OF SERVICES FOR WHICH ADVANCE IS RECEIVED IS ALSO IMPORTANT GUIDING FACTOR FOR TAXING THE SAME AS INCOME. IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE BACK TO THE FILE OF AO FOR DECIDING AFRES H AFTER FINDING OUT THE YEAR IN WHICH CORRESPONDING SERVICE S FOR SUCH ADVANCE WAS RENDERED AND ALSO FACT THAT IF THIS ADVANCE WAS REPAID IN SUBSEQUENT YEAR AND ALSO THE FACT AS TO WHEN THIS ADVANCE WAS OFFERED IN SUBSEQUENT AS INCOME IN SUBSEQUENT YEAR. T HE AO IS TO DECIDE THE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 8 . THE ASSESSEE IS ALSO AGGRIEVED FOR NOT ALLOWING SOFTWARE EXPENSES OF RS.3,12,000/ - . THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY ITA NO. 141 /1 2 4 THE DECISION OF HON B LE DELHI HIGH COURT IN THE CASE OF G.E.CAPITAL SERVICES LTD.300 ITR 420, WHEREIN IT WAS HELD THAT SOFTWARE EXPENSES ARE REVENUE IN NATURE. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT, WE DIRECT THE AO TO ALLOW ASSESSEES CLAIM OF SOFTWA RE EXPENSES AS REVENUE EXPENSES. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 28/03 / 201 6 . SD/ - SD/ - ( PAWAN SINGH ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 28/03 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//