ACIT (OSD) 8(3), MUMBAI V. XORIANT SOLUTIONS P. LTD, MUMBAI

ITA 3179/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56246 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SHRI
• Keywords: Capital asset; Capital expenditure
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 3179/MUM/2010 ASSESSMENT YEAR : 2006-07. ASSTT. COMMISSIONER OF M/S XORIANT SOLUTIONS P. LTD. INCOME TAX (OSD), VS. 4 TH FLOOR, WINCHESTER HIGH STREET, 8(1), MUMBAI. HIRANANDANI BUSINESS PARK, MUMBAI. PAN AAACX 0146P. APPELLANT. RESPONDENT APPELLANT BY : SHRI SANDEEP GO EL. RESPONDENT BY: SHRI PANKAJ TOPRANI. DATE OF HEARING : 01-12-2011. DATE OF PRONOUNCEMENT : 16-12-2011. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LEARNED CIT(APPEALS)-18, MUMBAI DATED 04-02-2010. 2. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(APPEALS) IN DELETING THE DISALLOWANCE MADE BY T HE AO ON ACCOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S 10B. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF PROVIDING BPO SERVICES. THE RETURN OF I NCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 21-1-2006 DECLARIN G TOTAL INCOME AT NIL AFTER 2 ITA NO.3179/MUM/2010 ASSESSMENT YEAR:2006-07 CLAIMING DEDUCTION U/S 10B. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B WAS EXA MINED BY THE AO. ACCORDING TO THE AO, IN ORDER TO CLAIM THE DEDUCTION U/S 10B, TH E ASSESSEE SHOULD BE ENGAGED IN THE BUSINESS OF COMPUTER SOFTWARE DEVELOPMENT. HE A LSO REFERRED TO CIRCULAR ISSUED BY THE CBDT IN THIS CONTEXT SPECIFYING THE PRODUCTS OR SERVICES WHICH WERE ENTITLED FOR THE BENEFIT OF DEDUCTION U/S 10B. HE H ELD THAT THE RELEVANT DETAILS IN RESPECT OF THE ACTIVITY EXACTLY CARRIED OUT DURING THE YEAR UNDER CONSIDERATION WERE NOT FURNISHED BY THE ASSESSEE IN ORDER TO ESTABLISH THAT IT QUALIFY FOR THE DEDUCTION PROVIDED IN SECTION 10B. ACCORDING TO THE AO, THE O NUS IN THIS REGARD WAS ON THE ASSESSEE AND THE ASSESSEE HAVING FAILED TO DISCHARG E THE SAME, HE DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 10B. ON APPEA L, THE LEARNED CIT(APPEALS) DELETED THE SAID DISALLOWANCE AND ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B AFTER HAVING FOUND THAT A SIMILAR CLAIM OF THE ASSESSEE WAS ALLOWED BY HIS PREDECESSOR IN ASSESSMENT YEAR 2002-03 AFTER EXAMIN ING THE ISSUE IN DETAIL AND AFTER CALLING FOR THE REMAND REPORT FROM THE AO. HE ALSO FOUND THAT THE AO HIMSELF HAD ALLOWED THE CLAIM OF THE ASSESSEE FOR A SIMILAR DEDUCTION IN ASSESSMENT YEARS 2003-04 TO 2005-06. SINCE THE ACTIVITIES CARRIED ON BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WERE IDENTICAL TO THAT OF THE E ARLIER YEARS, THE LEARNED CIT(APPEALS) DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B FOR THE YEAR UNDER CONSIDERATION. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B IN THE YEAR UNDER CONSIDERATION RELYING MAINLY ON THE OUTCOME OF THE EARLIER YEARS. AS MENT IONED BY HIM IN THE IMPUGNED ORDER, A SIMILAR CLAIM OF THE ASSESSEE WAS ALLOWED BY HIS PREDECESSOR IN ASSESSMENT YEAR 2002-03 AFTER EXAMINING THE ISSUE IN DETAIL AN D AFTER CALLING FOR REMAND REPORT 3 ITA NO.3179/MUM/2010 ASSESSMENT YEAR:2006-07 FROM THE AO. THE LEARNED DR HAS NOT BEEN ABLE TO BR ING ANY THING ON RECORD BEFORE US TO SHOW THAT THE DECISION OF THE LEARNED CIT(APP EALS) RENDERED IN ASSESSMENT YEAR 2002-03 ON A SIMILAR ISSUE HAS BEEN CHALLENGED BY THE DEPARTMENT BEFORE THE TRIBUNAL AND THE TRIBUNAL HAS REVERSED THE SAID DEC ISION OF THE LEARNED CIT(APPEALS). HE HAS ALSO NOT BEEN ABLE TO REBUT OR CONTROVERT THE FINDING OF THE LEARNED CIT(APPEALS) THAT THE AO HIMSELF HAS ALLOWE D A SIMILAR CLAIM OF THE ASSESSEE IN THE ASSESSMENT YEARS 2003-04 TO 2005-06 . SINCE THE ACTIVITIES CARRIED ON BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION ARE UNDISPUTEDLY SAME TO THAT OF THE EARLIER YEARS, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 10B FOR THE YEAR UNDER CONSIDERATION RELYING ON THE OUTCOME OF THE E ARLIER YEARS ON THE SIMILAR ISSUE. THE SAME IS, THEREFORE, UPHELD ON THIS ISSUE DISMIS SING GROUND NO.1 OF THE REVENUES APPEAL. 5. IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE A CTION OF THE LEARNED CIT(APPEALS) IN ALLOWING THE EXPENSES ON BROKERAGE AMOUNTING TO RS.11,19,482/- TO THE EXTENT OF RS.10,00,210/-. 6. IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAD D EBITED BROKERAGE EXPENSES AMOUNTING TO RS.11,19,482/-. WHILE JUSTIFYING ITS CLAIM FOR THE SAID EXPENSES, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) THAT BROKERAGE WAS PAID TO VARIOUS PARTIES FOR MAKING AR RANGEMENT TO PROCURE OFFFIE PREMISES, GUEST HOUSE ETC. NO DOCUMENTARY EVIDENCE, HOWEVER, COULD BE FILED BY THE ASSESSEE TO PROVE THE EXACT NATURE OF SERVICES RENDERED BY THE CONCERNED PARTY TO JUSTIFY THE PAYMENT OF BROKERAGE. THE ASSESSEE A LSO COULD NOT ESTABLISH ON EVIDENCE THAT ANY SUCH SERVICES WERE ACTUALLY RENDE RED BY THE CONCERNED PARTIES. THE AO, THEREFORE, DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF BROKERAGE. ACCORDING TO HIM, EVEN THE BROKERAGE EXP ENSES OTHERWISE WERE OF 4 ITA NO.3179/MUM/2010 ASSESSMENT YEAR:2006-07 CAPITAL NATURE AS THE SAME HAD BEEN INCURRED FOR PU RCHASE OF CAPITAL ASSET. THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(APPEALS) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) THA T BROKERAGE EXPENSES TO THE EXTENT OF RS.10,00,210/- WERE INCURRED ON PAYMENT M ADE TO M/S VELDON RELATORS FOR FINALIZING THE OFFICE PREMISES ON LEASE. IT WAS SUBMITTED THAT THE SAID PAYMENT WAS MADE BY CHEQUE AND EVEN TAX AT SOURCE WAS DEDUC TED THEREFROM. THE LEARNED CIT(APPEALS) FOUND THIS EXPLANATION OF THE ASSESSEE TO BE SATISFACTORY AND ALLOWED ITS CLAIM FOR BROKERAGE TO THE EXTENT OF RS.10,00,2 10/-. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE CASE OF CIT VS. BOMBAY C YCLE MOTOR AGENCY LTD. REPORTED IN 118 ITR 42 RELIED UPON BY THE LEARNED C OUNSEL FOR THE ASSESSEE, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT BROKERAGE P AID FOR ACQUIRING THE PREMISES ON LEASE WAS NOT AN EXPENDITURE OF CAPITAL NATURE AS THE SAME DID NOT BRING INTO EXISTENCE ANY ASSET OF AN INDIVIDUAL END URING NATURE. IN THE PRESENT CASE, A FINDING, HOWEVER, WAS GIVEN BY THE AO ON PAGE NO. 4 OF THE ASSESSMENT ORDER THAT BROKERAGE EXPENSES WERE INCURRED FOR PURCHASE OF CAPITAL ASSET. THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE IN THIS C ONTEXT BEFORE THE LEARNED CIT(APPEALS), HOWEVER, WAS CONTRADICTORY WHEREIN IT WAS STATED THAT BROKERAGE HAD BEEN PAID TO VELDON RELATORS FOR FINALIZING THE OFFICE PREMISES ON LEASE. THE LEARNED CIT(APPEALS) HAS NOT TAKEN NOTE OF THIS CON TRADICTION WHICH, IN OUR OPINION, IS MATERIAL TO DECIDE THE ISSUE. MOREOVER, AS NOTED BY THE AO IN THE ASSESSMENT ORDER, NO DOCUMENTARY EVIDENCE WAS PRODU CED BY THE ASSESSEE TO EXPLAIN THE NATURE OF SERVICES RENDERED BY THE CONC ERNED BROKERS OR EVEN TO ESTABLISH THE FACT THAT ANY SUCH SERVICES WERE ACTU ALLY RENDERED BY THE SAID BROKERS. THERE IS NO REFERENCE TO ANY SUCH DOCUMENTARY EVI DENCE PRODUCED BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AND A PERUSAL OF TH E IMPUGNED ORDER OF THE 5 ITA NO.3179/MUM/2010 ASSESSMENT YEAR:2006-07 LEARNED CIT(APPEALS) SHOWS THAT HE HAS ALLOWED THE CLAIM OF THE ASSESSEE FOR BROKERAGE EXPENSES MAINLY ON THE GROUND THAT THE SA ID CHARGES WERE PAID BY CHEQUES AND TAX AT SOURCE WAS DEDUCTED FROM SUCH PA YMENTS. IN OUR OPINION, THE DECISION RENDERED BY THE LEARNED CIT(APPEALS) WHILE GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE IS NOT WELL FOUNDED AS HE HAS OVERLOO KED THE SPECIFIC FINDINGS RECORDED BY THE AO IN THE ASSESSMENT ORDER WHILE DI SALLOWING THE CLAIM OF THE ASSESSEE FOR BROKERAGE EXPENSES. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER GIVING ONE MORE OPPO RTUNITY TO THE ASSESSEE OF BEING HEARD AND AFTER ASCERTAINING THE EXACT DETAILS WHIC H ARE RELEVANT FOR THIS PURPOSE. GROUND NO. 2 OF THE REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF DEC.,2011. SD/- SD/- (V. DURGA RAO) (P.M. J AGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 16 TH DEC., 2011. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE