BLUE STAR INFOTECH LTD, MUMBAI V. ASST CIT CIR 6(1), MUMBAI

ITA 1410/MUM/2012

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5882 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP LD
• Assessee Lawyers: S C TIWARI; RUTUJA PAWAR LD ARS
• Keywords: Depreciation; Earning of tax free income; TDS; Rule 8D
• Section: 143(3); 14A

Judgement Text

ITA NO.1410/MUM/2012 BLUE STAR INFOTECH LIMITED ASSESSMENT YEAR :2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1410/MUM/2012 ( / ASSESSMENT YEAR:2007-08) BLUE STAR INFOTECH LIMITED (NOW MERGED WITH BLUE STAR LTD.) BANDBOX HOUSE, 4 TH FLOOR 254-D, DR.ANNIE BESANT ROAD WORLI, MUMBAI-400 030. / VS. D CIT - 9 ( 2 ) (1) MUMBAI-400 020. ./ ./PAN/GIR NO. AAACB-6385-J ( /APPELLANT ) : ( / RESPONDENT ) APPELLANT BY : SHRI S.C. TIWARI & MS. RUTUJA PAWAR- LD. ARS RESPONDENT BY : MS. POOJA SWAROOP - LD. DR / DATE OF HEARING : 31/07/2019 / DATE OF PRONOUNCEMENT : 09/08/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2007-08 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-14, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-14/IT.14/RG.6(1)/10-11 DATED 28/12/2011 ON CERTAIN GROUNDS OF APPEAL. ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF ITA NO.1410/MUM/2012 BLUE STAR INFOTECH LIMITED ASSESSMENT YEAR :2007-08 2 APPEAL AS WELL AS ADDITIONAL GROUND OF APPEAL, HOWEVER, THE ONLY GROUNDS AS URGED BEFORE US ARE GROUND NOS. 3 TO 5 WHICH CONCERNS WITH (I) DISALLOWANCE OF SOFTWARE EXPENDITURE; (II) DISALLOWANCE U/S 14A & (III) SHORT CREDIT OF PREPAID TAXES. 2. THE ERSTWHILE ASSESSEE I.E. BLUE STAR INFOTECH LIMITED HAS MERGED WITH M/S BLUE STAR LIMITED AND THE ASSESSEE HAS ALREADY FILED REVISED FORM NO. 36, REFLECTING THE AFORESAID CHANGE. FINDING THE SAME IN ORDER, WE PROCEED TO ADJUDICATE THE APPEAL AS ARGUED BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN THE PAPER-BOOK ASSAILED THE ADDITIONS AS SUSTAINED BY LD. FIRST APPELLATE AUTHORITY. THE LD. DR SUBMITTED THAT THE ASSESSEE FAILED TO FILE REQUISITE DOCUMENTARY EVIDENCES DURING ASSESSMENT PROCEEDINGS AND THEREFORE, THE ADDITIONS WERE JUSTIFIED. 4. WE HAVE CAREFULLY DELIBERATED ON THE RIVAL SUBMISSIONS AND PERUSED RELEVANT MATERIAL ON RECORD. FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED IN SOFTWARE DEVELOPMENT WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S 143(3) R.W.S. 144 OF THE ACT WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.1103.40 LACS AFTER CERTAIN ADDITIONS / DISALLOWANCES / ADJUSTMENTS AS AGAINST RETURNED LOSS OF RS.35.41 LACS FILED BY THE ASSESSEE ON 31/10/2007. OUR ADJUDICATION ON THE 3 ISSUES IS GIVEN IN THE SUCCEEDING PARAGRAPHS. (I) DISALLOWANCE OF SOFTWARE EXPENDITURE DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSESSEE CLAIMED SOFTWARE EXPENDITURE OF RS.377.07 LACS UNDER THE HEAD LEGAL & ITA NO.1410/MUM/2012 BLUE STAR INFOTECH LIMITED ASSESSMENT YEAR :2007-08 3 PROFESSIONAL CHARGES. THE SAME WAS DISALLOWED BY LD. AO FOR WANT OF REQUISITE DETAILS. BEFORE LD. FIRST APPELLATE AUTHORITY, THE ASSESSEE DREW ATTENTION TO THE SUBMISSIONS MADE BEFORE LD. AO, IN THIS REGARD, ON 10/11/2010 & 27/12/2010 TO SUBMIT THAT THE STATED EXPENSES REPRESENTED FEES PAID TO OUTSIDE TECHNICAL CONSULTANTS FOR SOFTWARE DEVELOPMENT. THE LD. FIRST APPELLATE AUTHORITY, AFTER DUE CONSIDERATION, CONCURRED WITH ASSESSEES SUBMISSIONS THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SOFTWARE DEVELOPMENT. HOWEVER, AT THE SAME TIME, UPON PERUSAL OF RELEVANT AGREEMENTS, LD. FIRST APPELLATE AUTHORITY REACHED A CONCLUSION THAT THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND THEREFORE, THE ASSESSEE WOULD BE ELIGIBLE TO CLAIM DEPRECIATION AGAINST THE SAME. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR] HAS REITERATED THAT THE ASSESSEE HAD FILED ELABORATE SUBMISSIONS BEFORE LD. AO WHICH WERE NOT, AT ALL APPRECIATED. OUR ATTENTION HAS BEEN DRAWN TO THE FACT THAT THE ASSESSEE WAS DEALING IN SOFTWARE DEVELOPMENT AND ANY EXPENDITURE INCURRED ON THIS ACCOUNT WOULD BE REVENUE IN NATURE. THE LD. DR SUBMITTED THAT REQUISITE DETAILS WERE NOT FILED BY THE ASSESSEE BEFORE LD. AO AND THEREFORE, THE DISALLOWANCE WAS JUSTIFIED. UPON PERUSAL OF DOCUMENTS ON RECORD, WE FIND THAT THE ASSESSEE HAD NOT FILED DETAILS OF EXPENDITURE BEFORE LD. AO AND MERELY SUBMITTED THAT THE EXPENDITURE WAS ALLOWABLE. IT IS ALSO NOTED THAT THE ASSESSMENT WAS FRAMED U/S 144 FOR THE REASON THAT THE ASSESSEE FAILED TO FILE THE REQUISITE DETAILS OF EXPENDITURE BEFORE LD. AO. THEREFORE, WITHOUT DELVING MUCH DEEPER INTO THE ISSUE, THE IMPUGNED ORDER, ON THIS ISSUE, IS SET-ASIDE AND ITA NO.1410/MUM/2012 BLUE STAR INFOTECH LIMITED ASSESSMENT YEAR :2007-08 4 THE MATTER STAND RESTORED BACK TO THE FILE OF LD. AO FOR RE-ADJUDICATION WITH A DIRECTION TO THE ASSESSEE TO FILE THE REQUITE DETAILS AND DOCUMENTARY EVIDENCES, IN THIS REGARD, TO SUBSTANTIATE ITS CLAIM. THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. (II) DISALLOWANCE U/S 14A THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.8.59 LACS BUT DID NOT OFFER ANY SUO-MOTO DISALLOWANCE AGAINST THE SAME. THE LD. AO, APPLYING THE PROVISIONS OF SECTION 14A READ WITH RULE 8D, COMPUTED EXPENSE DISALLOWANCE U/R 8D(2)(III) FOR RS.0.62 LACS, BEING 0.5% OF AVERAGE INVESTMENTS HELD BY THE ASSESSEE. BEFORE FIRST APPELLATE AUTHORITY, THE ASSESSEE CONTENDED THAT RULE 8D WAS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION. ALTHOUGH LD. CIT(A) CONCURRED WITH ASSESSEES SUBMISSIONS, HOWEVER, FINDING DISALLOWANCE OF RS.0.62 LACS TO BE QUITE NOMINAL AND REASONABLE, CONFIRMED THE SAME. BEFORE US, LD. AR HAS CONTENDED THAT LD. AO HAS NOT RECORDED THE REQUISITE SATISFACTION BEFORE PROCEEDING TO APPLY RULE 8D. HOWEVER, AS RIGHTLY NOTED BY LD. CIT(A), RULE 8D WAS NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION AND SECONDLY, NO SUO-MOTO DISALLOWANCE WAS OFFERED BY THE ASSESSEE IN THE COMPUTATION OF INCOME. THE ADDITION HAS BEEN CONFIRMED KEEPING IN VIEW THE EXEMPT INCOME EARNED BY THE ASSESSEE AND QUANTUM OF DISALLOWANCE MADE BY LD. AO. NOTHING NEW FACTS HAS BEEN BROUGHT BEFORE US. THEREFORE, WE FIND NO REASONS TO INTERFERE WITH THE STAND OF LD. CIT(A), ON THIS ISSUE. THIS GROUND STANDS DISMISSED. (III) SHORT CREDIT OF PREPAID TAXES. BY WAY OF GROUND NO. 5.1, THE ASSESSEE IS AGGRIEVED BY SHORT GRANT OF TDS CREDIT FOR RS.3.79 LACS. IT HAS BEEN PLEADED THAT THE ASSESSEE HAS ITA NO.1410/MUM/2012 BLUE STAR INFOTECH LIMITED ASSESSMENT YEAR :2007-08 5 ALREADY FURNISHED THE REQUISITE TDS CERTIFICATES DURING ASSESSMENT PROCEEDINGS. UNDER THE CIRCUMSTANCES, IT WOULD SUFFICE ON OUR PART TO DIRECT LD. AO TO VERIFY THE ASSESSEES TDS CLAIM AND GRANT DUE TDS CREDIT, AS PER LAW. THIS GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. IN GROUND NO.5.2, THE ASSESSEE IS AGGRIEVED BY DENIAL OF FOREIGN TAX CREDIT OF RS.53.48 LACS. IT IS ADMITTED POSITION THAT THIS ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2003-04 TO 2005-06 ITA NOS.5750-51/MUM/2010, 8705/MUM/2011 COMMON ORDER DATED 17/04/2015, A COPY OF WHICH HAS BEEN PLACED ON RECORD. THEREFORE, FACTS BEING PARI-MATERIA THE SAME, LD. AO IS DIRECTED TO APPLY THE DECISION IN THOSE YEARS TO THE YEAR UNDER CONSIDERATION. THIS GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. 5. IN RESULT, THE APPEAL STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH AUGUST, 2019 SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 09.08.2019 SR.PS, JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE