Global Logic Technologies Limited, Hyderabad, Hyderabad V. ACIT,Circle-2(2) Hyderabad, Hyderabad

ITA 1672/HYD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2974 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 09-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SRINIVAS REDDY
• Keywords: Revised return
• Section: 143(3)

Judgement Text

ITA NO 1672 OF 2016 GLOBALLOG IC TECHNOLOGIES LTD HYDERABAD. PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1672/HYD/2016 (ASSESSMENT YEAR: 2012-13) M/S. GLOBAL LOGIC TECHNOLOGIES LTD HYDERABAD PAN: AADCR5222K VS ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 2(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS FOR REVENUE : SHRI K. SRINIVAS REDDY, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13 AGAIN ST THE ORDER OF THE LEARNED CIT (A)-2, HYDERABAD, DATE D 30.08.2016. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY, ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AGE NCIES, FILED ITS RETURN OF INCOME FOR THE A.Y 2012-13 ON 29.11.2 012 DECLARING A TOTAL INCOME OF RS.16,25,84,070. SUBSEQUENTLY, TH E ASSESSEE FILED A REVISED RETURN ON 20.03.2014 DECLARING INCO ME OF RS.8,86,37,400. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) OF THE ACT, THE AO OBSERVED THAT IN THE REVISED RETURN OF INCOME, THE ASSESSEE HAS REDUCED AN AMOUNT OF RS.7,39,46,648 FR OM THE DATE OF HEARING: 08.05 . 201 8 DATE OF PRONOUNCEMENT: 23.05.2018 ITA NO 1672 OF 2016 GLOBALLOG IC TECHNOLOGIES LTD HYDERABAD. PAGE 2 OF 7 TAXABLE INCOME TOWARDS DIRECTORS REMUNERATION. THE ASSESSEE WAS THEREFORE, ASKED TO FURNISH THE REASONS FOR RED UCING THE REMUNERATION PAID TO THE DIRECTORS WHICH WAS NOT D EBITED TO THE P&L A/C FOR THE FINANCIAL YEAR 2011-12. IN RESPONS E TO THE SAME, THE ASSESSEE, VIDE LETTER DATED 25.03.2015, EXPLAIN ED THAT THE DIRECTORS REMUNERATION WAS NOT PROVIDED IN THE BOO KS OF ACCOUNT FOR THE FINANCIAL YEAR 2011-12 BUT WAS PROVIDED IN THE BOOKS OF ACCOUNT FOR THE FINANCIAL YEAR 2012-13 AND THE ASSE SSEE COMPANY HAS DISALLOWED THE SAID AMOUNT IN THE COMPUTATION O F INCOME AS PRIOR PERIOD EXPENSES FOR THE FINANCIAL YEAR 2012-1 3 AS IT PERTAINS TO THE FINANCIAL YEAR 2011-12 ON REALIZING THE MIST AKE, A REVISED RETURN WAS FILED CLAIMING THE DIRECTORS REMUNERATI ON AS EXPENDITURE. IT WAS ALSO SUBMITTED THAT THE COMPANY HAS PROVIDED FOR DIRECTORS REMUNERATION FOR THE FINANCIAL YEAR 2011-12 RELEVANT TO THE A.Y 2012-13 AND THAT THE SAME IS BEING CLAIM ED IN THE REVISED RETURN OF INCOME FOR THE A.Y 2012-13 AND EN CLOSED THE COMPUTATION OF THE TOTAL INCOME FOR THE A.Y 2013-14 FOR THE REFERENCE OF THE AO. 3. THE AO, THEREAFTER, ASKED THE ASSESSEE TO FURNIS H THE COPIES OF THE INCOME-TAX RETURNS FILED BY THE DIREC TOR OFFERING THE SAID REMUNERATION TO TAX. IN RESPONSE TO THE SAME, THE ASSESSEE FURNISHED THE COPIES OF RETURNS OF INCOME FILED BY THE DIRECTORS FOR THE A.Y 2012-13 FROM WHICH IT WAS OBSERVED THAT THE REMUNERATION OF RS.7,39,46,648 HAD NOT BEEN OFFERED AS INCOME IN THE HANDS OF THE DIRECTORS FOR THE A.Y 2012-13. WHEN THIS WAS POINTED OUT, THE ASSESSEE EXPLAINED THAT THE REMUNE RATION HAS BEEN OFFERED BY THE DIRECTORS TO TAX FOR THE SAID A .Y 2013-14. IN VIEW OF THE SAME, THE AO WAS OF THE OPINION THAT TH E SAME IS NOT ITA NO 1672 OF 2016 GLOBALLOG IC TECHNOLOGIES LTD HYDERABAD. PAGE 3 OF 7 ALLOWABLE IN THE A.Y 2012-13 AS IT WAS NOT DEBITED TO THE P&L A/C AND WAS ALSO NOT CLAIMED AS A DEDUCTION IN THE ORIG INAL RETURN OF INCOME. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO AND THE A SSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI K.C. DEVDAS, WHILE REITERATING THE SUBMISSIONS MADE BY T HE ASSESSEE BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT THE SU M OF RS.7,39,46,648 WAS PAID TO THE DIRECTORS TOWARDS TH EIR REMUNERATION AS WELL AS BONUS AND THAT THE AO HAS N OT DISPUTED THE RENDERING OF THE SERVICES BY THE DIRECTORS NOR THE ACCRUAL OF THE EXPENDITURE IN THE HANDS OF THE ASSESSEE. HE SU BMITTED THAT SINCE THE SUM WAS PAID TO THE DIRECTORS IN THE NEXT FINANCIAL YEAR, THE SAME WAS DEBITED TO THE P&L A/C AND THEREAFTER, DISALLOWED AS PRIOR PERIOD EXPENSES. HE SUBMITTED THAT THE AO IN THE A.Y 2013-14 HAD NOT ALLOWED THE EXPENDITURE ON THE GROU ND THAT THE ASSESSEE HAS FILED THE REVISED RETURN OF INCOME IN THE A.Y 2012-13 CLAIMING THE SAID EXPENDITURE AND THE AO FOR THE A. Y 2012-13 HAS DISALLOWED THE SAME ON THE GROUND THAT THE DIRECTOR S HAVE OFFERED THE INCOME IN THEIR HANDS IN THE A.Y 2013-14. HE SU BMITTED THAT FOR CONSIDERING WHETHER AN ITEM IS TAXABLE IN THE H ANDS OF THE PAYER, THE MATTER HAS TO BE LOOKED AT FROM THE POIN T OF VIEW OF THE PERSON PAYING THE AMOUNT AND NOT THAT OF THE RECIPI ENTS. FOR THIS PROPOSITION, HE PLACED RELIANCE UPON THE DECISION O F THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SARADA BIN DING WORKS (1976) 102 ITR 187 (MAD.). HE SUBMITTED THAT BOTH T HE PAYEE AS WELL AS THE RECIPIENT MAY NOT NECESSARILY ADOPT THE SAME METHOD OF ACCOUNTING AND THEREFORE, THE DIFFERENCE IN METH OD OF ITA NO 1672 OF 2016 GLOBALLOG IC TECHNOLOGIES LTD HYDERABAD. PAGE 4 OF 7 ACCOUNTING MAY RESULT IN THE INCOME IN THE HANDS OF THE RECIPIENT NOT BEING OFFERED TO TAX IN THE SAME ACCOUNTING PER IOD IN WHICH THE AMOUNT IS PAID. 5. AS REGARDS THE AOS FINDING THAT THE ASSESSEE HA S NOT DEBITED THE AMOUNT TO THE P&L A/C AND THEREFORE, IS NOT ALLOWABLE, HE PLACED RELIANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MANUFAC TURING CO. LTD V. CIT (1971) 82 ITR 363 AND ALSO IN THE CASE O F BHARAT EARTHMOVERS LTD VS. CIT REPORTED IN (2000) 245 ITR 428 (S.C). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THA T THE ASSESSEE HAS FILED THE REVISED RETURN OF INCOME WITHIN THE T IME LIMIT MAKING A FRESH CLAIM AND THAT THE SAME OUGHT TO HAVE BEEN CONSIDERED AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF GOETZ E (INDIA) LTD VS. CIT (2006) 284 ITR 323 (S.C). FURTHER, HE ALSO PLACED RELIANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF CIT VS. EXCEL INDUSTRIES LTD (2013) 38 TAXMANN.COM 100 (S.C) FOR THE PROPOSITION THAT THERE IS NO SPECIFIC REQUIREMENT T O DISALLOW THE EXPENDITURE IN THE HANDS OF THE PAYER AS WELL AS TH E RECIPIENT WHEN THE TAX RATES REMAIN THE SAME. ALTERNATIVELY, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE EXPE NDITURE IS CONSIDERED AS NOT ALLOWABLE IN THE A.Y 2012-13, THE N THE SAME SHOULD BE ALLOWED AS A DEDUCTION IN THE A.Y 2013-14 I.E. IN THE YEAR IN WHICH THE SAME HAS BEEN ACTUALLY PAID. HE P LACED RELIANCE UPON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES VS. CIT (19 95) 213 ITR 523 (GUJ.) WHEREIN IT WAS HELD THAT IF THE LIABILIT Y IS CRYSTALLIZED IN THE CURRENT YEAR, THE SAME WILL BE ALLOWED AS A DED UCTION EVEN THOUGH THE LIABILITY PERTAINS TO ANOTHER YEAR. HE A LSO PLACED ITA NO 1672 OF 2016 GLOBALLOG IC TECHNOLOGIES LTD HYDERABAD. PAGE 5 OF 7 RELIANCE UPON THE DECISION OF THE TRIBUNAL IN THE C ASE OF SONY INDIA (P) LTD VS. DCIT 114 ITD 448 TO ARGUE THAT WH ERE THE EXPENDITURE PERTAINING TO A PARTICULAR A.Y IS ACCOU NTED IN ANOTHER A.Y, THE SAME CANNOT BE DISALLOWED IN BOTH THE A.YS . THUS, HE PRAYED THAT IF THE EXPENDITURE IS NOT TO BE ALLOWED IN THE A.Y 2012-13, THE SAME SHOULD BE DIRECTED TO BE ALLOWED IN THE A.Y 2013-14. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT MADE THE CLAIM IN THE ORIGINAL RETURN OF IN COME AND EVEN THE RECIPIENT HAS NOT OFFERED THE INCOME DURING THE RELEVANT A.Y AND THEREFORE, THE SAME IS NOT ALLOWABLE IN THE A.Y 2012-13. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE UNDISPUTED FACTS THAT T HE REMUNERATION IS PAID TO THE DIRECTORS OF THE COMPAN Y. THE FACTUM OF THESE DIRECTORS RENDERING SERVICES TO THE ASSESS EE ARE ALSO NOT DISPUTED. THE DISPUTE IS ONLY WITH REGARD TO THE NO N-DEBITING OF THE EXPENDITURE TO THE P&L A/C DURING THE RELEVANT A.Y AND NOT MAKING A CLAIM IN THE ORIGINAL RETURN OF INCOME FIL ED. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS MADE THE CLAIM BY FILING A REVISED RETURN OF INCOME WITHIN THE TIME FRAME ALLOWED UNDE R THE ACT. IN SUCH CIRCUMSTANCES, AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD (SUPRA), THE ASSESSEE CAN MAKE A CLAIM ONLY BY WAY OF FILING A REVISED RETURN OF INCOME AN D IF SUCH REVISED RETURN IS VALIDLY FILED WITHIN THE PRESCRIBED TIME LIMIT, THEN THE AO HAS TO CONSIDER THE SAME IN ACCORDANCE WITH LAW. TH EREFORE, THE ITA NO 1672 OF 2016 GLOBALLOG IC TECHNOLOGIES LTD HYDERABAD. PAGE 6 OF 7 REASON GIVEN BY THE AO THAT THE ASSESSEE HAS MADE A FRESH CLAIM IN THE REVISED RETURN AND THEREFORE, IS NOT ALLOWAB LE CANNOT BE SUSTAINED. 8. THE ASSESSEE HAS ADMITTEDLY NOT DEBITED THE DIRE CTORS REMUNERATION TO THE P&L A/C AND THEREFORE, HAS NOT CLAIMED IT IN THE ORIGINAL RETURN OF INCOME. ADMITTEDLY, THE ASSE SSEE HAS DISALLOWED THIS EXPENDITURE IN THE A.Y 2013-14 ON T HE GROUND THAT IT IS PRIOR PERIOD EXPENSES. THEREFORE, THE ST AND OF THE ASSESSEE HAS BEEN CONSISTENT THAT IT PERTAINS TO TH E A.Y 2012-13 ONLY. AS RIGHTLY POINTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE SAME ACCOUNTING POLICY OF THE PAYER AS WELL AS THE RECIPIENT MAY NOT BE THE SAME. THE RECIPIENT HAS OFFERED THE INCOME IN THE YEAR OF RECEIPT I.E. A.Y 2013-14, WHEREAS, THE ASSE SSEE HAS CLAIMED IT ON ACCRUAL BASIS. AS LONG AS THE ASSESSE E HAS RECEIVED THE SERVICES FROM THE DIRECTORS DURING THE FINANCIA L YEAR 2011-12 THE LIABILITY OF THE ASSESSEE HAS ARISEN IN THE F.Y 2011-12 ONLY AND THEREFORE, ON THE PRINCIPLES OF THE ACCRUAL, TH E ASSESSEE IS LIABLE TO PAY THE DIRECTORS REMUNERATION DURING THE FINANCIAL YEAR 2011-12 ONLY. THEREFORE, THE ASSESSEES CLAIM OF EX PENDITURE FOR THE A.Y 2012-13 IS TO BE CONSIDERED BY THE AO. THE FACT THAT THE RECIPIENTS HAVE OFFERED THE INCOME IN THE A.Y 2013- 14, SHOULD NOT AFFECT THE CLAIM OF THE ASSESSEE IN THE A.Y 2012-13 AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MANUFACTURING CO. LTD (SUPRA). THEREFORE, WE DIRECT THE AO TO ALLOW THE EXPENDITURE IN THE A.Y 2012-13 IN ACCORDA NCE WITH THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE. ITA NO 1672 OF 2016 GLOBALLOG IC TECHNOLOGIES LTD HYDERABAD. PAGE 7 OF 7 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNT ANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 23 RD MAY 2018. VINODAN/SPS COPY TO: 1 M/S. GLOBAL LOTIC TECHNOLOGIES LTD, P.NO.590A, PH ASE-1, ROAD NO.31, JUBILEE HILLS, HYDERABAD 500033 2 ACIT, CIRCLE 2(2) ROOM NO.513, 5 TH FLOOR, SIGNATURE TOWERS, OPP: BOTANICAL GARDENS, KONDAPUR, SERILINGAMPALLY, HYDER ABAD 500084 3 CIT (A)-2 HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER