HT Media Ltd., New Delhi V. ACIT, New Delhi

ITA 390/DEL/2012

• Counselvise Citation: 39020114 RSA 2012
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 25-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Capital asset; Depreciation; Cost of acquisition; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 390(DEL)2012 ASSESSMENT YEAR: 2004-05 HT MEDIA LIMITED, ASST T.COMMISSIONER OF INCOME TAX, 18-20, K.G. MARG, NEW DELHI-1. V. CIR. 12(1), N EW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI V.P. GUPTA & BASANT KUMAR, ADV. RESPONDENT BY: SHRI SAT PAL SINGH, SR. DR ORDER PER A.D. JAIN, J.M THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 004-05, CHALLENGING THE CIT(A)S ACTION IN CONFIRMING THE LEVY OF PENAL TY OF ` 2,36,545/- ON THE ASSESSEE U/S 271(1)(C) OF THE I.T. ACT. 2. THE FACTS ARE THAT DURING THE CAPTIONED ASSESSME NT YEAR, THE ASSESSEE HAS CLAIMED EXPENSES AMOUNTING TO ` 16,48,400/- DEBITED TO ITS PROFIT AND LOSS ACCOUNT RELATING TO SOFTWARE EXPENSES ON UPGRA DING EXISTING DATA PROCESSING SYSTEM OF THE COMPANY. THE AO TREATED THE SAME AS CAPITAL IN ITA NO. 390(DEL)2012 2 NATURE BY HOLDING THAT THE EXPENDITURE INCURRED ON SOFTWARE IS FOR ACQUIRING ON ASSETS HAVING ENDURING BENEFIT; THAT SINCE THE A SSESSMENT YEAR 2003-04 SOFTWARE IS NOW SPECIFICALLY COVERED UNDER SCHEDULE OF DEPRECIATION AS ASSET UNDER ITEM COMPUTER AND THUS SHOULD BE CAPITALIZE D BY THE ASSESSEE; AND THAT HE ALLOWED DEPRECIATION OF ` 9,89,040/- AT 60% ON THE SAME AND ADDED THE REMAINING AMOUNT OF ` 6,59,360/- TO THE INCOME OF THE ASSESSEE. 3. ON FURTHER APPEAL BY THE ASSESSEE, THE LD. CIT(A )XV SUSTAINED THE FINDINGS OF THE AO. THE AO HAD INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) BY HOLDING THAT THE ASSESSEE HAS FILED IN ACCURATE PARTICULARS OF ITS INCOME. 4. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED. AGGRIEVED, THE ASSESSEE IS IN FURTHER APP EAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEND ED THAT THE CIT(A) HAS ERRED IN UPHOLDING THE PENALTY OF ` 2,36,545/- LEVIED BY THE AO U/S 271(1)(C) OF THE I.T. ACT WITH REFERENCE TO THE CLA IM OF THE ASSESSEE FOR ALLOWABILITY OF SOFTWARE EXPENSES AS REVENUE EXPEND ITURE WITHOUT CORRECTLY APPRECIATING THE FACTUAL LAND LEGAL POSITION AND PA RTICULARLY THE FACT THAT THE ASSESSEE HAD NOT FURNISHED ANY INACCURATE PARTICULA RS; THAT THE CIT(A) ERRED IN UPHOLDING THE VIEW OF THE AO THAT THE LAW FROM T HE ASSESSMENT YEAR 2003- ITA NO. 390(DEL)2012 3 04 IS VERY CLEAR ON THE TREATMENT OF SOFTWARE EXPEN SES AS CAPITAL EXPENDITURE AND THEREFORE, THE PENALTY IS LEVIABLE U/S 271(1)(C ) OF THE ACT WITHOUT APPRECIATING THAT EVEN AFTER ASSESSMENT YEAR 2003-0 4 SOFTWARE EXPENSES INCURRED FOR MAINTENANCE AND UPGRADATION OF SOFTWAR E SYSTEM IS IN THE NATURE OF REVENUE EXPENDITURE DULY ALLOWABLE AS BUSINESS E XPENDITURE; AND THAT IN ANY CASE, IT IS DEBATABLE ISSUE AND THEREFORE, PENA LTY COULD NOT BE LEVIED U/S 271(1)(C) OF THE ACT. IT HAS BEEN CONTENDED THAT T HE AO HAS LEVIED THE PENALTY FOR THE REASON THAT DISALLOWANCE WAS MADE B Y THE AO IN THE ASSESSMENT ORDER AND THE SAME WAS UPHELD BY THE CIT (A) AND THE ASSESSEE HAD NOT FILED APPEAL BEFORE ITAT. THIS GROUND OF THE AO TO LEVY PENALTY IS UNJUSTIFIED IN VIEW OF THE WELL SETTLED LEGAL POSIT ION. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE DECISION OF SIR SHADI LAL SUGAR & GENERAL MILLS 168 ITR 705 (SC) THAT THERE MAY BE HUNDRED A ND ONE REASONS FOR ACCEPTING THE DISALLOWANCE; AND THAT IN THE RECENT DECISION OF SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. [2010] 322 ITR 158 ALSO THE HONBLE SUPREME COURT HAS EVEN GONE TO OBSERVE THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSE LF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. 6. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SOUGHT TO PLACE RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF RELIANCE PETRO ITA NO. 390(DEL)2012 4 PRODUCTS PVT. LTD.(SUPRA), IN SUPPORT OF THE CLAIM THAT IN MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, W ILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF THE ASSESSEES INCOME. 7. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY RELI ED ON THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT THE ASSESSEE HAD TREATED THE SOFTWARE EXPENSES AS A REVENUE EXPENDITURE, WHEREAS FROM ASS ESSMENT YEAR 2003-04, IT IS VERY CLEAR THAT SOFTWARE EXPENSES REQUIRED TO BE TREATED AS A CAPITAL EXPENDITURE. 8. THE AO, IT IS SEEN, MERELY REFERRED TO THE AMEND MENT IN LAW TO HOLD THAT THE SOFTWARE EXPENSES WERE DEPRECIABLE @ 60%, CONSIDERING THE SAME AS PART OF THE COMPUTER. THE ASSESSEE NURTURED THE V IEW THAT THE EXPENDITURE WAS NOT CAPITAL IN NATURE AND WAS ALLOWABLE AS A RE VENUE EXPENDITURE. IT WAS BECAUSE OF THE AO HAVING ALLOWED AN AMOUNT OF ` 9,89,040/- OUT OF THE TOTAL EXPENDITURE OF ` 16,48,400/-, AT 60% AND SINCE THE BALANCE AMOUNT DISALLOWED IN THE YEAR UNDER CONSIDERATION, OF ` 6,59,360/-, WAS CONSIDERED AS ALLOWABLE IN THE FOLLOWING YEARS, THAT THE ASSES SEE DID NOT FILE ANY APPEAL AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING THE ADDITION IN THE QUANTUM MATTER. FURTHER, IT CANNOT BE GAIN-SAID THAT DEPR ECIATION IS ALLOWABLE ONLY IF SOME EXPENDITURE IS NOT ALLOWABLE AS A REVENUE EXPE NDITURE AND IT REPRESENTS ITA NO. 390(DEL)2012 5 COST OF ACQUISITION OF CAPITAL ASSET. ANY-HOW, IT DOES NOT EMANATE FROM THE FACT SITUATION OF THE CASE THAT THE CLAIM MADE BY T HE ASSESSEE WAS NOT A BONA FIDE CLAIM. THE AO ALSO DID NOT RECORD ANY FINDIN G THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS EITHER FALSE OR WAS NOT BONA FIDE. THEN, THE SPECIAL BENCH OF THE TRIBUNAL IN AMWAY INDIA ENTER PRISES V. DCIT, 301 ITR (AT) 1, HAS HELD THAT PENALTY CANNOT BE LEVIED WITH REFERENCE TO A CLAIM MADE BY AN ASSESSEE FOR AN EXPENDITURE AS A REVENUE EXPENDITURE, WHICH HAS BEEN HELD TO BE OF CAPITAL NATURE. THAT THE VIEW HELD BY THE ASSESSEE WAS A POSSIBLE VIEW HAS NOT BEEN SUCCESSFULLY DISLODGED B Y EITHER OF THE AUTHORITIES BELOW. 9. IN RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), IT HAS BEEN HELD, INTER ALIA, THAT MERE MAKING OF A CLAIM WHICH IS NOT SU STAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS OF THE ASSESSEES INCOME. RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA ), IS DIRECTLY APPLICABLE TO THE FACTS OF THE PRESENT CASE, AS DISCUSSED. 10. THE LD. CIT(A), IN OUR CONSIDERED OPINION, HAS ERRED IN CONFIRMING THE PENALTY LEVIED. THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. THE LEVY OF CONCEALMENT PENALTY OF ` 2,36,545/- ON THE ASSESSEE IS, THEREFORE, CANCELLED . ITA NO. 390(DEL)2012 6 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.03.2012. SD/- SD/- (G.D. AGRAWAL) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 28.03.2012 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR