ACIT, CHENNAI V. Cognizant technology solutions india pvt ltd., CHENNAI

ITA 251/CHNY/2015

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9931 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 02-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: SURASIKA PARTHASARATHY
• Section: 10

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI , . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A.NOS.251 AND 252/MDS/2015 ASSESSMENT YEARS :2006-07 AND 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT I, 1775, JAWAHARLAL NEHRU INNER RING ROAD, ANNANAGAR WESTERN EXTENSION, CHENNAI 600 101. VS. M/S. COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., 5/535, OKKIAM, OLD MAHABALIPURAM, THORAIPAKKAM, CHENNAI 600 096. [PAN: AAACD3312M] ( %& %& %& %& /APPELLANT ) ( '(%& '(%& '(%& '(%& / RESPONDENT ) %& ) * / APPELLANT BY : SHRI P. RADHAKRISHNAN, JCIT '(%& ) * / RESPONDENT BY : MS. SURASIKA PARTHASARATHY, ADVOCATE ) + / DATE OF HEARING : 02.07.2015 ,-. ) + /DATE OF PRONOUNCEMENT : 09.07.2015 / / / / / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : BOTH THE APPEALS FILED BY THE REVENUE PERTAINING TO THE SAME ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS O F THE LD. COMMISSIONER OF INCOME TAX (APPEALS), LARGE TAXPAYER UNIT, CHENN AI, BOTH DATED 30.10.2014 RELEVANT TO THE ASSESSMENT YEAR 2006-07 AND 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT. THE ASSESSEE HAD INCURRED VISA MIGRATION CHARGES AND THE EXPENDITURE INCURRED BY T HE ASSESSEE WAS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .251 & 252 251 & 252 251 & 252 251 & 252/M/ /M/ /M/ /M/1 11 15 55 5 2 DISALLOWED BY THE ASSESSING OFFICER. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOL VED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EA RLIER ASSESSMENT YEAR. 3. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND TH AT THE VERY SAME ISSUE OF EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF VISA IMMIGRATION CHARGES HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSE SSEES OWN CASE IN I.T.A. NO. 1094/MDS/2012 DATED 28.08.2013 FOR THE A SSESSMENT YEAR 2008- 09 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS EXTRACTED AS UNDER: 5. THE ASSESSEE-COMPANY HAS INCURRED VISA IMMIGRA TION CHARGES NOT FOR THE INDIVIDUAL BENEFITS OF THE EMPLOYEES. T HE EMPLOYEES ARE VISITING FOREIGN COUNTRIES FOR DIFFERENT DURATIONS, NOT IN THEIR PERSONAL CAPACITY OR ENJOYMENT, BUT FOR CARRYING OUT THE WOR K ENTRUSTED BY THE ASSESSEE. THE ASSESSEE IS DEPUTING ITS EMPLOYEES TO OVERSEAS ASSIGNMENTS IN THE COURSE OF CARRYING ON OF ITS BUS INESS. THE VISAS ISSUED BY THE CONSULATES ARE NOT VISITING VISAS OR OTHER BUSINESS VISAS. THE VISAS ARE ISSUED FOR THE SPECIFIC PURPOSE OF AT TENDING THE WORK OF THE ASSESSEE-COMPANY ABROAD, RETAINING THE RELATION SHIP OF EMPLOYER EMPLOYEE. THEREFORE THIS EXPENDITURE HAS BEEN INCUR RED BY THE ASSESSEE FOR CARRYING ON OF ITS OWN BUSINESS AND NOT FOR THE ENJOYMENT OF THE INDIVIDUAL EMPLOYEES. THE DISALLOWANCE IS NOT JUSTI FIED. IT IS DELETED. 5. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL OR FILED ANY HIGHER COURT DECISION HAVING MODIFIED OR REVERSED THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .251 & 252 251 & 252 251 & 252 251 & 252/M/ /M/ /M/ /M/1 11 15 55 5 3 ABOVE DECISION OF THE TRIBUNAL. THE LD. CIT(APPEALS ) HAS RIGHTLY FOLLOWED THE ABOVE DECISION AND WE FIND NO INFIRMITY IN THE ORDE R PASSED BY THE LD. CIT(APPEALS) ON THIS ISSUE. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE FOR THE ASSESSMENT YEAR 2006-07 IS DISMISSED. 6. IN SO FAR AS LEVY OF INTEREST UNDER SECTION 115 WJ(3) IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE TRIBUNAL FOR THE VERY SAME EARL IER ASSESSMENT YEAR DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 7. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ER OF THE ASSESSING OFFICER. 8. AFTER HEARING BOTH SIDES, WE FIND THAT THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 ALLOWED THE CLAIM OF THE ASSESSEE AND RELEV ANT PORTION OF THE ORDER OF THE TRIBUNAL IS EXTRACTED AS UNDER: 6. THE THIRD ISSUE RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN REJECTING THE SUBM ISSIONS OF THE ASSESSEE PERTAINING TO THE CANCELLATION OF INTEREST LEVIED UNDER SECTION 115WJ(3). THE ASSESSING OFFICER HAS WORKED OUT THE INTEREST ON THE BASIS OF THE ADVANCE TAX LIABILITY IMPUTED ON THE B ASIS OF THE VALUE OF .27,58,91,166/-, RELATING TO EMPLOYEES STOCK OPTION PLAN. ACCORDING TO THE ASSESSEE, THE QUANTIFICATION OF THE VALUE OF EMPLOYEES STOCK OPTIONS HAD TO BE MADE ON THE BASIS OF AN APPROVED METHOD. IN FACT, THE RULES GOVERNING THE VALUATION OF STOCK OPTION WERE NOTIFIED ONLY IN DECEMBER, 2007. BY THAT TIME THE DATES FOR MAKING T HE PAYMENT OF THREE INSTALMENTS OF ADVANCE TAX WERE ALREADY OVER. FOR P AYING THE ADVANCE TAX FOR THE FIRST THREE INSTALMENTS, THE ASSESSEE H AS VALUED THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .251 & 252 251 & 252 251 & 252 251 & 252/M/ /M/ /M/ /M/1 11 15 55 5 4 EMPLOYEES STOCK OPTION ON A METHOD CONSIDERED TO BE REASONABLE BY IT. ON THE BASIS OF ITS OWN VALUATION, IN FACT, THE ASS ESSEE HAS WORKED OUT THE ADVANCE TAX LIABILITY ALSO INCLUDING THE VALUE OF EMPLOYEES STOCK OPTION. THERE WAS NO OPTION FOR THE ASSESSEE, BUT T O VALUE THE STOCK OPTIONS ON THE BASIS OF THE METHOD DEPLOYED BY IT, AS THE RULES WERE FRAMED ONLY SUBSEQUENTLY IN DECEMBER, 2007. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO VALUE THE STOCK OPTION EXACTLY ON T HE BASIS OF RULES, AS THE RULES THEMSELVES WERE NOT AVAILABLE TO THE ASSE SSEE PRIOR TO DECEMBER, 2007. 7. AT THE SAME TIME, THE ASSESSEE HAS NOT ABSTAINE D FROM ITS DUTY OF VALUING THE STOCK OPTION FOR THE PURPOSE OF ASCERTA INING THE ADVANCE TAX LIABILITY. ULTIMATELY, WHAT WAS REFLECTED IN THE QU ANTUM OF ADVANCE TAX IS ONLY A DEFICIENCY. WHEN THE STOCK OPTION WAS VAL UED AS PER THE RULES PROCLAIMED IN DECEMBER, 2007, THE VALUATION GOT INC REASED AND TO THAT EXTENT THE ADVANCE TAX LIABILITY OF THE ASSESSEE AL SO INCREASED. HERE IT IS NOT A CASE WHERE THE ASSESSEE HAS NOT AT ALL CONSID ERED THE VALUATION OF EMPLOYEES STOCK OPTION FOR THE PURPOSE OF CALCULATI NG THE ADVANCE TAX LIABILITY. 8. FURTHER, IT IS TO BE SEEN THAT ONCE THE RULES W ERE PROCLAIMED IN DECEMBER, 2007, THE ASSESSEE HAS REVISED THE VALUAT ION OF STOCK OPTION EXERCISED EARLIER AND WORKED OUT THE EXCESS AMOUNT OF ADVANCE TAX LIABILITY AND PAID THE DIFFERENTIAL AMOUNT ALONGWIT H THE LAST INSTALMENT OF ADVANCE TAX DUE IN THE PREVIOUS YEAR. THEREFORE, WHAT HAS HAPPENED IN THE PRESENT CASE IS AN INNOCENT DEFICIENCY CAUSE D IN THE QUANTUM OF ADVANCE TAX PERTAINING TO THE VALUE OF EMPLOYEES ST OCK OPTION. THIS DEFICIENCY WAS CAUSED FOR REASONS BEYOND THE CONTRO L OF THE ASSESSEE. THE ASSESSING OFFICER, ON THE OTHER HAND, WHILE COM PUTING THE INTEREST, DEPLOYED THE PERIOD EVEN PRIOR TO THE NOTIFICATION OF RULES IN DECEMBER, 2007. IN OTHER WORDS, THE ASSESSING OFFICER LEVIED INTEREST ON THE DEFICIENCY FOR THE ENTIRE PERIOD OF THE PREVIOUS YE AR. THAT IS WHY THE ASSESSEE WAS ASKED TO PAY A FURTHER AMOUNT OF INTER EST UNDER SECTION 115WJ(3). 9. THE ACTION OF THE ASSESSING OFFICER IN COMPUTIN G THE INTEREST FOR THE WHOLE PREVIOUS YEAR IS NOT JUSTIFIED IN LAW. TH E ASSESSEE HAS ALREADY PAID ADVANCE TAX EVEN PERTAINING TO THE EMPLOYEES S TOCK OPTION. BEFORE THE NOTIFICATION OF THE RULES IN DECEMBER, 2007, TH E VALUATION WAS MADE ON AN ACCEPTED PRINCIPLE OF VALUATION. ONCE THE RUL ES WERE PROMULGATED IN DECEMBER, 2007, THE ASSESSEE-COMPANY REVISED ITS VALUATION AND MADE GOOD THE DEFICIENCY IN THE ADVAN CE TAX PAID IN THE PREVIOUS YEAR ITSELF. THEREFORE, THE ASSESSEE HAD N O OCCASION TO I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .251 & 252 251 & 252 251 & 252 251 & 252/M/ /M/ /M/ /M/1 11 15 55 5 5 COMPUTE THE DIFFERENTIAL INTEREST FOR THAT PART OF STOCK OPTION EXERCISED BEFORE DECEMBER, 2007. IN THESE CIRCUMSTANCES, WE F IND THAT THE ASSESSEE IS NOT LIABLE TO MAKE ANY PAYMENT OF INTER EST UNDER SECTION 115WJ(3). ACCORDINGLY, THE DEMAND RAISED BY THE ASS ESSING OFFICER AGAINST THE DIFFERENTIAL AMOUNT OF INTEREST IS DELE TED. 9. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN T HE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RA ISED BY THE REVENUE IS DISMISSED. I.T.A. NO. 252/MDS/2015[A.Y. 2009-10] 10. THE ONLY ISSUE RAISED BY THE REVENUE IS WITH R EGARD TO INTEREST LEVIED UNDER SECTION 115WJ(3) OF THE ACT ON DEFERMENT OF A DVANCE TAX. THE ASSESSEE HAS SUBMITTED BY THE LD. CIT(A) THAT IT CO ULD NOT PAY THE FIRST INSTALMENT OF ADVANCE FRINGE BENEFIT TAX OF .4,60,00,000/- ON JUNE15, 2008 ON THE FACT THAT JUNE 15, 2008 WAS SUNDAY AND HENCE PAID THE ADVANCE FRINGE BENEFIT TAX ON JUNE 16, 2008. IT WAS FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 10 OF THE GENERAL CLAUSES ACT , 1897 RELATING TO COMPUTATION OF TIME WHEREBY IF THE OFFICE OR COURT IS CLOSED ON THE LAST DAY OF THE PRESCRIBED PERIOD, THE ACT OR PROCEEDING SHALL BE CONSIDERED AS DONE OR TAKEN IN DUE TIME IF IT IS DONE OR TAKEN ON THE NEX T DAY WHEN THE OFFICE OR COURT IS OPEN. THE LD. CIT(A), AFTER CONSIDERING TH E EXPLANATION OF THE ASSESSEE AND BY FOLLOWING THE GENERAL CLAUSE ACT, A S REFERRED BY THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO WITHDRA W THE DISALLOWANCE MADE UNDER SECTION 115WJ(3) OF THE ACT AND ALLOWED THE G ROUND RAISED BY THE ASSESSEE. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .251 & 252 251 & 252 251 & 252 251 & 252/M/ /M/ /M/ /M/1 11 15 55 5 6 11. THE REVENUE CARRIED THE MATTER IN APPEAL BEFOR E THE TRIBUNAL. 12. THE LD. DR HAS SUBMITTED THAT AS PER CIRCULAR NO. 10875/42.01.038/ 2007-08 DATED 10.04.2008, IT IS MANDATORY FOR THE T AXPAYER TO PAY THE PAYMENT ELECTRONICALLY. THEREFORE, EVEN IF IT IS SU NDAY, PAYMENTS CAN BE MADE. 13. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT THE CIRCULAR NO. 676, DATED 14.01.1994, IT WAS CLARIFIED BY THE BOARD THAT IF THE LAST DAY IS SUNDAY, PAYMENTS CAN BE MADE NEX T DAY. 14. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CA SE, THE ASSESSEE HAS TO PAY FRINGE BENEFIT TAX ON 15.06.2008. IT IS NOT DIS PUTED THAT THE DAY IS SUNDAY. THE ASSESSEE HAS PAID THE AMOUNT ON 16.06.2 008 I.E., ON MONDAY. THE ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFF ICER THAT BEING SUNDAY; IT WAS NOT ABLE TO PAY THE AMOUNT. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED. IT IS SUBMITTED BEFORE THE LD. CI T(A) THAT AS PER THE PROVISO TO SECTION 10 OF THE GENERAL CLAUSES ACT, 1897, IF THE PAYMENT DAY IS SUNDAY, PAYMENT CAN BE MADE ON THE NEXT DAY. THE LD . CIT(A) ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND DIRECTED THE ASSESS ING OFFICER TO WITHDRAW THE DISALLOWANCE. THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS TO MAKE ELECTRONIC PAYMENT AND THEREFORE, EVEN IF SUNDAY, P AYMENT CAN BE MADE. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .251 & 252 251 & 252 251 & 252 251 & 252/M/ /M/ /M/ /M/1 11 15 55 5 7 WE FIND THAT THERE IS NOT MUCH STRENGTH IN THE ARGU MENT OF THE LD. DR. EVEN IF PAYMENT HAS TO BE MADE THROUGH ELECTRONICALLY, CONC ERN STAFF, WHO IS IN- CHARGE OF THE CONCERN DEPARTMENT IS REQUIRED TO MAK E PAYMENT AND GENERALLY IN THE SOFTWARE COMPANIES, SATURDAY AND S UNDAY ARE CLOSED HOLIDAYS. THEREFORE, THE ASSESSEE HAS PAID THE TAX ON THE NEXT DAY I.E. MONDAY. UNDER THESE CIRCUMSTANCES, WE FIND THAT THE LD. CIT(A), BY FOLLOWING THE PROVISO TO SECTION 10 OF THE GENERAL CLAUSES AC T, RIGHTLY DIRECTED THE ASSESSING OFFICER TO WITHDRAW THE DISALLOWANCE MADE BY HIM. IN VIEW OF THE ABOVE, THE GROUND RAISED BY THE REVENUE IS DISMISSE D. 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 9 TH OF JULY, 2015 AT CHENNAI. SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 09.07.2015 VM/- / ) ''+01 21.+ /COPY TO: 1. %& / APPELLANT, 2. '(%& / RESPONDENT, 3. 3 ( ) /CIT(A), 4. 3 /CIT, 5. 14 ''+' /DR & 6. 5! 6 /GF.