ACIT, Central Circle - 1(1), Kolkata, Kolkata V. M/s. Citation Infowares Limited, Kolkata

ITA 2004/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0133 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 08-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MONDAL
• Assessee Lawyers: SOMDUTTA SOMADDAR
• Keywords: Revised return; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH KOLKATA BEFORE SHRI S.S. GODARA, JM & DR. A.L. SAINI, AM ITA NO.2004/KOL/2017 (ASSESSMENT YEAR: 2011-12) ACIT, CC-1(1), KOLKATA AAYKAR BHAWAN, 110, SHANTIPALLY, 3 RD FLOOR, KOL-700 107. VS. M/S. CITATION INFOWARES LIMITED 21A, SHAKESPEARE SARANI, 3 RD FLOOR, KOLKATA 700 017. ./ ./PAN/GIR NO. : AABCC 6044 J ( /APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI K. MONDAL, SR. DR RESPONDENT BY : MISS SOMDUTTA SOMADDAR, A/R / DATE OF HEARING : 25/09/2018 /DATE OF PRONOUNCEMENT: 07/12/2018 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAINING TO ASSESSMENT YEAR 2011-12, IS DIRECTED AGAINST THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-15, KOLKATA, IN APPEAL NO.185/CIT(A)-15/15-16/CIR-2/R&T/KOL, DATED 27.06.2017, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 20.12.2007. 2. THE GRIEVANCES RAISED BY THE REVENUE ARE AS FOLLOWS: 1).THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER LAW, THE LD. CIT(A) HAS ERRED DELETING THE ADDITION AMOUNTING TO RS.1,43,15,505/- MADE BY THE AO ON ACCOUNT OF ALLOWANCE FOR DEFERRED REVENUE EXPENDITURE DISREGARDING THE FACT THAT THE ASSESSEE DID NOT CLAIM ANY SUCH DEDUCTION IN ITS RETURN, NOR WERE SUCH EXPENSES DEBITED IN THE ACCOUNTS AND ALSO IN NOTE NO 12 IN SCHEDULE P OF THE ACCOUNT, IT IS MENTIONED THAT 'THE SAID DEFERRED REVENUE EXPENDITURE SHALL BE CHARGED TO REVENUE ACCOUNT IN THE ENSURING YEARS ON PROVIDING THE REQUISITE SERVICES TO THE CUSTOMERS IN RELATION TO THE SAID SPECIALIZED ACTIVITIES. 2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE WHERE NO CLAIM WAS MADE EITHER IN THE RETURN OF INCOME OR ACCOUNTS BUT SUCH CLAIM WAS MADE IN THE COURSE OF ASSESSMENT PROCEEDINGS M/S. CITATION INFOWARES LIMITED ITA NO.2004/KOL/2017 ASSESSMENT YEAR: 2011-12 2 WITHOUT FILING ANY REVISED RETURN AND NOT GIVING ANY JUSTIFIABLE REASON FOR NOT MAKING SUCH CLAIM IN THE RETURN OF INCOME IN VIOLATION OF THE APEX COURT'S DECISION IN GOETZE LNDIA LTD. V/S CIT IN 284 ITR 323[SC] 3) THAT IN FACTS AND CIRCUMSTANCES OF THE CASE AND UNDER LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,43,15,505/- WRONGLY RELYING ON A DECISION OF THE JURISDICTION HIGH COURT IN CIT VS BERGER PAINTS(LNDIA) LTD. (NO. 2) 2002 254 ITR 503 (CAL) WITHOUT EXAMINING THE FACTS OF THAT DECISION IS DIFFERENT THAN THE FACTS OF THE PRESENT CASE. FACTS OF THE OTHER CASE LAWS ALSO RELIED UPON BY THE CIT(A) ARE DIFFERENT FROM THE FACTS OF THE PRESENT CASE. 4) THAT THE DEPARTMENT CRAVES LEAVE TO ADD ALTER OR MODIFY ANY GROUNDS OF APPEAL IN THE COURSE OF APPELLATE PROCEEDINGS. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO NOTICED THAT THE ASSESSEE MADE A CLAIM OF RS.1,43,15,505/-, BEING ACCOUNTED AS 'DEFERRED REVENUE EXPENDITURE' IN THE ACCOUNTS AND NOT CHARGED TO PROFIT & LOSS ACCOUNT. IT WAS NOTED THAT NO SUCH CLAIM HAD BEEN MADE IN THE RETURN OF INCOME ITSELF, NOR WAS ANY SUCH DEBIT MADE IN THE ACCOUNTS. HOWEVER, NOTE NO. 12 IN SCHEDULE P OF THE B OF NOTES TO ACCOUNTS STATED THAT THE AMOUNT, SHALL BE CHARGED TO REVENUE ACCOUNT IN THE ENSUING YEARS. THE ASSESSEE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THAT SUCH A CLAIM WAS NOT ESTOPPED SIMPLY BECAUSE IT HAD NOT MADE THE CLAIM IN ITS OWN ACCOUNTS. THE ASSESSEE RELIED ON THE JUDGMENT OF THE HON`BLE CALCUTTA HIGH COURT IN THE CASE OF AVERY INDIA LTD. 199 ITR 745, AS WELL AS THE CASE OF BERGER PAINTS (INDIA) LTD. 254 ITR 503. HOWEVER, THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND DID NOT ALLOW THE CLAIM OF THE ASSESSEE. 4. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER PASSED BY THE LD. CIT(A). M/S. CITATION INFOWARES LIMITED ITA NO.2004/KOL/2017 ASSESSMENT YEAR: 2011-12 3 5. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD; WE NOTE THAT ASSESSEE HAD MADE A CLAIM OF RS. 1,43,15,505/- AS DEFERRED REVENUE EXPENDITURE. THIS AMOUNT WAS NOT CHARGED TO THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. THIS AMOUNT WAS CLAIMED AS DEDUCTION IN COMPUTATION OF INCOME AS IT WAS EXPLAINED THAT THESE EXPENSES RELATED TO TRAINING OF THE BPO PERSONNEL. THESE EXPENSES APPEARED HIGHER BECAUSE THIS WAS THE FIRST YEAR OF OPERATION OF THE COMPANY. THE LD A.O. DID NOT ALLOW THE DEDUCTION CLAIMED FOR THE REASONS THAT THESE EXPENSES WERE SPECIALIZED IN NATURE AND ITS BENEFITS WERE LIKELY TO ACCRUE IN THE YEARS TO COME. HENCE, THESE EXPENSES WERE TREATED AS CAPITAL IN NATURE. WE NOTE THAT ASSESSEE HAS SUBMITTED THAT THE ACTIVITIES OF BPO BUSINESS WAS STARTED W.E.F. 16.08.2004. CURRENT YEAR BEING THE FIRST YEAR, THESE EXPENSES WERE INCURRED TOWARDS TRAINING AND DEVELOPMENT OF MAN POWER IN A SPECIALIZED AREA OF BPO-CUM-CALL CENTRE ACTIVITIES. THE ASSESSEE HAS PROVIDED BREAK-UP OF THESE EXPENSES AND POINTED OUT THAT THESE WERE CLAIMED AS DEDUCTION BECAUSE THESE ARE REVENUE IN NATURE AND THERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE IN INCOME-TAX PROCEEDINGS. WHILE ACCOUNTING THESE EXPENDITURES, THEY ARE TREATED AS DEFERRED REVENUE EXPENDITURE, AS PER COMPANY LAW. IT SHOULD BE NOTED THAT THOUGH ASSESSEE COMPANY HAS TREATED SUCH EXPENSES IN ITS BOOKS AS DEFERRED REVENUE EXPENSES, STILL IT CAN CLAIM SUCH EXPENSES AS REVENUE EXPENDITURE IN INCOME-TAX PROCEEDINGS. FOR THAT WE RELY OF THE JUDGMENT OF THE HON`BLE HIGH COURT OF CALCUTTA IN THE CASE OF AVERY INDIA LTD. VS. CIT 199 ITR 745 (CALCUTTA HC). 6. WE NOTE THAT IN THE ASSESSEE`S CASE UNDER CONSIDERATION, SINCE THIS IS THE FIRST YEAR OF OPERATION, HUGE EXPENDITURE HAS BEEN INCURRED ON TRAINING OF THE MAN POWER OF THE BPO. THESE EXPENSES HAVE MAINLY BEEN INCURRED ON SALARY, FOOD, TRANSPORTATION, INTERNET CHARGES ETC. WHICH ARE REVENUE IN NATURE. AS PER COMPANY LAW ASSESSEE HAS CATEGORIZED THESE EXPENSES AS DEFERRED REVENUE EXPENSES BUT IT IS APPARENT THAT FOR INCOME-TAX PURPOSES THESE ARE REVENUE IN NATURE. WE NOTE THAT NATURE OF EXPENSES WOULD NOT CHANGE JUST BECAUSE ASSESSEE HAS CATEGORIZED THIS IN A PARTICULAR WAY. FOR THAT WE RELY ON THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS BERGER PAINTS (INDIA) LTD. 254 ITR 503, WHEREIN IT M/S. CITATION INFOWARES LIMITED ITA NO.2004/KOL/2017 ASSESSMENT YEAR: 2011-12 4 WAS HELD THAT DEFERRED REVENUE EXPENSES WERE ALLOWABLE IN THE YEAR IN WHICH THESE WERE INCURRED. SIMILAR, VIEW HAS BEEN EXPRESSED BY HONBLE DELHI HIGH COURT IN CIT VS JAI PARABOLIC SPRINGS LTD. 306 ITR 42 (DEL). AOS CONTENTION THAT THESE EXPENSES ARE CAPITAL IN NATURE, ARE NOT ACCEPTABLE AS THE BREAK-UP OF THE EXPENSES, AS DISCUSSED ABOVE, SHOWS THAT THESE ARE REVENUE IN NATURE. THAT BEING SO WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD CIT(A), HIS ORDER ON THIS ISSUE IS HEREBY UPHELD AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07/12/2018. SD/- (S.S. GODARA) SD/- (A. L. SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED: 07/12/2018 RS, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT -ACIT, CC-1(1), KOLKATA 2. / THE RESPONDENT.- - M/S. CITATION INFOWARES LIMITED 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. [ / GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR I.T.A.T, KOLKATA BENCHES, KOLKATA .