The ACIT, Circle-1, Surat V. M/s. Growth Avenue Ltd., Surat

ITA 2182/AHD/2012

• Counselvise Citation: 218220514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-03-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 03-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Unexplained cash credit; Depreciation; Opportunity of being heard; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 143(3); 147; 68; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD , , , , BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND .., ! '# '# '# '# SHRI T.R. MEENA, ACCOUNTANT MEMBER $%.. , &' ( & ! ) & ! ) & ! ) & ! ) ITA NOS. 2182 & 2537/AHD/2012 ASSESSMENT YEARS :1998-99 & 2000-01 THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, ROOM NO. 108, AAYAKAR BHAVAN, MAJURA GATE, SURAT - 395001 V/S . M/S. GROWTH AVENUES LIMITED 409, SUPER TEX TOWER, OPP. KINNERY CINEMA, RING ROAD, SURAT - 395002 PAN NO. A A A C G8681Q (APPELLANT) .. (RESPONDENT) C.O. NO. 140/AHD/2013 (IN ITA NO. 2182/AHD/2012) ASSESSMENT YEAR :1998-99 M/S. GROWTH AVENUES LIMITED 409, SUPER TEX TOWER, OPP. KINNERY CINEMA, RING ROAD, SURAT - 395002 V/S . THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, ROOM NO. 108, AAYAKAR BHAVAN, MAJURA GATE, SURAT - 395001 (APPELLANT) .. (RESPONDENT) ( * + & / BY REVENUE SHRI J. P. JHANGID, SR. D.R. & * + & / BY ASSESSEE SHRI HARDIK VORA, A.R. , * -%' /DATE OF HEARING 27.03.2014 ./0 * -%' /DATE OF PRONOUNCEMENT 04.04.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THESE TWO APPEALS AT THE BEHEST OF REVENUE AND C.O. AT THE BEHEST OF ASSESSEE FILED, WHICH HAVE EMANATED FROM THE ORDERS OF CIT(A)-I, SURAT, ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 2 DATED 27.07.2012 FOR A.Y. 1998-99 & 07.08.2012 FOR A.Y. 2000-01. ALL WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WA Y OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE EFFECTIVE GROUNDS OF REVENUES APPEALS IN BOTH YEARS AND ASSESSEES C.O. FOR A.Y. 1998-99 ARE AS UNDER: GROUNDS OF ITA NO. 2182/AHD/2012 (A.Y. 1998-99) [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10, 80,000/- MADE ON ACCOUNT OF DISALLOWANCE OF MONITORING & SURVEILLANC E CHARGE U/S. 40A(2)(B) AS NO SERVICE OR WORK WAS PROVIDED BY THE ASSOCIATE CONCERN TO THE ASSESSEE COMPANY IN LIEU OF RECEIPT OF HUGE PAYMENTS. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY DELETING THE ADDITION OF RS.8,5 1,836/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S 69 EVEN THOUGH THE AS SESSEE FAILED TO SUBSTANTIATE ITS CLAIM BY SUBMITTING THE IDENTITY O F THE DEPOSITORS AND THEREBY FAILING TO PROVE THE GENUINENESS OF THE TRANSACTIONS. [3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED BY DELETING THE AMOUNT OF RS.4,915 /- MADE FOR NATIONAL STOCK EXCHANGE INTEREST/PENALTY INSPITE OF THE ASSESSEES FAILURE TO SUBSTANTIATE ITS CLAIM BY SUBMITTING THE IDENTITY, CAPACITY AND GENUINENESS OF THE DEPOSITORS. GROUND OF ITA NO. 2537/AHD/2012 (A.Y. 2000-01) [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-I, SURAT HAS ERRED IN TREATING THE EXPENDITU RE REGARDING CUSTOMIZATION AND UPGRADATION CHARGES AS REVENUE EX PENDITURE INSTEAD OF CAPITAL EXPENDITURE ONLY ON THE GROUND T HAT THE DEPARTMENT HAD NOT PREFERRED APPEAL TO THE HONBLE HIGH COURT AND HAD IGNORED THE FACTS RECORDED BY THE A.O . ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 3 GROUNDS OF ASSESSEE'S C.O. NO. 140/AHD/2013 (A.Y. 1 998-99) 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED ASSESSING OFFICER HAS ERRED IN REOPENING CASE OF ASSESSEE U/S. 147. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN CONFIRMING ADDITION OF RS.3,52,084/- ON AC COUNT OF PRIOR PERIOD EXPENSE. FIRST WE TAKE ITA NO. 2182/AHD/2012 (1998-99) 2. GROUND NO.1 IS AGAINST DELETING THE ADDITION OF RS.10,80,000/- ON ACCOUNT OF DISALLOWANCE OF MONITORING & SURVEILLANC E CHARGE U/S. 40A(2)(B) AS NO SERVICE OR WORK WAS PROVIDED BY THE ASSOCIATE CO NCERN TO THE ASSESSEE COMPANY. THE A.O. OBSERVED THAT ASSESSEE HAS CLAIM ED MONITORING & SURVEILLANCE CHARGE OF RS.10,80,000/- DURING THE YE AR UNDER CONSIDERATION. THE ASSESSEES CASE FOR A.Y. 2000-01 WAS SCRUTINIZE D IN DETAIL AND IT WAS CONCLUDED BY THE A.O. THAT THE AMOUNT PAID TO GROWT H AVENUES FOR SURVEILLANCE CHARGES WAS WITHOUT RENDERING OF ANY S PECIFIC SERVICES BY THE FIRM TO THE ASSESSEE. IT WAS ALSO HELD THAT M/S. GROWTH AVENUES DID NOT HAVE ANY INFRASTRUCTURAL SUPPORT FOR PROVIDING THE KIND OF S ERVICES CLAIMED BY THE ASSESSEE. M/S. GROWTH AVENUES IS COVERED U/S. 40A( 2)(B) OF THE IT ACT. LD. A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, BUT THERE WAS NOT REPLY FROM THE ASSESSEE BEFORE THE A.O. THE A. O. DECIDED THE ISSUE ON THE BASIS OF EVIDENCE AVAILABLE ON RECORD. THE A.O . FOUND THAT MONITORING & SURVEILLANCE CHARGES PAID TO THE M/S. GROWTH AVENUE S WAS TO BE NOT AT ALL ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 4 ALLOWABLE, WHICH WAS ADDED BACK IN A.Y. 2000-01 U/S . 143(3) OF THE IT ACT VIDE ORDER DATED 31.01.2003. THE ORDER OF THE A.O. FOR A.Y. 2000-01 WAS CHALLENGED BEFORE THE CIT(A) WHO HAS CONFIRMED THE ADDITION, WHICH WAS FURTHER APPEALED BEFORE THE HONBLE ITAT. THE HON BLE ITAT HAS ALLOWED THE ASSESSEES CLAIM. THE DEPARTMENT FILED MISCELLANEO US APPLICATION AGAINST THE HONBLE ITAT ORDER, WHICH WAS PENDING BEFORE THE IT AT. DURING YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ALSO NOT AVAILED TH E OPPORTUNITY PROVIDED BY THE A.O. AND DESIRED DETAILS HAD NOT BEEN FURNISHED BEFORE THE A.O. THUS, IN ABSENCE OF ANY EVIDENCE/REPLY, HE MADE ADDITION OF RS. 10,80,000/- U/S. 40A(2)(B) OF THE IT ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE ASSESS EES APPEAL BY OBSERVING AS UNDER: 7.1 IN THE ASSTT YEAR 2000-01, CERTAIN ADDITIONS W ERE RESTORED TO THE FILE OF THE CIT(A) AND CERTAIN ISSUES WERE ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER BY THE ORDER OF THE ITAT. HOWEVE R, THE ISSUE OF MONITORING & SURVEILLANCE CHARGES ATTAINED FINALITY IN VIEW OF THE FACTS DISCUSSED SUPRA, AND CONSIDERING THE SAME, GROUND N O.2 IS DECIDED IN FAVOUR OF THE APPELLANT AND THE ADDITION IS DELETED. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEH EMENTLY SUPPORTED THE ORDER OF THE A.O. AT THE OUTSET, LD. A.R. FOR THE ASSESSEE ARGUED THAT THIS ISSUE HAS ALREADY DECIDED BY THE HONBLE ITAT IN FA VOUR OF THE ASSESSEE. THEREFORE, LD. CIT(A)S ORDER MAY PLEASE BE CONFIRM ED. ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 5 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE CO-ORDINATE A BENCH IN ITA NO.4231/A HD/2003 FOR A.Y. 2000-01 HAD DECIDED THIS ISSUE BY OBSERVING AS UNDER: 10.3 WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES, PERUSED THE RECORD AND GONE THROUGH THE DECISIONS CITED. THE P AYMENT OF RS.6,22,600/- WAS MADE IN ACCORDANCE WITH THE AGREE MENT WHICH IN FORCE FROM 1-4-97 AND THE DEPARTMENT HAS ALLOWED SUCH EXP ENSES FROM 1-4-97. THE ASSESSEE HAS FILED DETAILS OF SETTLERNENTWISE T URNOVER AND AO HAS NOT DISPUTED THAT NO SUCH TRANSACTIONS MADE THROUGH GRO WTH AVENUES. IT HAS ALSO BEEN NOTICED THAT THE AO HAS FAILED TO ESTABLI SH THAT THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE F AIR MARKET VALUE OF THE SERVICES FOR WHICH PAYMENT IS MADE SO AS TO INVOKE SECTION 40A(2)(B). AS REGARDS FOR WHICH PAYMENT IS MADE SO AS TO INVOKE S ECTION 40A(2)(B). AS REGARDS THE PAYMENT OF RS.22,73,035/- THE TWO PARTN ERS OF THE FIRM M/S GROWTH AVENUES VIZ. MR. VIREN SHAH AND MR. RAKESH D OSHI ARE QUALIFIED PROFESSIONAL POSSESSING DEGREE OF B COM AND M B A I N FINANCE. THEY ARE ASSOCIATED WITH THE STOCK MARKET SINCE LONG. THE B OARD OF DIRECTORS IN THEIR MEETING ON 3-4-99 ASSIGNED THE JOB OF MARKETI NG / MONITORING AND SURVEILLANCE OF THE TRADING OPERATIONS OF THE CUSTO MERS OF THE ASSESSEE COMPANY. SUCH RESOLUTION WAS PASSED IN ACCORDANCE WITH THE COMPANIES ACT, THAT AUTHORITIES HAD NOT DISAPPROVED THE RESOL UTION OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY IS DEALING IN SUCH A BUSINESS WHERE COMPUTER TECHNOLOGY IS REQUIRED FOR CONTROLLING THE EXPENSES, NET EXPENSES, CARRY OVER LIMITS, .. LIMITS, MARGINS A DDITIONS, VOLUNTARILY CLIENT WISE, THE PAYMENT WAS MADE FOR PREPARING FOR THOSE ACTIVITIES. WE NOTICED THAT THE DEPARTMENT HAS ALLOWED SUCH EXPENS ES FROM A.Y. 97-98. THE CIT(A) HAS ALSO ALLOWED SUCH EXPENSES IN IMMEDI ATELY PRECEDING YEAR. IN THE LIGHT OF ABOVE DISCUSSION WE ALLOW TH E CLAIM OF THE ASSESSEE AND DELETE THE ADDITIONS OF RS.6,22,000/- AND RS.22 ,73085/-. BY RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINA TE BENCH ON IDENTICAL FACTS, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 6 6. GROUND NO. 2 IS AGAINST DELETING ADDITION OF RS. 8,51,836/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S. 68. THE A .O. HAS GIVEN IDENTICAL FINDINGS ON THIS ISSUE AS GIVEN WITH REFERENCE TO A DDITION MADE U/S. 40A(2)(B) OF THE IT ACT AS NO REPLY WAS FILED BY THE ASSESSEE BEFORE THE A.O., DURING THE YEAR, ASSESSEE HAS SHOWN INCREASE IN UNSECURED LOAN OF RS.8,51,836/-. ON THIS ISSUE, THE ASSESSEE WAS ASKED TO PROVE THE GEN UINENESS OF THE LOAN, CREDITWORTHINESS OF THE CREDITOR AND IDENTITY OF TH E PERSON, BUT ASSESSEE HAD NOT OFFERED ANY EXPLANATION ABOUT THE NATURE AND SO URCE OF THE SAID DEPOSIT AND TOTALLY FAILED TO PROVE THE SAME. LD. A.O. MAD E ADDITION OF RS.8,51,836/-. 7. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL BY OBSERVING THAT THE ASSESSEE HAD GIVEN DETAILS OF LOAN AND DEPOSITING E XCEEDING RS.20,000/- IN THE AUDIT REPORT / REPAID DURING THE YEAR INCLUDING SQUARED UP ACCOUNTS. NAMES AND ADDRESSED OF PARTIES ARE ALSO GIVEN IN TH E RESPECTIVE SCHEDULE OF TAX AUDIT REPORT. THE A.O. HAD NOT MADE ANY INQUIR Y TO ARRIVE AT THE CONCLUSION AND FRESH LOAN HAD BEEN RECEIVED DURING THE YEAR IF HE DOUBTED THE SAME. THE ASSESSMENT WAS COMPLETED U/S. 144 OF THE IT ACT AS BEST JUDGMENT. THE FACTS SHOW THAT THE ASSESSEE HAD CL OSED DOWN ITS BUSINESS. THE RE-OPENING U/S. 147 WAS ON THE GROUND OF MONITO RING & SURVEILLANCE CHARGES. HOWEVER, HE MADE ADDITION ON ACCOUNT OF U NSECURED LOAN. SECTION 147 PROVIDES THE POWER TO THE A.O. TO EXTEND HIS COURSE OF INQUIRY ON OTHER ISSUES WHICH COME TO HIS NOTICE SUBSEQUE NTLY IN THE COURSE OF PROCEEDING BUT THE A.O. CANNOT MAKE FISHING INQUIRY . THEREFORE, HE HELD THAT ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 7 ADDITION MADE ON ACCOUNT OF UNSECURED CASH CREDITOR U/S. 68 NOT COVERED WITH THE VERY SPIRIT OF SECTION 147. 8. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEHE MENTLY RELIED UPON THE ORDER OF THE A.O. AT THE OUTSET, LD. A.R. SUPPORTE D THE ORDER OF CIT(A) AND ARGUED THAT ASSESSEES BUSINESS HAD BEEN CLOSED DOW N AND THE RE-OPENING WAS ON THE BASIS OF MONITORING & SURVEILLANCE CHARG ES PAID TO SISTER CONCERN. IN AUDIT REPORT, ALL THE PARTICULARS OF LOAN HAVE B EEN FURNISHED BY THE ASSESSEE. THE ASSESSEE FILED A COPY OF THE CIVIL SU IT FILED BY JAMMU & KASHMIR BENCH AGAINST THE ASSESSEE FOR RECOVERY OF RS.4.15 CRORE WHICH IS PENDING AND ARGUED THAT ASSESSEE DID NOT HAVE ANY E VIDENCE AS DESIRED BY THE A.O. LD. A.R. FOR THE ASSESSEE FURTHER ARGUED THAT DURING THE YEAR, NO FRESH LOAN HAS BEEN RECEIVED ONLY INTEREST PAID ON THE OLD LOAN HAD INCREASED THE AMOUNT OF THE CASH CREDITOR. THEREFORE, NO ADD ITION CAN BE MADE DURING THE YEAR. THUS, HE PRAYED TO CONFIRM THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE A.O. HAD NOT MADE ANY INQUIRY ON THE B ASIS OF AUDIT REPORT WHERE NAME AND ADDRESS OF THE DEPOSITORS WERE PROVI DED U/S. 131/136 OF THE IT ACT. AS ARGUED BY THE ASSESSEE, THESE ARE OLD L OANS AND THERE IS NO FRESH LOAN DURING THE YEAR ONLY INTEREST AMOUNT HAD ADDED IN THE UNSECURED LOAN AMOUNT. THEREFORE, NO ADDITION CAN BE MADE DURING THE YEAR UNDER CONSIDERATION. THE MATTER IS VERY OLD AND ASSESSME NT WAS COMPLETED IN MARCH 2006 AND ASSESSEES BUSINESS CLOSED. THEREFO RE, WE DO NOT FOUND ANY ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 8 REASON TO INTERVENE IN THE ORDER OF THE CIT(A). AC CORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). 10. GROUND NO.3 IS AGAINST DELETING THE AMOUNT OF R S.4,915/- MADE FOR NATIONAL STOCK EXCHANGE INTEREST/PENALTY. THE A.O. FOUND THAT ASSESSEE HAD CLAIMED INTEREST/PENALTY PAYMENT TO THE STOCK EXCHA NGE AT RS.4,915/-. AS DISCUSSED ABOVE, THE ASSESSEE DID NOT RESPOND TO TH E A.O. AGAINST THE QUERY RAISED BY HIM, THUS, HE MADE ADDITION OF RS.4,915/- . THE CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT THE PAYMENT MADE TO NATIONAL STOCK EXCHANGE IS ALLOWABLE BY RELYING UPON THE DECISION OF 130 TT J (MUMBAI) 446. THE LD. SR. D.R. HAD NOT CONTROVERTED THE FINDINGS OF THE C IT(A). THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A). NOW WE TAKE ITA NO. 2537/AHD/2012 (2000-01) 11. THE SOLE GROUND OF APPEAL IS AGAINST TREATING T HE EXPENDITURE REGARDING CUSTOMIZATION AND UPGRADATION CHARGES AS REVENUE EX PENSES. THE A.O. FOUND THAT ASSESSEE HAS CLAIMED CUSTOMIZATION AND U PGRADATION CHARGES RS.25 LACS. THE ASSESSEE SUBMITTED BEFORE THE A.O. THAT ASSESSEE INSTALLED E COSYSTEM APPLICATION PRODUCT FOR RS.25,25,000/- AND CLAIMED DEPRECIATION @ 25%. THOUGH AS OBSERVED IN THE ORIGINAL ASSESSME NT ORDER, IT WAS INSTALLED AFTER 30 TH SEPTEMBER. THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT ORDER, THEREFORE, DISALLOWED HALF OF THE CLAIM OF DEPRECIATION AT RS.3,15,625/-. THE ASSESSEE HAD CLAIMED CUSTOMIZAT ION AND UPGRADATION CHARGES OF RS. 25 LACS AS REVENUE EXPENSES, WHICH A SSESSING OFFICER ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 9 DISALLOWED IN THE ORIGINAL ASSESSMENT ORDER AND TRE ATED IT AS CAPITAL EXPENDITURE. WHILE DOING SO, THE A.O. ALLOWED THE DEPRECIATION OF RS.3,15,625- ON THIS ITEM. THE ASSESSEE ORIGINALLY CLAIMED THIS EXPENDITURE AS A CAPITAL EXPENDITURE AND CLAIMED DEPRECIATION B UT AT THE TIME OF APPEAL BEFORE HONBLE ITAT, THE ASSESSEE HAD CLAIMED THIS EXPENDITURE AS REVENUE EXPENDITURE. THIS ISSUE HAS BEEN SET ASIDE BY THE ITAT TO THE A.O. THEREFORE, THE A.O. GAVE A FRESH OPPORTUNITY BEFORE DECIDING SET ASIDE PROCEEDING BUT NO BODY ATTENDED THE PROCEEDING BEFO RE HIM. BUT, THE A.O. HAS CONSIDERED THE REPLY AS WELL AS EVIDENCE FURNIS HED AT THE TIME OF ORIGINAL ASSESSMENT FOR DECIDING THIS ISSUE. HE HELD THAT C USTOMIZATION AND UPGRADATION CHARGE IS A CAPITAL EXPENDITURE AND HE ALLOWED DEPRECIATION ON IT. THUS, HE MADE ADDITION OF RS.21,88,000/-. 12. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER: DECISION : 10. CONSIDERING THE REPLY OF THE APPELLANT AND THE DECISION OF HON'BLE BOMBAY HIGH COURT (249 CTR 30), THE SECOND GROUND O F APPEAL DECIDED IN FAVOUR OF APPELLANT. 11. AS REGARDS GROUND NO. 3, THE DEPARTMENT HAS GO NE TO HON'BLE HIGH COURT AGAINST THE ORDER OF ITAT DATED 18.11.2004 (S UPRA). THE ORDER OF HON.BLE GUJARAT HIGH COURT DATED 27.07.2006 ADMITTI NG THE APPEAL OF THE DEPARTMENT IS REPRODUCED HEREIN UNDER. 'CORAM : HONOURABLE THE ACTING CHIEF JUSTICE Y. R MEENA HONOURABLE MR. JUSTICE D.A MEHTA DATE: 27/07/2006 ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 10 ORAL ORDER THE FOLLOWING QUESTIONS ARE PROPOSED FOR ADMISSION FOR APPEAL: '(1) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE INCOME TAX APPELLATE TRIBUNAL IS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OUT OF BAD DEBTS WR ITTEN OFF IN THE SUM OF RS. 33,764/- AS THE ASSESSEE HAD FAILED TO ESTAB LISH THAT THE DEBT HAD BECOME BAD BY PRODUCING COGENT AND RELEVANT EVIDENC E UNDER SECTION 36(1)(VII) OF INCOME TAX ACT? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HONOURABLE TRIBUNAL IS RIGHT IN ADMITTING THE ADDITIONAL GROUND FOR CONSIDERATION THAT THE COST OF PURCHASE OF NEW SOFT WARE BEING RS. 25.25 LAKHS WAS REVENUE EXPENDITURE AND NOT CAPITAL EXPEN DITURE? (3} WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HONOURABLE TRIBUNAL IS RIGHT IN ALLOWING T HE COST OF NEW SOFTWARE OF RS. 25.25 LAKHS AS REVENUE EXPENDITURE, THOUGH T HE ASSESSEE ITSELF HAD IN ITS ACCOUNT SHOWN THE SAID EXPENDITURE AS CA PITAL EXPENDITURE AND, IN VIEW OF THE FACT THAT THE ASSESSEE HAD NOT CLAIM ED THE SAID AMOUNT AS REVENUE EXPENDITURE BEFORE THE ASSESSING OFFICER AN D THE APPELLATE COMMISSIONER? (4) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE HONOURABLE TRIBUNAL IS RIGHT IN DELETING T HE ADDITIONS MADE ON ACCOUNT OF BROKERAGE AMOUNTING TO RS. 6,22,600 AND MONITORING AND SURVEILLANCE CHARGES AMOUNTING TO RS. 22,73,085 PAI D TO M/S. GROWTH AVENUE, A PARTNERSHIP FIRM, WHEREIN, TWO DIRECTORS OF THE ASSESSEE COMPANY ARE PARTNERS, UNDER SECTION 40A(2)(B) OF TH E INCOME-TAX ACT?' QUESTION NO. 1 IS BASED ON THE FINDING OF FACT ON A PPRECIATION OF EVIDENCE. QUESTION NO. 3 IS PART OF QUESTION NO. 2. QUESTION NO. 4 RELATES TO THE ISSUE OF PAYMENT OF M ONITORING AND SURVEILLANCE CHARGES. MR B. B. NAIK, LEARNED COUNSE L FOR THE APPELLANT ADMITS THAT IN THE PRECEDING YEARS THIS AMOUNT WAS ALLOWED AS DEDUCTION. ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 11 IN THE VIEW OF THE AFORESAID FACTS, WE ADMIT THE AP PEAL IN SO FAR AS IT RELATES TO QUESTION NO. 2, WHICH IS REPRODUCED AS U NDER: WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, AND IN LAW, THE HONOURABLE TRIBUNAL IS RIGHT IN ADMITTING THE ADDITIONAL GROUND FOR CONSIDERATION THAT THE COST OF PURCHASE OF NEW SOFTWARE BEING RS. 25.25 LAKHS WAS REVENUE EXPENDITURE AND N OT CAPITAL EXPENDITURE? ISSUE NOTICE TO THE OTHER SIDE. PAPER BOOK BE FILED WITHIN THREE MONTHS. LIST THE APPEALS FOR FINAL HEARING AFTER THREE- MON THS.' 12. FROM A PERUSAL OF THE ABOVE, IT IS APPARENT THAT TH E DEPARTMENT DID NOT CHALLENGE THE DECISION OF ITAT ON THE ISSUE OF ''CUSTOMIZATION AND UPGRADATION' CHARGES OF SOFTWARE. ON THE TIME OF PU RCHASE PRICE OF NEW SOFTWARE OF RS.25,25,000/- DEPARTMENT TOOK A STAND THE ITAT HAS ALLOWED THIS EXPENDITURE TO BE TREATED AS REVENUE EXPENDITU RE. THE SAID GROUND HAS BEEN ADMITTED AND APPEAL IS PENDING BEFORE THE HONBLE HIGH COURT. THEREFORE, A.O. CANNOT DECIDE THE ISSUE OTHERWISE I N CONTRADICTION OF THE STAND OF THE DEPARTMENT BEFORE THE HONBLE HIGH COU RT. CONSIDERING THE SAME GROUND NO.3 IS ALSO ALLOWED IN FAVOUR OF APPEL LANT. 13. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. REL IED UPON THE ORDER OF THE A.O., HOWEVER, LD. A.R. SUPPORTED THE ORDER OF THE CIT(A) AND CLAIMED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND THES E ITEMS ARE IN NATURE OF REVENUE EXPENDITURE, THEREFORE, THE ORDER OF THE CI T(A) MAY BE CONFIRMED. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS APPARENT THAT HONBLE ITAT VIDE HIS ORDER DATED 08.11.2004 HAS ALLOWED THE CUSTOMIZATION & UPGRADATION CHARGES OF RS.25.25 LACS AS A REVENUE EXPENDITURE. THEREFORE, WE DO NOT HAVE ANY REASON TO INTERVENE IN THE ORDER OF THE CIT(A). ACCORDINGLY, REVENUES AP PEAL IS DISMISSED. ITA NOS. 2182 & 2537/AHD/2012 & C.O. NO. 140/AHD/20 13 A.Y. 1998-99 & 2000-01 ACIT VS. M/S GROWTH AVENUES LTD. PAGE 12 NOW WE TAKE ASSESSEES C.O. NO. 140/AHD/2013 (1998- 99) 15. LD. A.R. FOR THE ASSESSEE HAD NOT PRESSED SERIO USLY BOTH THE GROUNDS OF C.O. THEREFORE, THE C.O. IS DISMISSED AS NOT PRESS ED. 16. IN THE RESULT, REVENUES APPEALS IN BOTH YEARS ARE DISMISSED AND ASSESSEES C.O. IS DISMISSED AS NOT PRESSED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 04.04.2014 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA &1 &1 &1 &1 * ** * 2-3 2-3 2-3 2-3 4&30- 4&30- 4&30- 4&30- / COPY OF ORDER FORWARDED TO:- 1. ( / REVENUE 2. & / ASSESSEE 3. ## - 8 / CONCERNED CIT 4. 8- / CIT (A) 5. 3< 2- , , / DR, ITAT, AHMEDABAD 6. > ?@ / GUARD FILE. BY ORDER/ &1 &, / # , )