DCIT, New Delhi V. M/s Fidelio India (P) Ltd., New Delhi

ITA 1897/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81531 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Depreciation; Additional evidence; Cost of acquisition; Royalty expenses; Revenue expenditure; Capital expenditure

Judgement Text

ITA 1897/DEL/2013 ASSTT.YEAR: 2003-04 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 1897/DEL/2013 ASSESSMENT YEAR : 2003-04 DY.COMMISSIONER OF INCOME TAX, VS FIDELIO INDIA (P) LTD., CIRCLE-11(1), THE MIRA CORPORATION SUITES, NEW DELHI. BLOCK A-1, PLOT NO. 1 & 2, OLD ISHWAR NAGAR, NEW DELHI-110065 (PAN: AAACF4782B) (APPELLANT) (RESPONDENT) APPELLAN T BY: SMT. PARWINDER KAUR, SR.DR RESPONDENT BY : S/SHRI ARIJIT CHAKROVORTY, ATOLAN SAHA, ANURAG MITTAL O R D E R PER CHANDRAMOHAN GARG, JM THE ABOVE APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-XII, NEW DELHI DATED 30.3.2006 DATED 11.1 .2013 FOR AY 2009- 10. IN THIS APPEAL, THE REVENUE HAS RAISED SOLE GR OUND WHICH READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING AD DITION OF RS. 2,80,96,419/- MADE ON ACCOUNT OF ROYALTY. 2. AT THE OUTSET, HAVING HEARD THE APPLICATION OF T HE ASSESSEE RESPONDENT DATED 01.10.2013 FILED UNDER RULE 29 OF THE INCOME TAX (AT) RULES, 1963, WE OBSERVE THAT THE ASSESSEE RESPONDENT WISH TO PLA CE ON RECORD COPY OF THE ITA 1897/DEL/2013 ASSTT.YEAR: 2003-04 2 2 AGREEMENT DATED 3.3.2008 BETWEEN THE RESPONDENT AND MICROS-FIDELIO IRELAND LIMITED FOR DISTRIBUTION OF PMS SOFTWARE AN D ANOTHER AGREEMENT DATED 15.12.2003 BETWEEN RESPONDENT AND MICROS SYST EMS INC FOR DISTRIBUTION OF POS SOFTWARE. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINC E THE ABOVE DOCUMENTS COVER THE BUSINESS ACTIVITIES OF THE RESP ONDENT DURING THE RELEVANT ASSESSMENT YEARS, THESE AGREEMENTS ARE RELEVANT FOR PROPER ADJUDICATION OF THE APPEAL AND ISSUES PLACED BEFORE US. LD. DR REPLIED THAT IF IT IS FOU ND JUST AND PROPER TO ADMIT AFOREMENTIONED AGREEMENTS AS AD DITIONAL EVIDENCE OF THE ASSESSEE, THEN THE ENTIRE MATTER WOULD REQUIRE VERIFICATION AND EXAMINATION OF THE FACTS AT THE END OF AO. THE DR FURTHER SUBMITTED THAT IF THE AO IS GIVEN DUE OPPORTUNITY OF VERIFICATION AND EXAMINATION OF THESE AGREEMENT IN THE LIGHT OF OTHER FACTS AND CIRCUMSTA NCES OF THE CASE, THEN THE REVENUE HAS NO SERIOUS OBJECTION IN ALLOWING THE AP PLICATION OF THE ASSESSEE FOR SUBMISSION OF ADDITIONAL EVIDENCE. 4. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS ON ADMISSIBILITY OF ADDITIONAL EVIDENCE FILED BY THE RESPONDENT ASSESSE E, WE OBSERVE THAT THE MAIN CONTROVERSY IS RELATED TO THE ROYALTY CHARGES. THE AO CONSIDERED THE IMPUGNED EXPENDITURE AS CAPITAL EXPENDITURE AND GRA NTED DEPRECIATION @25% AND REMAINING AMOUNT OF THE SAID CAPITAL EXPEN DITURE WAS ADDED TO ITA 1897/DEL/2013 ASSTT.YEAR: 2003-04 3 3 THE TOTAL INCOME OF THE ASSESSEE. BEFORE THE CIT(A ), THE ASSESSEE RAISED VARIOUS GROUNDS CLAIMING THAT THE ASSESSEE WAS ENGA GED IN THE TRADING OF SOFTWARE IN INDIA, THEREFORE, DISALLOWANCE MADE BY THE AO BY TREATING THE PURCHASE COST OF THE SOFTWARE AS CAPITAL EXPENDITUR E IN NATURE IS NOT JUSTIFIED. THE ASSESSEE RESPONDENT ALSO CONTENDED THAT SUCH EX PENDITURE INCURRED BY THE ASSESSEE WAS ON ACCOUNT OF PROVISION OF SOFTWAR E FOR RESELLING THE SAME IN THE INDIAN MARKET AND SUCH PURCHASE COST IS ALLO WABLE AS REVENUE EXPENDITURE IN THE HANDS OF ASSESSEE RESPONDENT. T HE CIT(A) ACCEPTED THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE AND DEL ETED THE ENTIRE ADDITION MADE BY THE AO AND IN THE SECOND APPEAL THE REVENUE IS AGITATING THE ISSUE BY ALLEGING THAT THE CIT(A) WAS JUSTIFIED IN DELETI NG THE ADDITION BECAUSE THE ENTIRE PAYMENT MADE BY THE ASSESSEE CANNOT BE CONSI DERED AS REVENUE EXPENDITURE MERELY BECAUSE THE PAYMENT WAS REQUIRED TO BE MADE AT A CERTAIN PERCENTAGE OF THE RATES OF THE GROSS TURNOV ER OF THE PRODUCTS OF THE ASSESSEE AS ROYALTY. 5. IN VIEW OF ABOVE, WE COME TO A CONCLUSION THAT T HE ISSUE OF ROYALTY AS EXPENDITURE OF REVENUE OR AS EXPENDITURE OF CAPITAL NATURE IS OBVIOUSLY BASED ON THE AGREEMENTS BETWEEN THE ASSESSEE RESPONDENT A ND M/S MICROS FIDELIO IRELAND LIMITED AND MICROS SYSTEMS INC AND THE AUTHORITIES BELOW ITA 1897/DEL/2013 ASSTT.YEAR: 2003-04 4 4 HAVE DECIDED THE ISSUE WITHOUT CONSIDERING THESE BA SE AGREEMENTS WHICH WERE RELEVANT FOR PROPER ADJUDICATION AND REDRESSAL OF THE GRIEVANCE OF THE ASSESSEE AS WELL AS OF THE REVENUE. THEREFORE, WE FIND IT APPROPRIATE TO ADMIT THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE RESPO NDENT AND WE ADMIT THE SAME. HENCE, APPLICATION DATED 1.10.2013 OF THE AS SESSEE RESPONDENT IS ALLOWED. 6. SINCE WE HAVE ADMITTED AFOREMENTIONED AGREEMENTS AS ADDITIONAL EVIDENCE, THEREFORE, THE ENTIRE ISSUE AND CONTROVER SY REQUIRES EXAMINATION AND VERIFICATION AT THE END OF AO. THEREFORE, WE R ESTORE THE ISSUE OF ALLOWABILITY OF THE ROYALTY EXPENSES TO THE FILE OF AO WITH A DIRECTION THAT THE ISSUE SHALL BE DECIDED AFRESH BY AFFORDING DUE OPPORTUNITY OF HEARING FOR THE ASSESSEE AND WE ALSO MAKE IT CLEAR THAT THE CAS E IS BEING RESTORED TO THE FILE OF THE AO FOR ADJUDICATION OF ISSUE OF ROYALTY AND CASE IS RESTORED TO THE FILE OF THE AO UP TO THIS EXTENT ONLY. ACCORDINGLY, SOLE GROUND OF THE REVENUE IS DEEMED TO BE ALLOWED FOR STATISTICAL PUR POSES. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DEEM ED TO BE ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. ITA 1897/DEL/2013 ASSTT.YEAR: 2003-04 5 5 ORDER PRONOUNCED IN THE OPEN COURT ON 14.8.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 14TH AUGUST 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR