Manupatra Information Solutions Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1717/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53468 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 13-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI SENIOR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1483/DEL./2011 (ASSESSMENT YEAR : 2007-08) DCIT, CIRCLE 6 (1), VS. M/S. MANUPATRA INFORMATION SOLUTIONS PVT. LTD., NEW DELHI. E 197, RAJINDER NAGAR, NEW DELHI 110 060. (PAN : AACCM5884H) ITA NO.1717/DEL./2011 (ASSESSMENT YEAR : 2007-08) M/S. MANUPATRA INFORMATION SOLUTIONS PVT. LTD., VS . DCIT, CIRCLE 6 (1), E 197, RAJINDER NAGAR, NEW DELHI. NEW DELHI 110 060. (PAN : AACCM5884H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY SOOD, CA REVENUE BY : SHRI R.S. NEGI, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : BOTH THESE CROSS APPEALS ARISING OUT OF THE ORDER OF CIT (APPEALS)-IX, NEW DELHI DATED 26.11.2010. THE GROUNDS OF APPEAL RAISED IN REVENUES APPEAL IN ITA NO.1483/DEL/2011 ARE AS UNDER :- 1. THE ORDER OF LEARNED CIT (APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. ITA NOS.1483 & 1717/DEL./2011 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A) HAS ERRED IN ALLOWING 25% DEPR ECIATION ON DATA BASE AND DEVELOPMENT. 2.1 THE LD. CIT (A) IGNORED THE FINDING RECORDED BY THE ASSESSING OFFICER AND THE FACT THAT THE DEPRECIATIO N IS NOT ALLOWABLE ON INTANGIBLE ASSETS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT ( A) HAS ERRED IN DELETING THE ADDITION OF RS.16,84,500/- MADE BY ASSESSING OFFICER DISALLOWING THE VARIABLE COMMISSION PAID TO DIRECTORS. 3.1 THE LD. CIT (A) IGNORED THE FINDING THE RECORDE D BY THE ASSESSING OFFICER AND THE FACT THAT THE VARIABLE CO MMISSION TO THE DIRECTORS IS NOT ALLOWABLE EXPENSE. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF H EARING. THE GROUNDS RAISED IN THE ASSESSEES APPEAL READ AS UNDER :- 1) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS)-IX, NEW DELHI, HAS ERRED IN H OLDING THAT THE EXPENDITURE OF RS.63,70,259/- CLAIMED AS EXPEND ITURE BY APPELLANT IS CAPITAL EXPENDITURE, AND NO ALLOWABLE AS REVENUE EXPENDITURE. 2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE A DDITION OF RS.63,70,259/- ON ACCOUNT OF DATABASE AND DEVELOPM ENT COST MADE BY THE A.O. AND HOLDING THAT THE EXPENDITURE W AS CAPITAL EXPENDITURE AND NOT REVENUE EXPENDITURE. 3) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS MADE A DOUBLE DISALLOWANCE BY ENHANCEMENT OF INCOME BY RS.21,39,305/- AND ALSO DI SALLOWING THE ENTIRE DATABASE & DEVELOPMENT COST OF RS.63,70, 259/- AS CAPITAL EXPENDITURE SUBJECT TO DEPRECIATION ON THE SAME. 4) THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR DROP ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARIN G. ITA NOS.1483 & 1717/DEL./2011 3 2. THE RETURN OF LOSS WAS FILED ON 30.10.2007 DECLA RING LOSS OF RS.84,15,322/-. THE ASSESSMENT WAS COMPLETED U/S 1 43(3) ON 13.11.2009 AT AN INCOME OF RS.31,47,660/-. 3. GROUND NO.1 IN REVENUES APPEAL IS GENERAL IN NA TURE AND DOES NOT REQUIRE ANY ADJUDICATION. 4. GROUND NOS.2 & 2.1 IN THE REVENUES APPEAL AND G ROUND NOS.1 TO 3 IN ASSESSEES APPEAL ARE RELATED TO THE ISSUE WHEREIN THE EXPENDITURE CLAIMED BY THE ASSESSEE AS A REVENUE EXPENDITURE WHICH HAS BEE N HELD TO BE CAPITAL EXPENDITURE AND THE ADDITION OF RS.63,70,259/- WAS CONFIRMED WHICH WAS RELATED TO DATABASE AND DEVELOPMENT COST. THE REVE NUE IS IN APPEAL AGAINST THE ALLOWING 25% DEPRECIATION ON DATABASE AND DEVEL OPMENT AND ITS CLAIM IS THAT DEPRECIATION IS NOT ALLOWABLE ON INTANGIBLE AS SETS. 5. WE HAVE HEARD BOTH THE SIDES. THIS ISSUE WAS AL SO INVOLVED IN THE ASSESSMENT YEAR 2006-07 AND THE APPEALS BEING ITA N O.176/DEL/2011 & ITA NO.326/DEL/2011 HAVE COME UP TO THE LEVEL OF ITAT I N THAT YEAR WHERE THE ITAT HAS DECIDED THE ISSUE BY HOLDING AS UNDER :- 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE ENTIRE MATERIAL AVAILABLE ON RECORD. HONBLE DELHI HIGH COURT WHILE DECIDING DATE BASE DEVELOPMENT EXPENDITURE HA S CLEARLY HELD THAT THE WEBSITE MAY PROVIDE ENDURING BENEFIT BUT INTENT AND PURPOSE BEHIND SAME IS NOT TO CREATE AN ASSET B UT TO PROVIDE A MEANS FOR DISSEMINATING THE INFORMATION A BOUT THE ASSESSEE. IN THIS CASE ALSO THE ASSESSEE IS IN THE ACTIVITY OF DISSEMINATING THE INFORMATION ABOUT CASE LAWS WITH SUITABLE CAPTIONS AND HEAD-NOTES. IN OUR VIEW THE SAME IS IN THE FIELD OF PROFIT GENERATING APPARATUS OF THE ASSESSEE BUSINES S AND IS TO ITA NOS.1483 & 1717/DEL./2011 4 BE HELD AS REVENUE IN NATURE. RESPECTFULLY FOLLOWIN G THE HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF IN DIAN VISIT.COM (P) LTD. (SUPRA), WE UPHOLD THE CLAIM OF THE ASSESSEE. ACCORDINGLY, ASSESSEES GROUND ON THE ISS UE IN QUESTION IS ALLOWED AND THAT OF REVENUE IS DISMISSE D. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW ASSESSEE S APPEAL AND DISMISS THE REVENUES APPEAL ON THIS ISSUE. 6. IN REVENUES APPEAL, THE GROUND NOS.3 & 3.1 RELA TED TO THE DELETION OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F COMMISSION PAID TO THE DIRECTORS. 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE CIT (A) HAS GRANTED THE RELIEF BY HOLDING AS UNDER :- 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. AR AND FINDINGS RECORDED BY THE LD. AO AS PER THE ASSE SSMENT ORDER. IT IS SEEN THAT THE ID. AO PROCEEDED TO INVO KE THE PROVISIONS OF THE SECTION 36(1)(II) ON THE PREMISE THAT THE DIRECTORS HAD SUBSTANTIAL SHAREHOLDING IN THE COMPA NY. AS A MATTER OF FACT, ONE DIRECTOR HELD ONLY 100 SHARES A ND THE OTHER DIRECTOR HAD NO SHAREHOLDING OF THE APPELLANT COMPA NY AT ALL. THUS, THE AMOUNT PAID TO THEM AS COMMISSION COULD N OT HAVE BEEN OTHERWISE PAYABLE AS PROFIT OR DIVIDEND AS ENU MERATED IN SECTION 36(1)(II) OF THE ACT. THEREFORE, THE ASSESS ING OFFICER'S INVOKING THE PROVISIONS OF THE SAID SECTIONS IS NOT JUSTIFIED. APART FROM INVOKING THE SAID SECTION, THE LD. AO HA S NEITHER DOUBTED THE GENUINENESS OF THE CLAIM NOR ITS REASON ABLENESS. UNDER THESE CIRCUMSTANCES, I AM UNABLE TO CONFIRM T HE ADDITION MADE AS PER THE ASSESSMENT ORDER. THE SAME IS, THEREFORE, DIRECTED TO BE DELETED. THE GROUND NO. 2 IS ACCORDINGLY ALLOWED TO THE APPELLANT FOLLOWING MY O RDER IN THE APPELLANT'S CASE FOR THE A.Y. 2006-07. ITA NOS.1483 & 1717/DEL./2011 5 THIS ISSUE WAS ALSO INVOLVED IN THE ASSESSMENT YEAR 2006-07 WHEREIN THE ITAT HAS DELETED THE ADDITION BY HOLDING AS UNDER : - 8. APROPOS REVENUES REMAINING GROUND REGARDING COMMISSION PAID TO DIRECTORS, THE CIT(A) DELETED TH E ADDITION BY OBSERVING AS UNDER: 7.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. AR AND FINDINGS RECORDED BY THE LD. AO AS PER T HE ASSESSMENT ORDER. IT IS SEEN THAT THE LD. AO PROCEE DED TO INVOKE THE PROVISIONS OF THE SECTION 36(1)(II) ON T HE PREMISE THAT THE DIRECTORS HAD SUBSTANTIAL SHAREHOL DING IN THE COMPANY. AS A MATTER OF FACT, ONE DIRECTOR H ELD ONLY 100 SHARES AND THE OTHER DIRECTOR HAD NO SHAREHOLDING OF THE APPELLANT COMPANY AT ALL. THUS , THE AMOUNT PAID TO THEM AS COMMISSION COULD NOT HAVE BE EN OTHERWISE PAYABLE AS PROFIT OR DIVIDEND AS ENUMERAT ED IN SECTION 36(1)(II) OF THE ACT. THEREFORE, THE ASSESS ING OFFICERS INVOKING THE PROVISIONS OF THE SAID SECTI ON IS NOT JUSTIFIED. APART FROM INVOKING THE SAID SECTION , THE LD. AO HAS NEITHER DOUBTED THE GENUINENESS OF THE C LAIM NOR ITS REASONABLENESS. UNDER THESE CIRCUMSTANCES I AM UNABLE TO CONFIRM THE ADDITIONS MADE AS PER THE ASSESSMENT ORDER. THE SAME IS, THEREFORE, DIRECTED TO BE DELETED. THE GROUND NO. 6 IS ACCORDINGLY ALLOWED TO THE APPELLANT. 9. LEARNED DR RELIED ON THE ORDER OF AO. 10. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, CONTENDS THAT THERE IS CLEAR FINDING OF FACT THAT B OTH THE DIRECTORS WERE EMPLOYEE DIRECTORS. ONE HAD NO SHARE HOLDING AND THE OTHER HELD ONLY NOMINAL 100 SHARES. THE ORD ER OF CIT(A) IS RELIED ON. 11. AFTER HEARING BOTH PARTIES, WE FIND THAT THE AD DITION ON ACCOUNT OF DIRECTORS REMUNERATION HAS BEEN DELETED BY CIT(A) ON JUST AND PROPER CONSIDERATIONS OF FACTS. IN CASE OF DIRECTORS COMMISSION, FACTS HAVE NOT BEEN DISPUTED BY LEARNED DR. HOLDING OF 100 SHARES IN CASE OF ONE DIRECTOR CANNO T BE HELD TO BE COMMISSION DISALLOWABLE U/S 36(1)(II) TO THE DIR ECTOR. WE ITA NOS.1483 & 1717/DEL./2011 6 SEE NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISS UE, WHICH IS UPHELD. FACTS REMAIN THE SAME, RESPECTFULLY FOLLOWING THE D ECISION OF ITAT, WE DISMISS THESE GROUNDS OF REVENUES APPEAL. 8. GROUND NO.4 IN REVENUES APPEAL AND ASSESSEES A PPEAL ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF DECEMBER, 2011. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 16 TH DAY OF DECEMBER, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-IX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.