M/s Bebo Technologies Pvt. Ltd., Mohali V. DCIT, Mohali

ITA 241/CHANDI/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3599 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 26-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER MEENA
• Keywords: Opportunity of being heard; Principle of natural justice; Earning of tax free income; Revenue expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 241/CHD/2018 ASSESSMENT YEAR : 2014-15 M/S BEBO TECHNOLOGIES PVT LTD., VS. THE DCIT, #491, PHASE IV, CIRCLE-6 (1), MOHALI MOHALI-160059 PAN NO. AABCB9492R (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TEJ MOHAN SINGH, ADVO CATE RESPONDENT BY : SH. SURINDER MEENA, JCIT DATE OF HEARING : 24.05.2018 DATE OF PRONOUNCEMENT : 20.08. 2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 10.01.2018 OF THE COMMISSIONER OF INCOME TAX(A)- 2, CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A) ]. 2. THE ASSESSEE IN THIS APPEAL HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUMMARILY REJECTING THE ALLEGED ADDITI ONAL EVIDENCE PLACED ON RECORD WHICH GOES TO THE ROOT OF THE ADDITIONS MADE ON TECHNICAL GROUNDS WITHOUT AFFORDI NG ANY OPPORTUNITY OF BEING HEARD ON THE ISSUE WHICH IS AG AINST THE PRINCIPALS OF NATURAL JUSTICE AND AS SUCH THE ORDER PASSED IS ARBITRARY AND UNJUSTIFIED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. COMMISSIONE R OF INCOME TAX (APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS IN ITA NO. 241/CHD/2018- M/S BEBO TECHNOLOGIES PVT LTD., CHANDIGARH 2 UPHOLDING THE ADDITION OF RS.3,89,179/- MADE BY AP PLYING THE PROVISIONS OF SECTION 14A OF THE ACT IS ARBITRARY A ND UNJUSTIFIED. 3. THAT NO EXPENSE WHATSOEVER HAS BEEN INCURRED TO EAR N DIVIDEND INCOME AND AS SUCH INVOCATION OF SECTION 1 4A READ WITH RULE 8D OF THE ACT IS MISPLACED, ARBITRARY AND UNJUSTIFIED. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS.4,29, 549/- TREATING SOFTWARE LICENSE EXPENSES TO BE IN THE NAT URE OF CAPITAL EXPENSE AS AGAINST REVENUE EXPENSE CLAIMED BY THE ASSESSEE WHICH IS ARBITRARY AND UNJUSTIFIED. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS FURTHER ERRED IN UPHOLDING THE CHARGING OF INTEREST UNDER SECTION 234-C OF THE ACT WHICH IS NOT CHARGEABLE IN THE FACTS OF THE CASE. 6. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS, ARBI TRARY, OPPOSED TO LAW AND FACTS OF THE CASE AND IS THUS UN TENABLE. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ASSESSEE IN THIS APPEAL HAS TAKEN TWO EFFECTIVE ISS UES, FIRSTLY, RELATING TO THE DISALLOWANCE U/S 14A OF THE ACT TAKEN VIDE GROUND NOS.1 TO 3 AND SECONDLY, THE ISSUE RELATING TO ADDITION OF RS. 4,29,549/- TREATING SOFTWARE LICENSE EXPENSES TO BE IN THE NATURE OF CA PITAL EXPENSE AS AGAINST THE CLAIM OF THE ASSESSEE THAT THE SAME RE PRESENTS REVENUE EXPENDITURE. 7. GROUND NO.5 OF THE APPEAL IS CONSEQUENTIAL IN NATUR E AND GROUND NO. 6 OF THE APPEAL IS GENERAL IN NATURE. 8. GROUND NOS. 1 TO 3 : SO FAR AS GROUND NOS. 1 TO 3 OF THE APPEAL ARE CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF TH E TRIBUNAL IN THE ITA NO. 241/CHD/2018- M/S BEBO TECHNOLOGIES PVT LTD., CHANDIGARH 3 OWN CASE OF THE ASSESSEE YEAR FOR ASSESSMENT YEAR 2011-12 VIDE ORDER DATED 9.4.2018 PASSED BY THE TRIBUNAL IN ITA NO. 1258/CHD/2017 WHEREIN THE TRIBUNAL AFTER NOTING THE RELEVANT FACTS HAVE RESTORED THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER OBSERVING AS UNDER:- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE PARA 5.1 OF THE IMPUGNED ORDER OF TH E CIT(A) REVEALS THAT IT HAS BEEN NOTICED BY THE CIT (A) THAT ASSESSEE HAD CLAIMED THAT IT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO EARNING OF THE TAX EXEMP T INCOME. AS PER SUB SECTION (2) OF SECTION 14A OF TH E ACT, THE ASSESSING OFFICER IS SUPPOSED O DETERMINE THE A MOUNT OF EXPENDITURE IN RELATION TO THE TAX EXEMPT INCOME AS PRESCRIBED METHOD UNDER RULE 8-D, IF THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNT OF THE ASSESSE E IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF THE SAID EXPENDITURE IN RELATION TO T HE TAX EXEMPT INCOME OF THE ASSESSEE. FURTHER, AS PER THE PROVISIONS OF SUB SECTION (3) THE PROVISIONS OF SUB SECTION (2) SHALL ALSO APPLY IN RELATION TO THE CASE WHERE THE ASSESSEE CLAIMED THAT NO EXPENDITURE HAS BEEN INCUR RED BY HIM IN RELATING TO EARNING OF TAX EXEMPT INCOME. IN THE CASE IN HAND, APPARENTLY, THE TAX EXEMPT INCOME HAS BEEN EARNED FROM INVESTMENT IN MUTUAL FUNDS. IT IS PLEA OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN M AKING THE AFORESAID INVESTMENT. FURTHER, IT HAS NOT COME OUT ON THE RECORD WHETHER THE ASSESSEE HAS USED INTEREST B EARING FUNDS FOR MAKING THE AFORESAID INVESTMENT AND WHAT WERE THE AVAILABLE OWN FUNDS / INTEREST FREE FUNDS AVAIL ABLE TO THE ASSESSEE AS ON THE DATE OF MAKING THE INVESTMEN T AND FURTHER WHAT WERE THE RESOURCES FOR MAKING THE INVESTMENT IN MUTUAL FUNDS. THOUGH THE LD. CIT(A) HAS POWERS CO-TERMINUS WITH THAT OF ASSESSING OFFICER, BUT HE HAS FAILED TO EXAMINE THE CLAIM OF THE ASSESSEE IN THIS RESPECT. IN VIEW OF THIS, THE ENTIRE ISSUE IS REQU IRED TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR E XAMINING IT AFRESH AND TO PASS A SPEAKING ORDER ON THIS ISSU E IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT THE ASSES SING OFFICER WILL GIVE OPPORTUNITY TO THE ASSESSEE TO PR ESENT ITS ACCOUNTS AND EVIDENCES AND THEN TO EXAMINE THE SAME AND DECIDE THE ISSUE IN THE LIGHT OF THE RELEVANT JUDIC IAL PRONOUNCEMENTS. ITA NO. 241/CHD/2018- M/S BEBO TECHNOLOGIES PVT LTD., CHANDIGARH 4 9. THE FACTS AND ISSUE BEING IDENTICAL TO THAT HAVE BEEN RAISED IN THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 2011-12, THERE FORE, THE ISSUE TAKEN VIDE GROUNDS NOS. 1 TO 3 OF THE APPEAL IS ACC ORDINGLY RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH THE IDENT ICAL DIRECTIONS. 10. GROUND 4 : SO FAR AS THE GROUND NO. 4 IS CONCERNED THE ISS UE HAS BEEN DECIDED BY THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE VIDE ORDER DATED 9.4.2018 FOR ASSESSMENT YEAR 2011-12, OBSERVING AS UNDER:- 9. NOW COMING TO GROUND NO.3 OF THE APPEAL, THE ASSESSEE HAS AGITATED THE DISALLOWANCE OF EXPENDITURE OF RS. 43,302/- INCURRED ON SOFTWARE LICENSE EXPENSES. THE LD. COUNSEL FOR THE ASSESSEE HAS BROUGHT OUR ATTENTION TO PARA 6.2 OF THE IMPUGNED ORDER OF THE CIT(A) WHEREIN THE LD. CIT(A) HAS MENTIONED THAT THE AFORESAID EXPENDITURE WAS INCURRED TO SECURE ANTIVIRUS FOR MOBILES AND NORTEN ANTIVIRUS FOR COMPUTERS AND THE LICENSE FOR THE USE OF THE AFORESAID SOFTWARE WAS GRANTED FOR ONE YEAR ONLY. IN OUR VIEW, THE ANTIVIRUS EXPENSES ARE NOT OF THE NATURE OF EXPENSE S TO ENHANCE THE PERFORMANCE OF THE SOFTWARE OR IN ANY WAY OF ENDURING BENEFIT TO THE ASSESSEE. ANTIVIRUS SOFTWARE IS TO PROTECT THE COMPUTER / MOBILES AND DATA STORED THEREIN FROM THE ATTACK OF MALWARE AND IS ESSENTIALLY AN EXPENDITURE IN THE NATURE OF REVENUE EXPENDITURE. IN VIEW OF THIS, GROUND NO. 3 OF THE APPEAL IS ALLOWED AND THE DISALLOWANCE MADE ON ACCOUNT OF PURCHASE OF AFORESAID ANTIVIRUS SOFTWARE IS HEREBY ORDERED TO B E DELETED. 11. THE FACTS AND THE ISSUE INVOLVED BEING IDENT ICAL, GROUND NO.4 OF THE APPEAL IS ACCORDINGLY ALLOWED IN FAVOUR OF T HE ASSESSEE. ITA NO. 241/CHD/2018- M/S BEBO TECHNOLOGIES PVT LTD., CHANDIGARH 5 10. GROUND NOS. 5 & 6, AS OBSERVED ABOVE, ARE RESPECTIVELY CONSEQUENTIAL AND GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION AT THIS STAGE. THE APPEAL OF THE ASSESSEE IS, THEREFORE, ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20.08.2018 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :20.08.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR