DCIT, New Delhi V. M/s. Gates India Pvt. Ltd., New Delhi

ITA 3471/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3810 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 06-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPTHY
• Assessee Lawyers: S D KAPILA; PRAVESH SHARMA S
• Keywords: Depreciation; Royalty expenses; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.5852/DEL/2011 ASSESSMENT YEAR : 2003-04 ITA NO.3471/DEL/2014 ASSESSMENT YEAR : 2004-05 ITA NO.5156/DEL/2012 ASSESSMENT YEAR : 2007-08 ITA NO.3716/DEL/2013 ASSESSMENT YEAR : 2008-09 ACIT, CIRCLE-12(1), NEW DELHI. VS. GATES INDIA PVT. LTD., C-434, DEFENCE COLONY, NEW DELHI. PAN: AAACA8125F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.D. KAPILA & SHRI PRAVESH SHARMA, ADVOCATES DEPARTMENT BY : SHRI S.R. SENAPTHY, SR. DR ITA NOS.5852/DEL/2011, 3471/DEL/2014, 5156/DEL/2012 & 3716/DEL/2013 2 DATE OF HEARING : 23.01.2017 DATE OF PRONOUNCEMENT : 24.01.2017 ORDER PER BENCH: THESE FOUR APPEALS BY THE REVENUE RELATE TO ASSESS MENT YEARS 2003-04, 2004-05, 2007-08 AND 2008-09. SINCE SOME OF THE ISSUES RAISED IN THESE APPEALS ARE COMMON, WE ARE, THEREFO RE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR 2003-04. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF RS.74,56,229/- MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF PRODUCT DEVELOPMENT EXPENSES. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE PAID RS.74.56 LAC ON ACCOUNT OF PRODUCT DEVELOPMENT EXPE NSES, WHICH IS IN THE NATURE OF TESTING CHARGES. THE ASSESSING OFFIC ER, RELYING ON THE VIEW TAKEN BY HIM IN EARLIER YEARS, MADE THE ADDITION. THE LD. CIT(A), HOWEVER, DELETED SUCH ADDITION BY RELYING ON THE VI EW TAKEN BY HIM. ITA NOS.5852/DEL/2011, 3471/DEL/2014, 5156/DEL/2012 & 3716/DEL/2013 3 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS NOTICED THAT SIMILAR ISSUE CAME UP FO R CONSIDERATION BEFORE THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2002-03. VIDE ORDER DATED 31.07.2017 IN ITA NO.75/DEL/2011, THE TRIBUNAL HAS CONFIRMED THE DELETION OF DISALLOWANCE. A COPY OF S UCH ORDER HAS BEEN PLACED ON RECORD. RELEVANT DISCUSSION HAS BEEN MAD E ON PAGES 11 AND 14 OF THE ORDER. THE LD. DR FAIRLY CONCEDED THAT T HE FACTS AND CIRCUMSTANCES OF THE INSTANT GROUND ARE SIMILAR TO THOSE FOR THE ASSESSMENT YEAR 2002-03. RESPECTFULLY FOLLOWING TH E PRECEDENT, WE UPHOLD THE IMPUGNED ORDER ON THIS SCORE. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ASSESSMENT YEAR 2004-05 6. THE FIRST GROUND IS AGAINST THE DELETION OF DISA LLOWANCE OF RS.38,44,431/- ON ACCOUNT OF TESTING CHARGES/PRODUC T DEVELOPMENT CHARGES. 7. BOTH THE SIDES AGREED THAT THE FACTS AND CIRCUMS TANCES OF THIS GROUND ARE SIMILAR TO THOSE FOR THE ASSESSMENT YEAR 2003-04. FOLLOWING ITA NOS.5852/DEL/2011, 3471/DEL/2014, 5156/DEL/2012 & 3716/DEL/2013 4 THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER IN DELETING THE DISALLOWANCE. 8. THE ONLY OTHER GROUND IN THIS APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF SOFTWARE EXPENSES. 9. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE THA T THE ASSESSEE CLAIMED SOFTWARE EXPENSES OF RS.5.62 LAC. ON BEING CALLED U PON TO FURNISH THE DETAILS OF SUCH EXPENSES, THE ASSESSEE SUBMITTED TH AT THIS INCLUDED PURCHASE OF VARIOUS SOFTWARES LIKE NOVELL NETWARE, MS PROJECT 2003, AND AUTOCAD ETC. NOT CONVINCED WITH THE ASSESSEES SUBMISSION FOR TREATING IT AS REVENUE EXPENDITURE, THE ASSESSING O FFICER CAPITALIZED THE SAME. AFTER ALLOWING DEPRECIATION @ 60%, AN ADDITIO N OF RS.2,92,473/- WAS MADE, WHICH STOOD DELETED IN THE FIRST APPEAL. 10. HAVING HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE CAME UP FOR CONS IDERATION BEFORE THE TRIBUNAL IN EARLIER YEARS AS WELL. VIDE ITS ORDE R FOR THE ASSESSMENT YEAR 2002-03, THE TRIBUNAL UPHELD THE DELETION OF SIMIL AR DISALLOWANCE. HOWEVER, WHEN THE MATTER CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL ITA NOS.5852/DEL/2011, 3471/DEL/2014, 5156/DEL/2012 & 3716/DEL/2013 5 IN RESPECT OF ASSESSMENT YEAR 2006-07, THE TRIBUNAL REMITTED THE MATTER TO THE FILE OF ASSESSING OFFICER FOR CONSIDERING TH E NATURE, USE AND USEFUL LIFE OF SOFTWARE AND, THEREAFTER, DECIDING THE QUES TION OF DEDUCTIBILITY. THE LD. AR WAS FAIR ENOUGH TO ACCEPT THAT THE MATTE R MAY BE RESTORED FOR EXAMINATION IN THE SIMILAR WAY. RESPECTFULLY FOLLO WING THE TRIBUNAL ORDER FOR THE ASSESSMENT YEAR 2006-07, WE REMIT THE MATTER TO THE FILE OF ASSESSING OFFICER FOR DECIDING THE QUESTION OF SOFT WARE EXPENSES AS REVENUE OR CAPITAL IN THE LIGHT OF THE DISCUSSION M ADE BY THE TRIBUNAL IN ITS ORDER FOR ASSESSMENT YEAR 2006-07. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ASSESSMENT YEAR 2007-08 . 12. THE FIRST GROUND IS AGAINST THE DELETION OF DIS ALLOWANCE OF RS.26,79,194/- ON ACCOUNT OF TESTING CHARGES/PRODUC T DEVELOPMENT CHARGES. BOTH THE SIDES ARE AGREEABLE THAT THE FAC TS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE OF ASSESSMENT YEAR 2003-04. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER IN DELETING THE DISALLOWANCE. ITA NOS.5852/DEL/2011, 3471/DEL/2014, 5156/DEL/2012 & 3716/DEL/2013 6 13. GROUND NO.3 IS AGAINST THE DELETION OF DISALLOW ANCE OF SOFTWARE EXPENSES. HERE ALSO BOTH THE SIDES AGREED THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE O F ASSESSMENT YEAR 2004-05. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE SEND THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING THE SAME IN CONSONANCE WITH DIRECTIONS GIVEN EARLIER. 14. THE ONLY OTHER GROUND WHICH SURVIVES IN THIS AP PEAL IS AGAINST DELETION OF DISALLOWANCE OF RS.10,44,969/- PAID TO GATES CORPORATION, USA, HOLDING THE SAME AS REVENUE EXPENDITURE. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE WAS RAISED IN THE APPEAL OF THE REVENUE FOR IMMEDIATELY PRECEDING ASSESSMENT YE AR. THE TRIBUNAL, VIDE ITS ORDER DATED 29.07.2011 IN ITA NO.2535/DEL/ 2011, HAS CONFIRMED THE DELETION OF DISALLOWANCE OF ROYALTY E XPENSES. THE FACTS BEING SIMILAR, WE UPHOLD THE IMPUGNED ORDER ON THIS SCORE. 16. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.5852/DEL/2011, 3471/DEL/2014, 5156/DEL/2012 & 3716/DEL/2013 7 ASSESSMENT YEAR 2008-09 17. THE FIRST GROUND OF THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.65,99,143/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TESTING FEES. 18. BOTH THE SIDES ARE AGREEABLE THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE FOR THE ASSESSMENT YEAR 2003-04. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER IN DELETING THE DISALLOWANCE. 19. GROUND NO.2 RELATE TO THE DELETION OF ADDITION OF RS.7,81,198/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SOFTWAR E EXPENSES. 20. HERE ALSO BOTH THE SIDES AGREED THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE OF ASSESSMENT YEAR 2004-05. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE REMIT THE MATTER TO THE FILE OF THE AO FOR DECIDING IT IN TERMS AS DISCUSSED ABOVE. 21. GROUND NO.3 RELATES TO THE DELETION OF ADDITION OF RS.43,08,295/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ROYALTY EXPENSES. ITA NOS.5852/DEL/2011, 3471/DEL/2014, 5156/DEL/2012 & 3716/DEL/2013 8 22. HERE ALSO BOTH THE SIDES AGREE THAT THE FACTS A ND CIRCUMSTANCES OF THIS GROUND ARE SIMILAR TO THOSE FOR THE ASSESSMENT YEAR 2007-08. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER IN DELETING THE DISALLOWANCE. 23. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 24.01.201 8. SD/- SD/- [BEENA A. PILLAI] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 24 TH JANUARY, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.