The DCIT, Circle 8, Ahmedabad V. SPX Flow Technology (India) Pvt. Ltd. (Earlier known as Johnson Pumps (India) P.Ltd.), Ahmedabad

ITA 1883/AHD/2013

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8596 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITI SAMAUT
• Assessee Lawyers: PARIMAL PARMAR ARS
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 43B; 143(3); 40(a)(ia); 195; 32; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 8, AHMEDABAD (APPELLANT) VS SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. (EARLIER KNOWN AS JOHNSON PUMPS (INDIA) PVT. LTD.), SURVEY NO. 275, OPP. MURLIDHAR SOCIETY, ODHAV ROAD, AHMEDABAD - 382415 PAN: AAAC S7234B (RESPONDENT) REVENUE BY : S H RI /MS SMITI SAMAUT , SR. D . R. ASSESSEE BY: SHRI TUSHAR HEMANI & SHRI PARIMAL PARMAR, ARS. DATE OF HEARING : 26 - 10 - 2 018 DATE OF PRONOUNCEMENT : 12 - 12 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A. Y. 2009 - 10 , ARI SES FROM ORDER OF THE CIT(A) - IXV, AHMEDABAD DATED 05 - 04 - 2 013 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE R EVEN UE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2,24,464/ - MADE ON ACCOUNT OF DEPRECIATION ON COMPUTER SOFTWARE BY TREA TING THE SAME AS 'INTANGIBLE ASSETS'. 2). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE TOTAL ADDITION OF RS.55,28,040/ - MADE U/S. 145A OF THE ACT, [ WITH RESPECT TO THE UNTILISED BALANCE OF MODVAT / CENVAT CREDIT OF RS.21,94,236/ - AND BALANCE WITH THE EXCISE AUTHORITIES OF RS.33,33,804/ - , TOTALING TO RS.55,28,040/ - ]. | I T A NO . 1883 / A HD/2 0 13 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 2 3). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT ION OF RS.41,41,869/ - MADE ON ACCOUNT OF UNDERVALUATION OF STOCK. 4). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11,97,747/ - OUT OF TOTAL ADDITION OF RS.14,36,110/ - ON ACC OUNT OF FOREIGN TRAVEL EXPENSES WHICH REMAINED WITH REGARD TO BUSINESS PURPOSE. 5). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE TOTAL ADDITION OF RS.7,65,007/ - MADE ON ACCOUNT OF COMMISSI ON EXPENSES, UNDER THE HEAD : 'COMMISSIONS TO OTHERS' EVEN THOUGH NO PROOF OF GENUINENESS OF SERVICES RENDERED WAS FILED. 6). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.71, 931/ - OUT OF TOTAL ADDITION OF RS.2,39,769/ - MADE ON ACCOUNT OF EXPENDITURE ON PURCHASE OF COMPUTER SOFTWARE ITEMS BY TREATING THE SAME AS 'INTANGIBLE ASSET'.. 7). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.1,56,439/ - MADE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. 8). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.12,68,118/ - MADE ON ACCOUN T OF PAYMENT MADE TO M/S. SPX PROCESS EQUIPEMENT NIL.BV U/S. 40(A)(IA) R.W.S.195 OF' THE ACT. 9). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IN THIS CASE, THE ASSESSEE HAS FILED RETURN OF INCOME ON 15 TH SEP, 2018 DECLARING TOTAL INCOME AT RS. 6 , 49 , 60 , 360/ - . SUBSEQUENTLY, THE C ASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 19 TH AUGUST, 201 0. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143 SUBSECTION 3 OF THE ACT ON 26 DECEMBER 2011 AND MADE V ARIOUS ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. THE AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LEARNED CIT APPEAL AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER MADE UNDER SECTION 143 SUBSECTION 3 OF THE ACT. THE REVENUE HAS FILED DIFFERENT GROUNDS OF APPEAL AS SUPRA AGAINST THE DECISION OF LD. CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER WHICH ARE ADJUDICATED AS UNDER : - DISALLOWANCE OF 2, 24 , 464/ - ON ACCOUNT OF DEPRECIATION ON COMPUTER SOFTWARE 4. IN THE ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN COMPUTER SOFTWARE UNDER THE HEAD INTANGIBLE ASSET ON WHICH IT HAS CLAIMED DEPRECIATION @ 60%. ON QUARRY T HE ASSESSEE EXPLA INED THAT ITEM NO. III ( 5) OF PART A OF THE N EW A PPENDIX - 1 TO INCOME TAX RULE 1962 ENTITLES AN ASSESSEE FOR ALLOWANCE OF DEPRECIATION @ 60% ON COMPUTER @ 60% ON COMPUTER I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 3 INCLUDING COMPUTERS SOFTWARE. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT ONCE THE ASSESSEE HAS TREATED SUCH APPLICATION SOFTWARE, BEING LICENSE AS INTANGIBLE ASSETS IN ITS BOOKS THEN THE ASSESSE CANNOT BE PERMITTED TO TREAT THE SAME DIFFERENTLY FOR INCOME TAX PURPOSES. THEREFORE, THE ASSESSING OFFICER HAS HELD THAT THE APPLICATION SOFTWARE BEING LICENSE ARE INTANGIBLE ASSET AND THEY ARE ELIGIBLE FOR DEPRECIATION U/S. 32 OF THE ACT @ 25%. CONSEQUENTLY, THE ASSESSING OFFICER HAS DI SALLOWED THE EXCESS CLAIM OF DEPRECIATION OF RS. 2 , 24 , 464/ - ADDED TO THE TOTAL INCOME OF THE ASSESSEE OF THE ASSESSEE. THE ASSESSEE HAS PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOTICED THAT AS PER RULE 5 OF INCOME TAX RULES 1962 DEPRECIATION ALLOWANCE U/S. 32 OF THE INCOME TAX ACT SHALL BE CALCULATED AT THE PERCENTAGE SPECIFIED IN T H E SECOND COLUMN OF THE T ABLE IN A PPENDIX 1 EFFECTIVE FRO M ASSESSMENT YEAR 2006 - 07 ON WARDS DEPRECIATION IS TO BE CALCULATED @ PRESCRIBED IN NEW APPENDIX - 1 ENTRY AT SERIAL NO. 5 OF PART - III (WHICH DEALS WITH RATE DEPRECIATION ON MACHINERY AND PLANT) OF THE SAID TABLE REFERRED TO COMPUTER, INCLUDING COMPUTER SOFTWARE AND THE RATE OF DEPRECIATION PRESCRIBED IN THE SAID TABLE AGAINST THIS ENTRY IS 60% . A S PER NOTE 7 BELOW THE SAID TABLE COMPUTER SOFTWARE MEANS ANY COMPUTER PROGRAM RECORDED IN ANY DISC, TAPE, PERFORATED MEDIA OTHER INFORMATION STORA GE DEVICE. IN THE LIGHT OF THE ABOVE PROVISION OF INCOME TAX , WE OBSERVED THAT INCOME TAX ACT DOES NOT MAKE ANY DIFFERENCE BETWEEN THE SYSTEM SOFTWARE AND APPLICATION SOFTWARE, THEREFORE, WE JUSTIFY THE DECISION OF LD. CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE OF DEPRECIATION @ 60% ON THE COMPUTER SOFTWARE. ACCORDINGLY THIS GROUND OF REVENUE IS DISMISSED. DELETING THE ADDITION OF RS. 55 , 28 , 044/ - U/S. 145 A OF THE ACT I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 4 6. DURING T H E COURSE OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THA T ASSESSEE HAS SHOWN AMOUNT RECEIVABLE ON ACCOUNT OF UN - UTILIZED/CLOSING BALANCE ON ACCOUNT OF MODVAT/CENVAT CREDIT UNDER LOAN AND ADVANCES AND THE SAME WAS NOT INCLUDED IN THE VALUE OF CLOSING STOCK. THE ASSESSING OFFICER WAS OF THE VIEW THAT I T IS REQUIRED AS PER PRO VISION S OF SECTION 145A OF T HE ACT THAT TAXES/DUTY/CESS/FEES RELATED TO STOCK NEED TO BE INCLUDED IN THE VALUE OF CLOSING STOCK, THEREFORE, ASSESSEE WAS ISSUED SHOW CAUSED TO EXPLAIN WHY THE CLOSING BALANCE /UNUTILIZED MODVAT/CENVAT SHOULD NOT BE ADDED TO T HE CLOSING STOCK AS PER THE PROVISIONS OF SECTION 145A OF THE ACT. T H E ASSESSEE EXPLAINED THAT THE ASSESSEE COMPANY HAS BEEN CONSISTENTLY FOLL OWING THE EXCLUSIVELY METHOD OF ACCOUNTING IN RESPECT OF MODVAT (EXCISE DUTY PAID ON PURCHASE OF RAW MATERIALS) AND T HEREFORE CENVAT CREDIT ON INPUT IS DEBITED TO A SEPARATE ACCOUNT I.E. MODVAT CREDIT RECEIVABLE WHICH IS UTILIZED FOR THE PAYMENT OF EXCISE DUTY ON FINISHED PRODUCT. T HEREFORE, THERE WAS NO QUESTION OF TRE AT ING UN - UTILIZED MODVAT CREDIT AS INCOME IN THE YEAR. THE ASSESSEE HAS ALSO ST ATED THAT ABOVE METHOD WAS TAX NE UTRAL. THE ASSESSING OFFICER H AS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND HELD THAT IN VIEW OF THE EXPRESS PROVISION OF SECTION 1 4 5A OF THE ACT THE UN - UTILIZED BALANCES O F TAXES N EED TO BE INCLUDED IN T H E VALUE OF CLOSING STOCK , THE REFORE, THE ASSESSING OFFICER H AS INCLUDED THE SAME OF RS. 55 , 28 ,04 4/ - IN THE VALUE OF CLOSING STOCK. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSE SSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IN THIS CONNECTION, WE HAVE NOTICED THAT ASSESSEE WAS FOLLOWING SIMILAR METHOD IN THE PRECEDING YEARS AND THERE WERE NOTES IN THE AUDIT REPORT THAT IF THE ADJUSTME NT ON ACCOUNT OF SECTION 145A WAS MADE, THERE WOULD BE NO EFFECT ON THE INCOME. I T IS NOTICED THAT THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING FOR LAST MANY YEARS AND ALL PURCHASES AND SALES OF GOODS ARE ACCOUNTED NET OF MODVAT INCLUDING INVE NTORY I.E. OPENING STOCK AND CLOSING STOCK. ON THIS ISSUE THE HON'BLE ITAT BENCH OF AHMEDABAD IN THE CASE OF I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 5 ALPANIL INDUSTRIES V. ACIT IN ITA NO. 169/AHD/2005 AND 170/AHD/2005 FOR A.Y. 1999 - 2000 & 2000 - 2001 HAS DISCUSSED THE PRINCIPLE RELATED TO VALUATIO N OF CLOSING STOCK U/S.145A OF THE ACT. THE RELEVANT PORTION IS REPRODUCED AS UNDER: - ' SECTION 145A REQUIRES REVALUATION OF NOT INVENTORY ALONE BUT ALSO REQUIRES REVALUATION OF PURCHASE AND SALES. ON REVALUATION OF PURCHASE BY INCLUDING THE AMOUNT OF EXCI SE DUTY IN RESPECT OF WHICH MODVAT CREDIT IS AVAILABLE TO THE ASSESSEE, THE PURCHASE OF THE ASSESSEE WILL INCREASE RESULTING IN CORRESPONDING DECREASE IN THE PROFIT OF THE ASSESSEE. THE ASSESSEE 'S CONTENTION THAT VALUE OF CLOSING STOCK IS CREDITED IN THE PROFIT AND LOSS ACCOUNT TO SET OFF THE VALUE OF UNCONSUMED ITEMS OF PURCHASE AND THEREFORE, BOTH SHOULD HAVE SAME BASIS CANNOT BE CONTROVERTED. THE ONLY EXCEPTION TO THIS THEORY IS THAT WHEN THE MODVAT VALUE IS LESS THAN THE COST THEN EFFECTIVELY UNREALIZE D LOSS IS ALLOWED AS A DEDUCTION TO THE ASSESSEE ON THE WELL SETTLED PRINCIPLES. IN THE INSTANT CASE, THE LOWER AUTHORITIES WERE OT JUSTIFIED IN REVALUING ONLY CLOSING STOCK SO AS TO INCLUDE THE AMOUNT OF EXCISE DUTY PAID ON PURCHASE WITHOUT REVALUING THE CORRESPONDING PURCHASES. WE HAVE GONE THROUGH THE GUIDELINES EXPLAINED BY THE ICAI AND FIND OURSELVES IN AGREEMENT THEREWITH THAT THERE WILL NOT BE ANY EFFECT ON THE PROFIT OF LOSS ARRIVED AT EITHER BY FOLLOWING INCLUSIVE METHOD OF ACCOUNTING OR EXCLUSIVE METHOD OF ACCOUNTING FOR EXCISE DUTY. THE ONLY EFFECT WILL BE THAT - THE EXCISE DUTY PAYABLE ON CLOSING STOCK OF FINISHED GOODS WILL BE TO THE EXTENT NOT DEPOSITED WITH THE GOVERNMENT BEFORE THE DUE DATE OF FURNISHING OF RETURN WILL BE ADDED TO THE INCOME O F THE ASSESSEE IN VIEW OF PROVISION OF SECTION 43B OF THE ACT. IN VIEW OF THE DISCUSSION MADE HEREINABOVE, IN OUR CONSIDERED OPINION, THERE WILL BE NO EFFECT IN THE TAXABLE PROFIT OF THE ASSESSEE BY INCLUDING THE AMOUNT OF EXCISE DUTY PAID ON PURCHASE IN T HE VALUE OF CLOSING STOCK OF RAW MATERIAL, WHETHER AS RAW MATERIAL OR AS FORMING PART OF WORK - IN PROGRESS OR FINISHED GOODS. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE IN BOTH THE YEAR UNDER APPEAL AND ALLOW THE GROUNDS OF AP PEAL OF THE ASSESSEE.' 8 . WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. AFTER CONSIDERING THE FINDING OF THE LD. CIT(A) ALONG WITH JUDICIAL FINDING, WE CONSIDER THAT THERE WILL BE NO EFFECT IN THE TAXABLE PROFIT OF THE ASSESSEE BY INCLUDING THE AMOUNT OF EXCISE DUTY PAID ON PURCHASE IN THE VALUATION OF CLOSING STOCK OF RAW MATERIA L SINCE THE ASSESSEE WAS FOLLOWING EXCUSIVE METHOD OF ACCOUNTING AS ELABORATED IN THE FINDINGS OF THE LD.CIT(A), THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE DECISION OF LD. CIT(A). ACCORDINGLY THE APPEAL OF THE REVENUE IS DISMISSED. ADDI TION OF RS. 41 , 41 , 869/ - ON ACCOUNT OF UNDER VALUATION OF STOCK 9 . DURING ASSESSMENT, THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO FURNISH THE COPY OF STATEMENT OF STOCK STATEMENT SUBMITTED TO THE BANK. FROM THE PERUSAL OF THE STOCK STATEMENT SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT VALUE OF STOCK REFLECTED IN STOCK STATEMENT SUBMITTED TO THE I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 6 BANK DID NOT MATCH WITH THE VALUE OF STOCK REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE COMPANY . ON FURTHER VERIFICATION , THE ASSESSING OFFIC ER NOTICED THAT ASSESSEE HAS SHOWN THE VALUE OF STOCK IN BANK STATEMENT SUBMITTED FOR THE MONTH OF MARCH, 2009 TO THE BANK AT RS. 9 , 63 , 99 , 250/ - WHEREAS IN THE BOOKS OF THE ASSESSEE THE TOTAL VALUE OF STOCK AS ON 31 ST MARCH, 2009 WAS SHOWN AT RS. 9 , 22 , 5 7 , 381/ - . CONSEQUENTLY THE DIFFERENCE IN STOCK TO T HE AMOUNT OF RS 41 , 41 , 869/ - WAS TREATED BY THE ASSESSING OFFICER AS UNDERVALUATION OF STOCK BY THE ASSESSEE AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ASSESSE FILED APPEAL BEFORE THE LD . CIT(A). THE LD. CIT(A) HAS DELETED THE APPEAL. 10 . WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE HAS FILED STOCK STATEMENT TO THE BANK REFLECTING THE POSITION OF CLOSING STOCK AS ON 24 TH MARCH, 20 09. HOWEVER, IN THE BALANCE SHEET OF T HE ASSESSEE, THE POSITION OF STOCK WAS SHOWN AS ON 31 ST MARCH, 2009. THE ASSESSING OFFICER HAS NOT DISPROVED THESE MATERIAL FACTS THAT THE DIFFERENCE IN THE VALUATION OF CLOSING STOCK WAS ARISE N BECAUSE OF DIFFERENCE I N THE DATE S AS PER WHICH CLOSING STOCK WAS REFLECTED IN THE BANK STATEMENT AND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. RELIANCE IS ALSO PLACED ON THE JUDICIAL PRONOUNCEMENT OF THE HON BLE HIGH COURT IN THE CASE OF RIDDHI STEEL AND TUBES LTD. (TAX APP EAL NO. 846 OF 2013). CONSIDERING THESE FACTS, WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A). IN THE RESULT , THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. DELETING ADDITION OF RS. 11 , 97 , 747/ - ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES 1 1 . D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS INCURRED ON F OREIGN TRAVEL FOR RS. 1 4,36,110 / - . ON QUARRY T HE ASSESSEE HAS SUBMITTED DETAILS AND STATED THAT FOREIGN TRAVEL EXPENSES WERE INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF BUSINESS OF THE I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 7 COMPANY AS THE EMPLOYEES OF THE COMPANY SUCH AS ACCOUNTANT/ DY.MANAGERS, DEVELOPMENT MANAGERS, SENIOR MARKETING MANAGER, ETC. HAD VISITED SINGAPORE, CHINA, NEITHERLAND, ITALY AND BELGIUM ON VARIOUS DATES FOR BUSI NESS PROMOTION ETC. . THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE STATING THAT THE ASSESSEE HAS ONLY SUBMITTED THE GENERAL EXPLANATION AND ASSESSEE HAS NOT SUBMITTED THE DETAIL OF PARTIES TO WHOM THEY MET ABROAD FOR BUSINESS PURP OSES PROMOTION/MARKETING. TH EREFORE, THE CLAIM OF FOREIGN TRAVELLING EXPENSES OF RS. 1 4,36,110 / - WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A ). T HE LD. CIT(A) HAS PARTLY ALLOWED T HE APPEAL OF THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO RS . 2,38,363/. 1 2 . WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE HAS SUBMITTED THE DETAILS OF EMPLOYEES WHO HAD TRAVELLED ABROAD, DURATION OF VI SIT, COUNTRIES VISITED, NATURE AND AMOUNT OF E XPENSES AND PURPOSE OF TRAVEL. THE ASSESSEE HAS ALSO SUBMITTED THAT ANNUAL TURNOVER OF T HE ASSESSEE WAS MORE THAN RS. 43 , 85 , 60 , 522/ - , THEREFORE, THE FOREIGN TRAVEL EXPENDITURE OF RS. 14 , 36 , 110/ - WAS TOTALLY RE LEVANT AND SUPPORTED BY THE DOCUMENTARY EVIDENCES . IT IS OBSERVED THAT COMPLETE DETAILS OF EMPLOYEES WHO TRAVELED ABROAD, COUNTRIES VISITED, NATURE AND AMOUNT OF EXPENSES AND PURPOSE OF TRAVEL BUT PROVIDED TO THE ASSESSING OFFICER THEREFORE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES MERELY ON THE SUSPICION WITHOUT CONSIDERING THE EVIDENCES PLACED ON RECORD AND WITHOUT DISPROVING THE DETAILS AND EVIDENCES SUBMITTED BY THE ASSESSEE. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES , WE A RE INCLINED WITH THE FINDING OF LEARNED CIT APPEAL. T HEREFORE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS DISMISSED. ADDITION OF RS. 7 , 65 , 007/ - ON ACCOUNT OF COMMISSION EXPENSES I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 8 1 3 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF COMMISSION PAID TO OTHER AT RS. 7 , 65,007/ - APART FROM COMMISSION PAID TO SELLING AGENT M/S. ATE ENTERPRISES LTD. AT RS. 2 , 22 , 16 , 970/ - . HOWEVER, IN CASE OF COMMISSION PAID TO O THERS, THE ASSESSEE HAS NEITHER SUBMITTED COPY OF AGREEMENT NOR SUBMITTED ANY PROOF OF SERVICES AS CITED BY THE ASSESSING OFFICER , THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED THE ASSESSEE S CLAIM OF PAYMENT OF COMMISSION TO OTHER AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASESSEE. 1 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IT IS NOTICED THAT ASSESS EE HAS SUBMITTED DETAILS OF COMMISSION PAID TO VARIOUS DEALERS AS OVERRIDING COMMISSION IN ACCORDANCE WITH THE S ALES PROMOTION. I T IS ALSO NOTICED THAT ASSESSEE HAS PAID COMMISSION TO VARIOUS DEALERS FOR EXTRA EFFORTS IN PROCURING ORDER S FROM CUSTOMERS AFT ER VERIFI CATION AND APPROVED BY THE M ARKET ING M ANAGER OF THE ASSESSEE COMPANY. IT IS NOTICED THE ASSESSING OFFICER HAS NOT MADE ANY INQUIRIES U/S 133 (6)/ 131 OF THE ACT TO DISPROVE THE GENUINENESS OF THE EXPENDITURE CLAIMED BY THE ASSESSEE IN THE FORM OF OVERRIDING COMMISSION PAID TO THE VARIOUS DEALERS FOR THE EXTRA EFFORTS MADE IN PROCURING THE ORDERS FROM THE CUSTOMERS. T HEREFORE WE DON'T FIND ERROR IN THE DECISION OF LEARNED CIT(A), THEREFORE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. DELE TING THE ADDITION OF RS. 71 , 931/ - ON ACCOUNT OF EXPENDITURE ON PURCHASE OF COMPUTER SOFTWARE 1 5 . THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED EXPENSES OF RS. 2 , 74 , 021/ - ON ACCOUNT OF EXPENSES INCURRED ON COMPUTER SOFTWARE AS RE VENUE EXPEN SES . HE WAS OF THE VIEW THAT SOFTWARE WAS BASICALLY A LICENCE AND WAS OF CAPITAL NATURE, THEREFORE, THE SAME WAS NOT ALLOWABLE AS REVENUE EXPENSES U/S. I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 9 37 OF T HE ACT. AFTER ALLOWING THE DEPRECIATION @25% TO THE AMOUNT OF RS. 34252/ - THE ASSESSING OFFICER HA S ADDED THE REMAINING AMOUNT OF EXPENSES OF RS. 2,39,769 / - TO T HE TOTAL INCOME OF THE ASSESSEE AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE T H E LD. CIT(A). T HE LD. CIT(A) HAS ALLOWED THE CLAIM OF DEPRECIATION @ 60% AS AGAINST 25%. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE HAVE NOTICED THAT DEPRECIA TION ON THE COMPUTER SOFTWARE IS ALLOWABLE @ 60% AS ADJUDICATED SUPRA IN THIS ORDER, THEREFORE, WE ARE INCLINED WITH THE LD. CIT(A) FOR ALLOWING THE DEPRECIATION @ 60% . THEREFORE, APPEAL OF THE REVENUE IS DISMISSED ON THIS ISSUE . DELETING ADDITION OF RS. 156439/ - ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION 1 6 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS DISALLOWED THE FOREIGN EXCHANGE FLUC TUATION LOSS OF RS.1,56,439 IN RESPECT OF FORW ARD CONTRACT ENTERED INTO FAR UNDERLYING EXPORTS TRANSACTIONS AT RS. 1 , 23 , 00 1/ - AND RS. 33428/ - IN RESPECT OF THE REINSTATEMENT OF EXPORT RECEIVABLES AND OUTSTANDING CREDITORS FAR IMPORT OF GOODS BY TREATING T HE SAME AS OF NOTIONAL/CONTINGENT NATURE . AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. 1 7 . WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE MATERIAL ON RECORD CARE FULLY. IT IS NOTICED THAT LOSS ON ACCOUNT OF EXCHANGE RATE OF RS. 1 , 56 , 439/ - COMPRISED OF TWO ITEMS, RS. 1 , 23 , 001/ - IN RESPECT OF FORWARD CONTRACT EN T ERED BY THE ASSESSEE COMPANY FOR UNDERLYING EXPORT CONTRACT AND RS. 33 , 428/ - IN RESPECT OF REINSTATEMENT OF EXPORT RECEIVABLE AND CREDITORS FOR IMPORT OF GOODS OUTSTANDING AS ON 31 ST MARCH, 2009. WE CONSIDER THAT ASSESSEE HAS SUBMITTED THE CORRESPONDING DETAIL DEMONSTRATING THAT THE AMOUNT COMPUTED BY WAY OF DIFFERENCE BETWEEN RATE AT WHICH THE CONTRACT WAS ENTERED INTO AND THE RATE ON THE LAST DAY OF THE PREVIOUS YEAR HAS BEEN DEBITED IN RESPECT OF FORWARD CONTRACT ENTERED INTO BY THE ASSESSE FOR UNDERLYING EXPORT TRANSACTION WHICH WAS I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 10 OUTSTANDING AS ON 31 ST MARCH, 2009. SIMILARLY, THE AMOUNT IN RESPECT O F RE INSTATEMENT OF EXPORT RECEIVABLE AND CREDITORS FOR IMPORT AS ON 31 ST MARCH, 2009 WERE RE INSTATED AT THE FOREIGN EXCHANGE RATE PREVAILING ON 31 ST MARCH, 2009. IT IS ALSO NOTICED THAT THE FOREIGN EXCHANGE RATE DIFFERENCES HAD BEE N INCURRED IN THE ORDINARY COURSE OF BUSINESS IN ACCORDANCE WITH THE CONSISTENT ACCOUNTING POLICY FOLLOWED BY THE COMPANY WHICH WAS IN COMPLIANCE TO THE ACCOUNTING STANDARD 11 ISSUED BY THE ICAI. IT IS ALSO NOTICED RULE 115 OF THE INCOME TAX RULE PROVIDES THAT ALL THE ASSESSEE SHOULD CONVERT THEIR FOREIGN EXCHANGE ASSETS INTO INDIAN RUPEES ON THE LAST DAY OF PREVIOUS YEAR. IN VIEW OF THE FACTS AND DETAILED FINDING OF THE LD. CIT(A), WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE , THERE FORE, THE SAME IS DISMISSED. DELETING DISALLOWANCE OF RS. 12 , 68 , 118/ - U/S. 40(A)(IA)OF THE ACT 1 8 . DURING ASSESSMENT T HE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS MADE PAYMENT OF RS. 12 , 68 , 118/ - TO M/S. SPX PROCESS EQUIPMENT NL BV AND IN FORM NO. 3CEB THE ASSESSEE HAS SHOW N THE DETAILS OF INTERNATIONAL TRANSACTION WITH THE ABOVE NAMED ASSOCIATED ENTERPRISE. ON QUERY, THE ASSESSEE EXPLAINED THAT THESE PAYMENTS WERE MADE FOR REPAIRING CHARGES/SCRAPING OF GOODS WHICH WAS SOLD TO THE SAID NON - RESIDENTS. HOWEVER THE ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE HAS MADE AFORESAID PAYMENT TO THE NON - RESIDENT FOR CARRYING OUT THE S O ME WORK AND THE ASSESSEE HAS NOT TAKEN ANY PERMISSION U/S. 195/197 OF THE ACT FOR REMITTING THE SAID AMOUNT WI THOUT DEDUCTING TDS. THEREFORE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS VIOLATED THE PROVISION OF SECTION 195 OF THE ACT BY NOT DEDUCTING TDS ON THE ABOVE REFERRED PAYMENT OF RS. 1268118/ - MADE TO THE ABOVE NAMED ASSOCIATED CONCERN OF THE ASSESS EE. THEREFORE, THE SAID SUM OF RS. 1268118/ - WAS DISALLOWED U/S. 40(A)(IA) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION STATING THAT NO ELEMENT OF INCOME WAS INVOLVED IN THIS EXPENDITURE. I.T.A NO. 1883 /AHD/20 13 A.Y. 2009 - 10 PAGE NO D CIT VS. SPX FLOW TECHNOLOGY (INDIA) PVT. LTD. 11 1 9 . WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE HAS MADE PAYMENT TO NON - RESIDENT FOR TWO PURPOSES (I) RS. 2 , 89 , 025/ - TOWARDS CHARGES FOR REPAIR S CARRIED OUT BY SUCH COMPANIES OUTSIDE INDIA (II) RS . 9 , 79 , 093/ - TOWARDS CLAIM FOR GOODS REJECTED AND SCRAPPED BY SUCH COMPANIES DUE TO INFERIOR QUALITY/MANUFACTURING DEFECTS. IT IS OBSERVED THAT ASSESSEE HAS ACTUALLY EXPORTED GOODS BUT THERE WERE CERTAIN MANUFACTURING DEFECT IN SUCH GOODS , THEREFORE, TH ESE GOODS WERE REQUIRED TO BE REPAIRED IN SOME CASES AND IN SOME CASES THE SAME WERE TO BE SCRAPPED. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES IT CLEARLY DEMONSTRATED THAT THE ASSESSEE HAS MADE PAYMENT AS REIMBURSEMENT TO ITS CONCERNED CUSTOMER , THEREFORE, WE CONSIDER THAT NO PART OF AMOUNT PAID TO SUCH PARTIES WAS CHARGEABLE TO TAX IN INDIA IN THEIR HAND, THEREFORE, WE ARE INCLINED WITH THE FINDINGS OF LD. CIT(A) OF DELETING THE IMPUGNED ADDITIONS .ACCORDINGLY , THE APPEAL OF THE REVENUE IS DISM ISSED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 12 - 12 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD : DATED 12 /12 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,