DCIT, New Delhi V. M/s Nutek India Ltd, Gurgaon

ITA 3322/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58970 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 19-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 07-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Capital asset; Depreciation; Wrong claim; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NOS.3321 & 3322/DEL/2010 ASSESSMENT YEARS : 2004-05 & 2005-06 DCIT, CIRCLE 13 (1), NEW DELHI. VS. M/S NUTEK INDIA LTD., B-27, INFOCITY, SECTOR 34, GURGAON 122002. PAN : AAACN2270L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATYEN SETHI, ADVOCATE REVENUE BY : SHRI R.S. NEGI, SR.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER BOTH THESE APPEALS ARE FILED BY THE REVENUE. THEY A RE DIRECTED AGAINST THE CONSOLIDATED ORDER DATED 21 ST MAY, 2010 PASSED BY THE CIT(A) FOR ASSESSMENT YEARS 2004-05 AND 2005-06. 2. IN BOTH THE APPEALS THE REVENUE IS AGGRIEVED WITH THE DELETION OF CONCEALMENT PENALTY LEVIED UPON THE ASSESSEE. THE GROU NDS OF APPEAL IN BOTH THE APPEALS ARE IDENTICAL EXCEPT THAT THERE IS DIFFERENCE IN FIGURE. THE GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2004- 05 READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN DELETING THE PENALTY OF RS .26,43,275/- IMPOSED U/S 271(1)(C) OF INCOME TAX ACT, 1961 BY ASS ESSING OFFICER. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LD. CIT (A) ERRED IN NOT APPRECIATING THAT THE I SSUE HAS ITA NOS.3321 &3322/DEL/2010 2 BEEN DECIDED BY THE APEX COURT VIDE ITS JUDGMENT IN THE CASE OF ARVIND MILLS 197 ITR 422 (SC) DATED 21.07.1992 THAT EX PENSES ON SOFTWARE IS CAPITAL EXPENDITURE. THUS, THERE WAS NO DEBATE ON THE ISSUE AFTER THE JUDGMENT OF THE SUPREME COURT. AS SESSEE HAS CLAIMED THE EXPENDITURE TO BE OF REVENUE NATURE EVE N BEING AWARE OF THE JUDGMENT OF THE SUPREME COURT. THUS IT IS A CLEAR CASE OF MAKING A FALSE CLAIM. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD, ANY FRES H GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS O F APPEAL. 3. THE FIGURE OF PENALTY FOR ASSESSMENT YEAR 2005-06 IS A SUM OF ` 13,45,427/-. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSI NESS OF PROVIDING ENGINEERING AND SOFTWARE CONSULTANCY SERVICE S. IT IS ENGAGED IN THE BUSINESS ACTIVITIES OF PROVIDING INFRASTR UCTURE ROLL OUT SOLUTIONS FOR BOTH MOBILE AND FIXED TELECOMMUNICATION S NETWORKS. THE SERVICES PROVIDED BY THE ASSESSEE INCLUDE INSTALLATION AND MAINTENANCE OF TELECOM NETWORK EQUIPMENT/INFRASTRUCT URE AND SUCH SERVICES ARE PROVIDED TO TELECOMMUNICATION EQUIPMENT MANUFACTURERS, TELECOM OPERATORS AS WELL AS THIRD PARTY INFRASTRUCTURE LEASING COMPANIES. DURING THE COURSE OF THESE SERVICES THE ASSE SSEE COMPANY RECEIVED ORDERS FROM VARIOUS CLIENTS TO SET UP BTS SITES PURSUANT TO WHICH IT PURCHASED SOFTWARE AND EXPENSES WER E CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE HAS PURCHASED NEPTHEN E, ASSESS & HORIZON SOFTWARE IN FINANCIAL YEAR 2003-04 DEVELOP ED FOR RADIO NETWORK PLANNING AND TRANSMISSION NETWORK PLANNING WOR K. THESE SOFTWARES CAN BE USED TO ASSESS WHERE A BTS SITE NEEDS TO BE CONSTRUCTED, BASED ON THE MORPHOLOGY AND DEMOGRAPHY O F A REGION USUALLY SPECIFIED BY A DIGITIZED MAP ON HORIZON SOFTWA RE PLATFORM. THUS, THESE SOFTWARES WERE PROCURED AND UTILIZED FOR SET TING UP OF VARIOUS BTS SITES TO PERFORM THE WORK OF THE CLIENTS LI KE AIRTEL, ERICSSON, MOTOROLA, ETC. FOR FINANCIAL YEAR 2003-04 THE TOTA L CONSULTANCY RECEIPTS OF THE ASSESSEE ARE ` 23,16,56,565/-. IT PURCHASED SOFTW ARES OF THE VALUE OF ` 1,36,74,380/- UPTO 30 TH SEPTEMBER, 2003 AND ` 27,11,800/- AFTER 31 ST SEPTEMBER, 2003 AND TAKING INTO ACCOUNT SUCH PURCHA SE OF ITA NOS.3321 &3322/DEL/2010 3 SOFTWARE, THE ASSESSING OFFICER ALLOWED DEPRECIATION @ 6 0% AND 30% RESPECTIVELY. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE OF THE PURCHASE PRICE OF SOFTWARE BEING REVENUE EXPENDITURE TOTALING TO ` 1,63,86,180/- AND ALLOWED THE DEPRECI ATION AT ` 90,18,168/- AND MADE THE DISALLOWANCE OF ` 73,68,012 /- ON WHICH THE IMPUGNED CONCEALMENT PENALTY HAS BEEN LEVIED. 4. SIMILARLY, FOR ASSESSMENT YEAR 2005-06, THE TOTAL SOF TWARE EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT WERE A SUM OF ` 93,75,800/- AND DEPRECIATION @ 60% HAS BEEN ALLOWED THEREON AT ` 56,25,480/- AND BALANCE AMOUNT OF ` 37,50,320/- HAS BEEN DISALLOWED. 5. IT HAS BEEN THE CASE OF THE ASSESSEE THAT THE SOFTWARE BEING UTILIZED IN THE BUSINESS ACTIVITY OF THE ASSESSEE WERE CLA IMABLE AS REVENUE EXPENDITURE. AS AGAINST THAT, IT IS THE CASE OF THE DEPARTMENT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON SOFTWAR E IS CAPITAL EXPENDITURE WHICH IS ELIGIBLE FOR DEPRECIATION PROVI DED SPECIFICALLY IN THE SCHEDULE REGARDING SOFTWARE AND, ACCORDINGLY, DEP RECIATION HAS BEEN ALLOWED @ 60%. THE DISALLOWED AMOUNT HAS BEEN C ONSIDERED AS CONCEALED INCOME OF THE ASSESSEE. PENALTY HAS BEEN DELE TED BY THE CIT (A) ON THE GROUND THAT THE ISSUE REGARDING ALLOWA BILITY OR OTHERWISE OF SOFTWARE EXPENDITURE AS REVENUE EXPENDITURE HAD BE EN SUBJECT MATTER OF DISPUTE AT VARIOUS LEVELS AND DIFFERENT OPIN IONS WERE AVAILABLE ON THE SUBJECT, THEREFORE, ON A DEBATABLE ISSUE CONCEALMENT PENALTY COULD NOT BE APPLIED. LEARNED CIT (A) ALSO HAS OBSERVED THAT THE CLAIM OF THE ASSESSEE IS NOT A BOGUS EXPENDITURE AND IT IS MERELY A CASE WHERE THE CONTENTIONS OF THE ASSESSEE HAS BEEN REJECT ED BY TREATING THE SOFTWARE EXPENSES AS CAPITAL EXPENDITURE. 6. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY THE LEARNED DR THAT SOFTWARE EXPENSES HAVE SPECIFICALLY BEEN TREATED IN THE SCHEDULE AS ITA NOS.3321 &3322/DEL/2010 4 CAPITAL ASSET, THEREFORE, IT CANNOT BE SAID THAT IT WA S A DEBATABLE ISSUE. THE ASSESSEE CLAIMED THE ENTIRE EXPENSES AS REVENUE EXPEND ITURE, HENCE, IT WAS LIABLE FOR CONCEALMENT PENALTY. 7. ON THE OTHER HAND, IT WAS SUBMITTED BY THE LEARNED AR THAT THE ISSUE THAT WHETHER OR NOT THE SOFTWARE EXPENSES ARE CLAI MABLE AS REVENUE EXPENDITURE HAD BEEN SUBJECT MATTER OF DISPUT E. HE SUBMITTED THAT SUCH ISSUE BEING SUBJECT MATTER OF DEBATE IS CLEAR FROM THE VERY FACT THAT A SPECIAL BENCH WAS FORMULATED TO RESOLVE THE ISSUE AND HE REFERRED TO THE DECISION OF THE SPECIAL BENCH IN THE CASE OF AMWAY INDIA ENTERPRISES VS. DCIT 111 ITD 122. HE SUBMI TTED THAT THE DATE OF DECISION IN THE CASE OF AMWAY INDIA ENTERPRISE S IS 15 TH FEBRUARY, 2008 AND THE ASSESSMENTS IN THE CASE OF THE ASSESSE E WERE FRAMED VIDE ASSESSMENT ORDERS DATED 29 TH SEPTEMBER, 2006 AND 30 TH MARCH, 2007 FOR ASSESSMENT YEARS 2004-05 AND 2005-06 RESP ECTIVELY. HE ALSO SUBMITTED THAT THERE WAS NO MALA FIDE INTENTIO N IN CLAIMING THE ENTIRE EXPENSES AS REVENUE EXPENDITURE AS THERE IS NO DI FFERENCE IN TAX RATE BORNE BY THE ASSESSEE. HE SUBMITTED THAT THE RETUR NS OF INCOME OF THE ASSESSEE WERE FILED AT ` 3,50,30,930/- AND ` 5,5 7,03,500/- FOR ASSESSMENT YEARS 2004-05 AND 2005-06 RESPECTIVELY. THERE FORE, HE PLEADED THAT LEARNED CIT (A) HAS RIGHTLY DELETED THE PENALTY AND HIS ORDER SHOULD BE UPHELD. HE ALSO REFERRED TO THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO P RODUCTS PVT. LTD. 322 ITR 158 (SC) AND, THUS, IT WAS SUBMITTED THAT THE DEPARTMENTAL APPEALS SHOULD BE DISMISSED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE ALLOWABILITY OR OTHERWISE OF THE ENTIRE SOFTWARE EXPENSES AS REVENUE EXPENDITURE HAS BEEN A MATTER OF DEBATE AND TO RESOLVE THE DIFFERENCE, THE ISSUE WAS REF ERRED TO A SPECIAL BENCH OF THE ITAT AND THE MATTER WAS DECIDED BY THE ITAT ITA NOS.3321 &3322/DEL/2010 5 SPECIAL BENCH IN THE CASE OF AMWAY INDIA ENTERPRISES ( SUPRA) VIDE ITS ORDER DATED 15 TH FEBRUARY, 2008. THE ASSESSMENT ORDERS IN BOTH THE CASES HAVE BEEN PASSED PRIOR TO THE DATE OF DECISION BY THE SPECIAL BENCH. ACCORDING TO THE WELL SETTLED LAW, WHILE CON SIDERING THE LEVY OF CONCEALMENT PENALTY, THE DATE OF FILING OF THE RETU RN IS RELEVANT. THEREFORE, WE HAVE TO SEE THE POSITION AS IT WAS EXISTIN G ON THE DATE OF FILING OF THE RETURN. WHEN THE ASSESSEE FILED ITS RE TURN OF INCOME THE ISSUE REGARDING ALLOWABILITY OR OTHERWISE OF THE SOFTWA RE EXPENSES IN THEIR ENTIRETY WAS SUBJECT MATTER OF DISPUTE AT VARIOU S LEVELS OF ADJUDICATION. THEREFORE, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF THE CIT (A) VIDE WHICH IT HAS BEEN HELD THAT ON DEBATABL E ISSUE CONCEALMENT PENALTY CANNOT BE LEVIED. HERE, REFERE NCE ALSO CAN BE MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT AN INCORRECT CLAIM, BY NO STRETCH OF IMAGINATION, CA N TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS AND WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE INC ORRECT OR ERRONEOUS OR FALSE, THERE IS NO QUESTION OF LEVIABILITY OF PENALTY. HERE, IN THE PRESENT CASE, NO SUCH FINDING HAS BEEN RECORDED BY THE ASSESSING OFFICER THAT ANY OF THE PARTICULARS MENTIONED BY THE ASSESSEE IN ITS RETURN ARE INCORRECT OR ERRONEOUS OR FALSE . THEREFORE, ALSO, ACCORDING TO THE FACTS OF THE CASE, PENALTY HAS R IGHTLY BEEN DELETED BY LEARNED CIT (A). WE FIND NO MERIT IN TH E DEPARTMENTAL APPEALS. THE APPEALS ARE DISMISSED. 9. IN THE RESULT, THE APPEALS ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.03.20 12. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 23.03.2012. ITA NOS.3321 &3322/DEL/2010 6 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES