Omega Technology Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 4310/DEL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0115 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 23-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 08-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B DHAMKANUNJNA
• Keywords: Depreciation; Carry forward of business losses; Unabsorbed depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E , NEW DELHI BEFORE SHRI I.C. SUDHIR , JUDICIAL MEMBER AND SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A.NO. 4310/DEL/2012 A.Y. 200 5 - 06 OMEGA TECHNOLOGY PV.LTD. C/O SH. KAPIL GOEL, ADVOCATE A - 1/25, SECTOR 15, ROHINI DELHI 110 035 PAN: AAACO 4670 M VS. ITO, WARD 13(4) DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. KAPIL GOEL, ADV. DEPARTMENT BY : SH. B.DHAMKANUNJNA, SR.DR ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(APPEALS) XV II I, NEW DELHI DATED 2 0 . 03 .201 2 PERTAINING TO THE A.Y. 200 5 - 06. 2. THOUGH THE ASSESSEE HAS RAISED IN ALL 6 GROUNDS OF APPEAL, AT THE TIME OF HEARING HE SUBMITTED THAT HE IS NOT PRESSING GROUND NO.1 TO 5. HENCE THESE ARE DISMISSED AS NOT PRESSED. 2.1 . THE ASSESSEE PRESSED GROUND NO.6 ONLY WHICH READS AS UNDER. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A) ERRED IN NOT APPRECIATING THAT THERE IS NO CONCEPT OF TAXATION OF GROSS RECEIPTS (JUST BECAUSE ASSESSEE HAS OFFERED IT) AND WITHOUT PREJUDICE ASSESSEE MAY BE ASSESSED ON SOME REASONABLE PROFIT RATE AS DEEMED FIT (SAY 10%). 3. FACTS IN BRIEF : - THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND CONSULTANCY. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMP ANY HAS SHOWN A SINGLE RECEIPT OF ITA 4310/DEL/2012 A.Y. 2005 - 06 OMEGA TECHNOLOGY P.LTD., DELHI 2 RS. 6,48,000/ - . AGAINST THIS RECEIPT THE ASSESSEE CLAIMED EXPENSES AGGREGATING TO RS.5,52,894/ - , THE ENTIRE RECEIPT WAS FROM M/S NC INFOTECH. THE ASSESSEE FILED RETURN OF INCOME ON 28.9.200 7 FOR THE A.Y. 2005 - 06 DECLARI NG INCOME OF RS.22,847/ - . THE A.O. CAME TO A CONCLUSION THAT THE ASSESSEE HAS NOT RENDERED ANY SERVICES IN M/S NC INFOTECH AND THE TRANSACTION IS A SHAM TRANSACTION. HE ASSESSED THE RECEIPT AS INCOME FROM OTHER SOURCES . HE ALSO DISALLOWED THE EXPE NDITURE CLAIMED BY THE ASSESSEE. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL WITHOUT SUCCESS. FURTHER AGGRIEVED THE ASSESSEE IS BEFORE US. 4 . WE HAVE H EARD SHRI P.DHAMKANUNJA, LD.SR.D.R. ON BEHALF OF THE REVENUE AND SHRI KAPIL GOEL, THE LD.COUNSEL FOR THE ASSESSEE. 5. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD, ORDERS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS 6. THE SOLE ISSUE THAT IS ARGUED BEFORE US IS THE ALLOWABILITY OF EXPENDITURE CLAIMED OF RS.5,52,894/ - . THE EXPENDITURE IS AS FOLLOWS: DEVELOPMENT CHARGES ( A ) INCURRED DURING THE YEAR - RS.1,11,250/ - ( B ) DEFERRED REVENUE EXPENDITURE - RS. 1,70,000 / - T O T A L : RS. 2,81,000/ - DEPRECIATION RS. 50,241/ - DIRECTOR S SALARY RS. 1,20,000/ - BROUGHT FORWARD LOSSES/DEPRECIATION RS. 1,06,300/ - ITA 4310/DEL/2012 A.Y. 2005 - 06 OMEGA TECHNOLOGY P.LTD., DELHI 3 6.1 . THE LD. SR. D.R. SH.DAMKANUNJA SUBMITTED THAT ONCE THE ASSESSEE HAS NOT CHALLENGED THE ASSESSMENT OF THE RECEIPT AND RS.6,48,000/ - UNDER THE HEAD INCOME FROM OTHER SOURCES , THEN WHAT IS ALLOWABLE U/S 5 7( III ), IS ONLY EXPENDITURE RELATABLE TO THE EAR NING OF SUCH INCOME. THUS HE SUBMITS THAT THE ENTIRE CLAIM OF THE ASSESSEE HAS TO BE DISMISSED. 6.2. MR.KAPIL GOEL TRIED TO SUBSTANTIATE EACH EXPENDITURE AND SUBMITTED THAT THE FACT THAT THE ASSESSEE HAS COMMENCED BUSINESS IS NOT IN DISPUTE AS IN THE EARL IER A.YS, THE INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND THEY WERE BOTH CARRY FORWARD BUSINESS LOSSES AS WELL AS UN ABSORBED DEPRECIATION. HE SUBMITTED THAT EVEN IF THE EXPENDITURE IS ALLOWED UNDER THE HEAD INCOME FROM BU SINESS , INTERHEAD SET OFF CAN BE DONE FOR THE SAME A.Y. 6.3 . WE NOW CONSIDER THE CLAIM OF EACH OF THE EXPENDITURE. 6. 4 . (A) RS.1,70,000/ - IS 1/5 TH OF THE EXPENDITURE OF RS.8,50,000/ - INCURRED IN THE F.Y. 2000 - 2001. THE ASSESSEE HAD ALREADY CLAIMED 1/5 TH OF THE EXPENDITURE IN A.Y. 2001 - 2002 AND IN THE 4 CONSEQUENT A.YS. THIS IS THE 5 TH A.Y. OF CLAIM. THUS, THIS EXPENDITURE CANNOT BE DISALLOWED AT THIS STAGE WITHOUT DISTURBING THE EARLIER YEAR ASSESSMENTS . IN THE RESULT WE DIRECT THE A.O. TO ALLOW TH IS CLAIM OF THE ASSESSEE . (B) REGARDING DEVELOPMENT CHARGES OF RS.1,11,250/ - THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE BEFORE THE A.O. INDEPENDENT ENQUIRIES WERE DONE BY THE A.O. AND NOT POSITIVE EVIDENCE WAS FOUND . UNDER THESE CIRCUMSTANCES WE CONFIRM THE DISALLOWANCE OF RS.1,11,250/ - . (C) THE NEXT ISSUE IS ALLOWABILITY OF DEPRECIATION. THERE ARE NO FRESH ADDITIONS DURING THE YEAR. TH E DEPRECIATION IS CLAIMED ON THE BLOCK OF ITA 4310/DEL/2012 A.Y. 2005 - 06 OMEGA TECHNOLOGY P.LTD., DELHI 4 ASSETS , ON THE OPENING WRITTEN DOWN VALUE. UNDER THESE CIRCUMSTANCES THE DISALLOWANCE IN QUESTION IS BAD IN LAW. WE DIRECT THAT THE SAME BE ALLOWED. ( D) NEXT ISSUE IS ON DISALLOWANCE OF DIRECTOR S SALARY. THE A SSESSEE HAS PRODUCED EVIDENCE FOR THE SAME. THUS WE DIRECT THAT THE SAME BE ALLOWED. 6. 5 . THE LAST ISSUE IS SET OFF OF CARRY FORWARD OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION. THIS IS CONSEQUENTIAL. THE A.O. MAY DE - NOVO ADJUDICATE THIS ISSUE AS PER LAW. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2015. SD/ - SD/ - [ I.C. SUDHIR ] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DT. THE 29 TH JUNE, 2015 MANGA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES