PROGRESS SOFTWARE SOLUTIONS (INDIA ) P. LTD, HYDERABAD V. DCIT 13(1)(2), MUMBAI

ITA 3011/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7757 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Double taxation relief; Set aside
• Section: 143(3); 10B; 195

Judgement Text

1 ITA 3011/MUM/2019 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) I.T.A. NO.3011/MUM/2019 (ASSESSMENT YEAR : 2009-10) M/S PROGRESS SOFTWARE SOLUTIONS INDIA PRIVATE LIMITED, NO.18, 4 TH FLOOR, 1 LABS CENTRE, NO.8 SOFTWARE UNIT LAYOUT, MADHAPUR, HYDERABAD TELANGANA 500 081 PAN : AAACT7450Q VS DCIT-13(1)(2), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI MAHAVEER JAIN , AR RESPONDENT BY SHRI. UJJAWAL KUMAR , DR DATE OF HEARING 16-06-2021 DATE OF PRONOUNCEMENT 30-08-2021 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER DA TED 04-01-2019 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-21, MUMBAI FOR THE ASSESSMENT YEAR 2009-10. 2. BEFORE I PROCEED TO DEAL WITH THE DISPUTED ISSUE S, IT IS NECESSARY TO RECAPITULATE THE RELEVANT FACTS LEADING TO THE FILI NG OF THE PRESENT APPEAL. 3. BRIEFLY STATED, THE ASSESSEE IS A RESIDENT COMPA NY STATED TO BE ENGAGED IN BUSINESS OF COMPUTER SOFTWARE DEVELOPMENT, SALE OF PRODUCT LICENSE ON COMMISSION AND TRADING IN PRODUCT SOFTWARE LICENSE. FOR THE ASSESSMENT YEAR 2 ITA 3011/MUM/2019 UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 28-09-2009 DECLARING LOSS OF RS.89,29,099/-. ASSESSMENT IN CASE OF THE ASSESSEE WAS ORIGINALLY COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 26-12-02011 MAKI NG THE FOLLOWING ADDITIONS / DISALLOWANCES:- 1. DISALLOWANCE UNDER SECTION 40(A)(I) FOR NON DEDU CTION OF TAX ON PAYMENT MADE TOWARDS PURCHASE OF SOFTWARE RS. 23,50,466/- 2. DISALLOWANCE ON ACCOUNT OF DIFFERENCE OF LOSS ON NON EXPORT ORIENTED (EOU) UNIT RS.48,54,250/- 3. DISALLOWANCE UNDER SECTION 36(1)(VA) ON ACCOUNT OF DELAYED REMITTANCE OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND RS. 6,69,035/- 4. AS A RESULT OF THE AFORESAID DISALLOWANCES, THE TOTAL LOSS WAS DETERMINED AT RS.10,55,380/-. AGAINST THE ASSESSMENT ORDER SO PAS SED, ASSESSEE PREFERRED APPEAL BEFORE LEARNED COMMISSIONER (APPEALS). WHILE DISPOSING OF ASSESSEES APPEAL, LEARNED COMMISSIONER (APPEALS) GRANTED PART IAL RELIEF BY DELETING THE DISALLOWANCE ORS,.6,69,035/- MADE UNDER SECTION 36( 1)(VA) OF THE INCOME TAX ACT, 1961. AGAINST THE ORDER PASSED BY LEARNED COMMISSIO NER (APPEALS), THE ASSESSEE WENT IN FURTHER APPEAL BEFORE THE TRIBUNAL. THE TRI BUNAL, WHILE DECIDING ASSESSEES APPEAL IN ITA NO.3151/MUM/2013 DATED 28/ 09/2016 RESTORED THE ISSUES BACK TO THE ASSESSING OFFICER FOR FRESH ADJUD ICATION. PURSUANT TO THE ORDER PASSED BY THE TRIBUNAL, THE ASSESSING OFFICER PASSE D A FRESH ASSESSMENT ORDER REPEATING THE ADDITIONS MADE EARLIER. THOUGH, ASSES SEE CONTESTED THE ADDITIONS BEFORE LEARNED COMMISSIONER (APPEALS); HOWEVER, IT WAS UNSUCCESSFUL. BEING AGGRIEVED, THE ASSESSEE IS AGAIN BEFORE THE TRIBUNA L. 3 ITA 3011/MUM/2019 5. BE THAT AS IT MAY, IN GROUNDS 1 AND 2 ASSESSEE H AS CHALLENGED THE DISALLOWANCE OF RS.23,50,466/- DUE TO NON DEDUCTION OF TAX AT SOURCE ON PAYMENT MADE TOWARDS PURCHASE OF SOFTWARE. 6. BRIEFLY THE FACTS ARE, IN COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED EXPEN DITURE OF RS.23,50,466/- TOWARDS PURCHASE OF COMPUTER SOFTWARE PRODUCTS FROM A NON RESIDENT COMPANY, VIZ. SAVVION, USA. BEING OF THE VIEW THAT THE PAYM ENT MADE BY THE ASSESSEE IS IN THE NATURE OF ROYALTY, IN TERMS OF SECTION 9(1)(VI) OF THE ACT, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE E XPENDITURE CLAIMED SHOULD NOT BE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. IN RESPONSE TO THE QUERY RAISED, ASSESSEE FURNISHED DETAILED SUBMISSION SUPPORTED BY JUDICIAL PRECEDENTS STATING THAT THE PA YMENT MADE IS NOT IN THE NATURE OF ROYALTY; HENCE, THERE IS NO REQUIREMENT F OR DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. THE ASSESSING OFFICE R, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. RELYING UPON THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS SAMSUNG ELEC TRONICS CO LTD (2012) 23 TAXMANN.COM 26 AND COUPLE OF OTHER DECISIONS, HE OB SERVED THAT THE PAYMENT MADE FOR SUPPLY OF EVEN A SHRINK-WRAPPED SOFTWARE I S IN THE NATURE OF ROYALTY, SINCE, IT IS NOT THE PRICE OF THE CD ALONE NOR SOFT WARE ALONE NOR THE PRICE OF LICENSE GRANTED, BUT IT IS A COMBINATION OF ALL. HE OBSERVE D, UNLESS A LICENSE IS GRANTED PERMITTING THE END-USER TO COPY AND DOWNLOAD THE SO FTWARE, THE CD WOULD NOT BE HELPFUL TO THE INDIVIDUAL. THUS, RELYING UPON SOME JUDICIAL PRECEDENTS, HE CONCLUDED THAT THE PAYMENT MADE BY THE ASSESSEE TOW ARDS PURCHASE OF SOFTWARE IS IN THE NATURE OF ROYALTY ON WHICH THE ASSESSEE W AS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 195 OF THE ACT. ASSESSEE HAVIN G FAILED TO DO SO, THE ASSESSING 4 ITA 3011/MUM/2019 OFFICER DISALLOWED THE AMOUNT PURPORTEDLY UNDER SEC TION 40(A)(I) OF THE ACT. THE ASSESSEE CONTESTED THE AFORESAID DISALLOWANCE BEFOR E LEARNED COMMISSIONER (APPEALS) WITHOUT ANY SUCCESS. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED, THE ASSESSEE BUYS THE SOFTWARE FROM THE NONRESIDENT COMPANY FOR RESELLIN G IT TO THE CUSTOMERS IN INDIA AND NOT FOR SELF CONSUMPTION. DRAWING OUR ATTENTION TO THE COPY OF THE RESELLER AGREEMENT PLACED IN THE PAPER BOOK, HE SUBMITTED, T HE LICENSE GRANTED BY THE NONRESIDENT COMPANY, VIZ. THE OWNER OF THE SOFTWAR E IS FOR THE LIMITED PURPOSE OF RESELLING AND NOT FOR INTERNAL USE. HE SUBMITTED , AS PER THE TERMS OF THE AGREEMENT, NEITHER THE ASSESSEE NOR ANY THIRD PARTY IS PERMITTED TO TRANSLATE, MODIFY, ADAPT, ENHANCE, EXTEND, DECOMPILE, DEASSEM BLE OR REVERSE ENGINEER THE SOFTWARE PROGRAM. HE SUBMITTED, THE AGREEMENT ALSO MAKES THE ASSESSEE LIABLE FOR ANY UNAUTHORIZED DISCLOSURE, USE OR COPYING OF THE SOFTWARE PROGRAM, AS, THE NONRESIDENT COMPANY, FOR ALL INTENT AND PURPOSE AN D AT ALL TIME REMAINS THE OWNER OF TRADEMARK, SERVICE MARK AND LOGOS RELATING TO THE SOFTWARE PROGRAM. THUS, HE SUBMITTED, AS PER THE TERMS OF THE AGREEME NT, THE ASSESSEE IS SIMPLY A DISTRIBUTOR OF A COPYRIGHTED ARTICLE AND NOT THE CO PYRIGHT. THUS, HE SUBMITTED, THE PAYMENT MADE TO THE NONRESIDENT COMPANY FOR PURCHA SE OF SOFTWARE IS NOT IN THE NATURE OF ROYALTY EITHER UNDER THE PROVISIONS O F INDIAUSA DOUBLETAXATION AVOIDANCE AGREEMENT (DTAA) OR UNDER SECTION 9(1)(VI ) OF THE ACT. FURTHER, HE SUBMITTED, THE ISSUE IS NOW SETTLED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF ENGINEERING ANALYS IS CENTRE OF EXCELLENCE (P) LTD VS CIT 432 ITR 471 (SC) WHEREIN THE HONBLE SUP REME COURT, WHILE DEALING WITH THE IDENTICAL NATURE OF PURCHASE OF SOFTWARE F OR RESALE UNDER DISTRIBUTION AGREEMENT HAS HELD THAT PAYMENT MADE TOWARDS PURCHA SE OF A COPYRIGHTED 5 ITA 3011/MUM/2019 ARTICLE FOR RESALE/DISTRIBUTION IS NOT IN THE NATUR E OF ROYALTY UNDER ARTICLE 12 OF THE INDOUSA TAX TREATY. HE SUBMITTED, THE DECISIONS RE LIED UPON BY THE ASSESSING OFFICER HAD BEEN SET ASIDE BY THE HONBLE SUPREME C OURT WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. THUS, HE SUBMITTED, THE DISALLOWANCE SHOULD BE DELETED. 8. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY REL YING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED C OMMISSIONER (APPEALS) SUBMITTED, AS PER THE PROVISIONS OF SECTION 195 OF THE ACT, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE WHILE MAKING PAYME NT IN THE NATURE OF ROYALTY. THUS, HE SUBMITTED, THE ADDITION MADE SHOULD BE SUS TAINED. 9. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. A READING OF THE IMPUGNED ASSESSMENT ORDER WOULD MAKE IT CLEAR THAT PRIMARILY RELYING UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN CASE OF SAMSUNG ELECTRONICS CO LTD AND COUPLE OF OTHER DECISIONS, T HE ASSESSING OFFICER HAS CONCLUDED THAT PAYMENT MADE TOWARDS PURCHASE OF SOF TWARE, WHETHER OFF THE SHELF OR OTHERWISE, IS IN THE NATURE OF ROYALTY; HE NCE, REQUIRES DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. LEARNED COMMIS SIONER (APPEALS) HAS ALSO ENDORSED THE AFORESAID REASONING OF THE ASSESSING O FFICER WITHOUT MUCH DELIBERATION. IT APPEARS, THE DEPARTMENTAL AUTHORIT IES HAVE COME TO THEIR RESPECTIVE CONCLUSION WITHOUT PROPERLY EXAMINING TH E RELEVANT FACTS RELATING TO THE PURCHASE OF SOFTWARE BY THE ASSESSEE AND HAVE B EEN COMPLETELY SWAYED AWAY BY THE RATIO LAID DOWN IN CERTAIN JUDICIAL PRONOUNCE MENTS. THEREFORE, IT IS NECESSARY TO EXAMINE THE RELEVANT FACTS. 10. UNDISPUTEDLY, ASSESSEE HAS PAID THE AMOUNT OF RS.23,50,466/- TO A US BASED COMPANY TOWARDS PURCHASE OF COMPUTER SOFTWARE . THE ISSUE, WHICH REQUIRES TO BE EXAMINED IS, WHETHER THE ASSESSEE HA D MADE THE PAYMENT TOWARDS 6 ITA 3011/MUM/2019 PURCHASE OF A COPYRIGHTED ARTICLE FOR RESALE IN IND IA OR A COPYRIGHT FOR USE ACCORDING TO ITS OWN WILL AND CONVENIENCE. IN THIS REGARD, IT IS NECESSARY TO LOOK INTO THE AGREEMENT BETWEEN THE ASSESSEE AND SAVVION , USA, TERMED AS RESELLER/VAR (VALUE ADDED RESOLUTION) AGREEMENT. AS PER THE TERMS OF THE AGREEMENT, SOFTWARE PROGRAM MEANS, THE COMMERCIALLY AVAILABLE OBJECT CODED SOFTWARE PRODUCT AS SPECIFIED IN EXHIBIT A TO THE AGREEMENT. A REFERENCE TO EXHIBIT A INDICATES THE PRODUCT, I.E. ON SAVVION BUSINESS MANAGER. THUS, THE ASSESSEE HAS BEEN AUTHORIZED TO RESALE THE AFORESAI D SOFTWARE PRODUCT TO CUSTOMERS IN INDIA. FURTHER, THE AFORESAID AGREEME NT AUTHORIZES THE ASSESSEE AS A RESELLER TO ENTER INTO END USER LICENSE AGREEMENT ( EULA) WITH END-USER. THE AGREEMENT SPECIFIES THAT THE LICENSE GRANTED UNDER THE AGREEMENT IS NOT FOR INTERNAL USE OF THE RESELLER. FURTHER, CLAUSE 2.2 O F THE AGREEMENT RESTRICTS THE RESELLER AND ANY THIRD PARTY NOT TO TRANSLATE, MODI FY, ADAPT, ENHANCE, EXTEND, DECOMPILE, DEASSEMBLE OR REVERSE ENGINEER THE SOFT WARE PROGRAM. AS PER CLAUSE 5(B) OF THE AGREEMENT, THE ASSESSEE, BEING THE RESE LLER ACKNOWLEDGES AND AGREES THAT ANY UNAUTHORIZED DISCLOSURE, USE OR COPYING OF THE SOFTWARE PROGRAM MAY COST SAVVION,USA SERIOUS FINANCIAL LOSS; HENCE, IN THE EVENT OF ANY UNAUTHORIZED DISCLOSURE, USE OR COPYING OF THE SOFTWARE PROGRAM, THE ASSESSEE WOULD BE LIABLE FOR CONSEQUENTIAL ACTIONS AND REMEDIES BY SAVVION, USA. FURTHER, CLAUSE 5(C) MAKES IT CLEAR THAT THE ASSESSEE HAS ONLY LIMITED R IGHT TO USE TRADEMARK, SERVICE MARK AND LOGOS RELATING TO SAVVION, USA OR THE SOFT WARE PROGRAM SOLELY IN CONNECTION WITH DISTRIBUTING THE SOFTWARE PROGRAM I N TERMS WITH THE AGREEMENT. WHEREAS, OWNERSHIP OF SUCH TRADEMARK, SERVICE MARK AND LOGOS RELATING TO THE SOFTWARE PROGRAM WILL ALWAYS REMAIN WITH SAVVION, U SA. 7 ITA 3011/MUM/2019 11. THUS, THE AFORESAID TERMS OF THE AGREEMENT MAKE IT CLEAR THAT THE ASSESSEE IS PURELY A DISTRIBUTOR/RESELLER OF A SHRINK-WRAPPE D/OFF THE SHELF SOFTWARE HAVING NO RIGHT TO MAKE ANY VALUE ADDITION. ANY UNAUTHORIZ ED USE OF THE SOFTWARE LICENSE / PRODUCT WOULD EXPOSE THE ASSESSEE TO LEGAL CONSEQ UENCES. THUS, WHAT THE FACTS ON RECORD REVEAL IS, THE ASSESSEE HAS PURCHASED FOR DISTRIBUTION A COPYRIGHTED ARTICLE. THE ASSESSEE HAD NOT PURCHASED ANY COPYRI GHT EITHER FOR ITS INTERNAL USE, CONSUMPTION OR RESALE. IT IS ALSO EVIDENT, THE COMP UTER SOFTWARE PURCHASED BY THE ASSESSEE IS NOT A CUSTOMIZED PRODUCT FOR A PARTICUL AR CUSTOMER IN INDIA. IT IS IN THE NATURE OF A STANDARDIZED PRODUCT WHICH CAN BE SOLD TO ANY PERSON WHO IS WILLING TO BUY IT. THUS, IT IS IN THE NATURE OF A PRODUCT W HICH CAN BE BOUGHT AND SOLD IN THE OPEN MARKET. 12. HAVING DEALT WITH THE FACTUAL POSITION, IT IS N ECESSARY TO EXAMINE THE RECENT DECISION OF THE HONBLE SUPREME COURT IN CASE OF EN GINEERING ANALYSIS CENTRE OF EXCELLENCE (P) LTD VS CIT (SUPRA) WHEREIN THE HONB LE APEX COURT, SO TO SAY, HAS PUT AT REST ALL CONTROVERSIES RELATING TO THE NATUR E OF PAYMENT MADE TOWARDS PURCHASE OF A COPYRIGHTED ARTICLE. A CAREFUL READIN G OF THE AFORESAID JUDGMENT OF THE HONBLE APEX COURT WOULD REVEAL THAT AFTER ANAL YZING A NUMBER OF DECISIONS EXPRESSING DIVERGENT VIEWS, THE HONBLE SUPREME COU RT HAS OBSERVED THAT WHERE THE DISTRIBUTION AGREEMENT PROVIDES ONLY FOR A NON EXCLUSIVE, NON TRANSFERRABLE LICENSE TO RESALE COMPUTER SOFTWARE WITHOUT TRANSFE RRING ANY COPYRIGHT IN THE COMPUTER PROGRAM EITHER TO THE DISTRIBUTOR OR TO TH E ULTIMATE END-USER AND FURTHER, STIPULATING THAT APART FROM THE RIGHT TO U SE COMPUTER PROGRAM BY THE END- USER HIMSELF, THERE IS NO FURTHER RIGHT TO SUB LICE NSE OR TRANSFER OR ANY RIGHT TO REVERSE ENGINEER, MODIFY, REPRODUCE ANYTHING IN ANY MANNER OTHERWISE THAN PERMITTED BY LICENSE TO THE END-USER, THE PAYMENT M ADE TOWARDS SUCH LICENSE IS 8 ITA 3011/MUM/2019 THE PRICE PAID TO THE NONRESIDENT MANUFACTURER/SUP PLIER FOR THE COMPUTER PROGRAM AS GOODS EITHER IN A MEDIUM WHICH STORE THE SOFTWARE OR IN A MEDIUM BY WHICH SOFTWARE IS EMBEDDED IN HARDWARE. THEREFORE, THE PAYMENT MADE IS NOT TOWARDS ROYALTY FOR USE OF THE COPYRIGHT IN THE COM PUTER SOFTWARE. THEREFORE, THERE IS NO REQUIREMENT FOR DEDUCTING TAX AT SOURCE UNDER SECTION 195 OF THE ACT, KEEPING IN VIEW ARTICLE 12 OF INDIAUSA DTAA. A REA DING OF THE AFORESAID JUDGMENT OF THE HONBLE SUPREME COURT WOULD MAKE IT CLEAR THAT THE VIEW EXPRESSED BY THE HONBLE KARNATAKA HIGH COURT IN CA SE OF SAMSUNG ELECTRONICS CO. LTD AND SIMILAR OTHER DECISIONS HAVE NOT BEEN ACCEP TED. IF THE RATIO LAID DOWN IN ENGINEERING ANALYSIS CENTRE OF EXCELLENCE (P) LTD V S CIT (SUPRA) IS APPLIED TO THE FACTS OF THE PRESENT CASE, IT WILL DEFINITELY LEAD TO THE CONCLUSION THAT THE ASSESSEE HAVING PAID THE AMOUNT OF RS.23,50,466/- TOWARDS PU RCHASE OF A COPYRIGHTED ARTICLE FOR DISTRIBUTION IN INDIA WITHOUT HAVING AN Y RIGHT TO USE THE COPYRIGHT, THE PAYMENT MADE IS NOT IN THE NATURE OF ROYALTY AS PER ARTICLE 12 OF INDIAUSA DTAA. THEREFORE, THERE IS NO REQUIREMENT FOR DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. THAT BEING THE CASE, THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS) IS HEREBY DELETED. THESE GROUNDS ARE ALLOWED. 13. IN GROUNDS 3 AND 4, ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF LOSS OF RS.48,54,215/-. 14. BRIEFLY THE FACTS ARE, IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 10B OF THE ACT IN RESPECT OF ITS EXPORT ORIENTED UNIT (EOU). I N COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, WHILE EXAMINING ASSESSEES CLAIM OF DEDUCTION OBSERVED THAT THE ASSESSEE HAS FURNISHED SEGMENTAL PROFIT AND LOSS ACCOUNT AND A 9 ITA 3011/MUM/2019 CERTIFICATE FROM THE CHARTERED ACCOUNTANT IN FORM 5 6G. ON PERUSAL OF THE SAID DOCUMENT, HE OBSERVED THAT OUT OF THE TOTAL TURNOVE R OF RS.9,69,53,236/-, THE TURNOVER OF THE EOU IS RS.8,38,77,285/- WORKING OUT TO 86.51% OF THE TOTAL TURNOVER. IN OTHER WORDS, THE TURNOVER OF THE NON EOU UNIT IS RS.1,30,75,950/-. ON A QUERY TO THE ASSESSEE, IT WAS SUBMITTED THAT E MPLOYEE EXPENSES HAVE BEEN BIFURCATED ON ACTUAL BASIS. HOWEVER, HE ALLEGED THA T THE ASSESSEE DID NOT FURNISH ANY EMPLOYEE-WISE DETAILS OF WORK PERFORMED AND OTH ER RELATED ACTIVITIES IN RESPECT OF EOU AND NON EOU UNIT. FURTHER, HE OBSERV ED, THE SEGMENTAL PROFIT AND LOSS ACCOUNT FURNISHED BY THE ASSESSEE BIFURCATES T HE SALARY NOT ON THE BASIS AS MENTIONED IN AUDITORS CERTIFICATE. THUS, HE CONCLU DED THAT THE ASSESSEE FAILED TO PROVE THAT THE SALARY COST HAS BEEN BIFURCATED ON A CTUAL BASIS. ACCORDINGLY, HE APPORTIONED THE EMPLOYEE RELATED EXPENSES / BENEFIT S IN PROPORTION OF TURNOVER RELATING TO EOU AND NON EOU UNIT. ACCORDINGLY, HE A PPORTIONED EMPLOYEE EXPENSES OF RS.5,68,34,060/- TO EOU UNIT WHICH REDU CED THE PROFIT OF EOU UNIT BY RS.3,04,907/-. SIMILARLY, DUE TO APPORTIONMENT OF E XPENSES TO NON EOU UNIT IN SAME RATIO, THE LOSS GOT REDUCED. THIS RESULTED IN ADDITION OF RS.48,54,215/-. LEARNED COMMISSIONER (APPEALS) ALSO SUSTAINED THE A DDITION MADE BY THE ASSESSING OFFICER. 15. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS THE NINTH YEAR OF CLAIM OF DEDUCTION UNDER SECTION 10B AND IN EARLIER YEARS ASSESSEES CLAIM HAS BEEN ACCEPTED. HE SUBMITTED, ASSESSEE MAINTAIN SEPA RATE BOOKS OF ACCOUNT FOR EOU AND NON EOU UNITS. HE SUBMITTED, SEGMENTAL PROF IT AND LOSS ACCOUNT HAVE ALSO BEEN FURNISHED BEFORE THE ASSESSING OFFICER AL ONG WITH CERTIFICATE OF THE AUDITOR. HE SUBMITTED, THE DETAILS OF STAFF WORKING IN EOU UNIT WAS ALSO FURNISHED BEFORE THE DEPARTMENTAL AUTHORITIES. HE SUBMITTED, SALARY PAID TO SOME OF THE 10 ITA 3011/MUM/2019 COMMON STAFF IS ALLOCATED ON TURNOVER BASIS. THUS, HE SUBMITTED, WHEN THE ASSESSEE HAS MAINTAINED SEPARATE ACCOUNTS FOR EOU A ND NON EOU UNITS AND FURNISHED ALL THE NECESSARY DETAILS, THE SALARY EXP ENSES COULD NOT HAVE BEEN APPORTIONED ON THE BASIS OF TURNOVER. HE SUBMITTED, THE ASSESSING IS FOLLOWING THE SAME METHOD OF ACCOUNTING FROM THE EARLIER YEARS AN D THERE WAS NEVER ANY ISSUE REGARDING DEDUCTION CLAIMED UNDER SECTION 10B OF TH E ACT. THUS, HE SUBMITTED, THE DISALLOWANCE SHOULD BE DELETED. 16. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND EARNED COMMISSIONER (APPEALS) . 17. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. IT IS THE CLAIM OF THE ASSESSEE THAT SEPARATE BOOKS OF AC COUNT ARE MAINTAINED FOR EOU AND NON EOU UNITS. IN FACT, THE ASSESSING OFFICER H IMSELF HAS STATED THAT SEGMENTAL PROFIT AND LOSS ACCOUNT ALONG WITH CERTIFICATE OF T HE AUDITOR HAS BEEN FURNISHED BEFORE HIM. THE DISPUTE IS ONLY WITH REGARD TO THE APPORTIONMENT OF SALARY PAID TO THE STAFF. IT IS OBSERVED, BEFORE THE DEPARTMENTAL AUTHORITIES, THE ASSESSEE HAD FURNISHED A LIST OF EMPLOYEES WORKING EXCLUSIVELY F OR THE EOU UNIT, WHEREAS, THE ASSESSING OFFICER HAS ALLEGED THAT THE ASSESSEE HAD NOT PROVIDED ANY EMPLOYEE- WISE DETAILS OF WORK PERFORMED AND OTHER RELATED AC TIVITIES IN RESPECT OF EOU AND NON EOU UNITS. FURTHER, THE ASSESSING OFFICER HAS A LSO OBSERVED THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE SALARY HAS BEEN BIFURC ATED ON ACTUAL BASIS. IN CASE, THE ASSESSEE IS MAINTAINING SEPARATE BOOKS OF ACCOUNT, SALARY PAID TO EMPLOYEES OF BOTH EOU AND NON EOU UNITS CAN BE DISTINCTLY ASCERT AINABLE/IDENTIFIABLE FROM THE THEM, HENCE, ASSESSEES CLAIM CANNOT BE REJECTED. 18. AFTER PERUSING THE MATERIAL ON RECORD, I AM OF THE VIEW THAT THE DEPARTMENTAL AUTHORITIES HAVE NOT PROPERLY EXAMINED THE ISSUE FACTUALLY. 11 ITA 3011/MUM/2019 THEREFORE, I DIRECT THE ASSESSING OFFICER TO VERIFY THE BOOKS OF ACCOUNT MAINTAINED, BOTH, FOR EOU AND NON EOU UNITS AND IF THE SALARY P AID TO THE EMPLOYEES OF BOTH THE EOU AND NON EOU UNITS, IS FOUND TO BE ON ACTUAL BASIS AS PER THE SEPARATELY MAINTAINED BOOKS OF ACCOUNT, NO DISALLOWANCE CAN BE MADE. THUS, THE ISSUE IS RESTORED BACK TO THE ASSESSING OFFICER FOR THE LIMI TED PURPOSE OF VERIFYING THE SALARY EXPENDITURE AS PER THE SEPARATELY MAINTAINED BOOKS OF ACCOUNT AND COMPUTING THE DEDUCTION UNDER SECTION 10B OF THE AC T. THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSE. 19. IN GROUND 5, THE ASSESSEE HAS CHALLENGED THE DI SALLOWANCE OF RS.6,69,035/- UNDER SECTION 36(1)(VA) OF THE ACT. 20. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. AS DISCUSSED EARLIER, THE AFORESAID DISALLOWANCE WAS M ADE IN THE ORIGINAL ASSESSMENT ORDER. ASSESSEE CONTESTED THE SAID DISALLOWANCE BE FORE LEARNED COMMISSIONER (APPEALS). BEING SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE, LEARNED COMMISSIONER (APPEALS) DELETED THE DISALLOWANCE. IT IS EVIDENT, THE REVENUE HAD NOT FILED ANY APPEAL CONTESTING THE AFORESAID DELET ION BEFORE THE TRIBUNAL, WHEREAS, THE ASSESSEE FILED AN APPEAL BEFORE THE TR IBUNAL CHALLENGING COUPLE OF OTHER DISALLOWANCE. WHILE DECIDING ASSESSEES APPEA L, THE TRIBUNAL RESTORED THE ISSUES TO THE ASSESSING OFFICER FOR DE NOVO ADJUDICA TION. THUS, AS COULD BE SEEN, THE ISSUE RELATING TO DELAYED PAYMENT OF EMPLOYEES PROVIDENT FUND ATTAINED FINALITY AFTER THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN THE FIRST ROUND ITSELF. SURPRISINGLY, WHILE COMPLETING THE ASSESSME NT IN PURSUANCE TO THE ORDER PASSED BY THE TRIBUNAL, THE ASSESSING OFFICER HAS A GAIN MADE THE SELFSAME DISALLOWANCE. THIS, IN MY VIEW, IS TOTALLY UNJUSTIFI ED AND AMOUNTS TO TRAVELLING BEYOND THE DIRECTION OF THE TRIBUNAL WHILE RESTORIN G THE ISSUES. THUS, THE 12 ITA 3011/MUM/2019 IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. ACCORDINGLY, I DELETE THE DISALLOWANCE OF RS.6,69,0 35/-. 21. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON 30/08/2021. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI, DT : 30/08/2021 PAVANAN COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, MUMBAI 6. GUARD FILE /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI