Kessel Engineering Works Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4701/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82177 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D , NEW DELHI) BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER I.T.A. NO.4701 /DEL/2010 ASSESSMENT YEAR : 2007-08 KESSEL ENGINEERING WORKS PVT. LTD., VS. ITO, WARD 5(1), 1008, PRAGATI TOWER, RAJENDRA PLACE, NEW DELHI. NEW DELHI-110 008. GIR / PAN:AABCK7374D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURESH GUPTA, CA RESPONDENT BY : SHRI VIVEK NANGIA, SR. DR ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LD. CIT(A) DATED 31.08.2010. THE ASSESSEE HAS RAISED TWO GROU NDS OF APPEAL ONE OF WHICH RELATES TO THE ACTION OF LD. CIT(A) BY WHICH HE HAD CONFIRMED THE DISALLOWANCE FOR MAKING PAYMENT OF RS.85,01,026/- U /S 40(A)(IA) OF THE ACT. THE SECOND GROUND OF APPEAL IS AGAINST THE ACTION O F LD. CIT(A) BY WHICH HE HAD CONFIRMED THE ACTION OF A.O. IN NOT ALLOWING DE PRECIATION ON COMPUTER SOFTWARE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDIN GS, THE A.O. OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENDITURE TOWARDS PAYMENT OF FREIGHT AND ITA NO.4701/DEL/2011 2 CARTAGE, JOB WORK CHARGES AND CONSULTATION FEE AND IT HAD NOT DEDUCTED TAX AS REQUIRED UNDER VARIOUS SECTIONS OF THE ACT. THEREF ORE, ASSESSEE WAS SHOW CAUSED TO FILE DETAILS OF TDS. AS PER A.O., THE AS SESSEE COULD NOT PRODUCE DETAILS OF TDS DEDUCTED THEREFORE, THE A.O. MADE AD DITION U/S 40(A)(IA) FOR NON DEDUCTION OF TDS. THE A.O. FURTHER OBSERVED TH AT THE ASSESSEE HAD ACQUIRED A TECHNICALLY DESIGNED SOFTWARE WORTH RS.4 6,72,500/- FORM M/S. CROSSDAY LTD. AND THE SAME WAS ACQUIRED ON 27.03.20 07. THEREFORE, IN ORDER TO FIND OUT WHETHER THE SOFTWARE WAS ACTUALLY PUT TO USE DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS REQUIRED TO C LARIFY AS TO WHEN THE SOFTWARE WAS ACTUALLY PUT TO USE. IN REPLY, THE AS SESSEE SUBMITTED THAT THE SOFTWARE WAS INSTALLED IN FEB., 2007 AND ITS PAYMEN T FOR PURCHASE WAS MADE DURING THE FINANCIAL YEAR 2006-07 AND 2007-08. THE A.O. HOWEVER, OBSERVED THAT THE ASSESSEE HAD NOT MADE PAYMENT AS PER TERMS OF AGREEMENT AND IN FACT AT THE TIME OF ISSUING OF CHEQUE, THE A SSESSEE HAD NOT SUFFICIENT BALANCE IN HIS BANK ACCOUNT. IT WAS FURTHER OBSERV ED THAT THE SOFTWARE PURCHASED BY THE ASSESSEE WAS HIGHLY TECHNICAL IN N ATURE AND TRAINING FOR THE SAME WAS BOUND TO TAKE SOME TIME. THEREFORE, HE HE LD THAT IT WAS VERY MUCH IMPOSSIBLE TO PUT TO USE THE SOFTWARE FOR COMM ERCIAL PURPOSES BEFORE THE CLOSE OF FINANCIAL YEAR UNDER CONSIDERATION. I N VIEW OF THE ABOVE, THE A.O. DISALLOWED THE CLAIM OF DEPRECIATION ON SOFTWA RE ON THE BASIS THAT THE SAME WAS NOT ACTUALLY PUT TO USE FOR THE PURPOSE OF BUSINESS. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE LD. CIT(A). HOWEVER, LD. CIT(A) UPHELD THE ADDITION MADE BY A.O. AGGRIEVED, THE ASSESSEE IS I N APPEAL BEFORE US. 3. AS REGARDS THE FIRST ISSUE OF NON DEDUCTION OF T DS ON VARIOUS PAYMENTS, THE LD. A.R. SUBMITTED THAT NONE OF THE P AYMENTS REMAINED ITA NO.4701/DEL/2011 3 UNPAID AS ON 31.03.2007 AND ALL PAYMENTS WERE MADE DURING THE YEAR ITSELF. IN SUPPORT, LD. A.R. INVITED OUR ATTENTION TO PAPER BOOK PAGES 37-69 WHERE CONFIRMATIONS FROM VARIOUS PAYEES WERE PLACED, IT W AS SUBMITTED THAT THESE CERTIFICATES WERE OBTAINED AFTER THE CONCLUSION OF LD. CIT(A)S ORDER AND SUBMITTED THAT THESE ARE IN THE NATURE OF ADDITIONA L EVIDENCES WHICH ARE NECESSARY IN THE INTERESTS OF SUBSTANTIAL JUSTICE A ND THEREFORE, IT WAS PRAYED THAT SAME MAY BE ADMITTED AS ADDITIONAL EVIDENCE. IT WAS SUBMITTED THAT THESE CERTIFICATES PROVE THAT NOTHING REMAINED UNPA ID AS ON THE CLOSE OF FINANCIAL YEAR AND THEREFORE, THE CASE OF THE ASSES SEE WAS COVERED BY SPECIAL BENCH DECISION IN THE CASE OF MERYLIN SHIPPING AND TRANSPORTERS VS ACIT 20 TAXMAN.COM 244 AND WAS FURTHER COVERED BY HONBL E ALLAHABAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES (P) L TD. IN I.T.A. NO. 122 OF 2013. IT WAS SUBMITTED THAT IN THAT CASE OF VECTOR SHIPPING SERVICES (P) LTD. DECIDED BY HONBLE ALLAHABAD HIGH COURT IT HAS BEEN HELD THAT DISALLOWANCE U/S 40(A)(IA), CAN ONLY BE MADE IF THE PAYMENTS WER E OUTSTANDING AS ON THE CLOSE OF FINANCIAL YEAR WHICH WAS NOT THE CASE IN T HE PRESENT APPEAL AS ALL THE PAYMENTS WERE ALREADY MADE DURING THE YEAR ITSELF. HE SUBMITTED THAT THIS ASPECT AS TO WHETHER THESE PAYMENTS WERE ACTUALLY M ADE IN THE YEAR ITSELF OR NOT, HAS NOT BEEN EXAMINED BY AUTHORITIES BELOW, TH EREFORE, IT WOULD BE APPROPRIATE TO REMAND THE CASE FOR READJUDICATION. 4. LD. D.R. ACCEPTED THE PROPOSITION AND HAD NO OBJ ECTION TO ADMISSION OF ADDITIONAL EVIDENCE. 5. REGARDING THE SECOND ISSUE OF DEPRECIATION ON SO FTWARE, THE LD. A.R. INVITED OUR ATTENTION TO COPY OF APPLICATION UNDER RULE 29 FOR ADMISSION OF ADDITIONAL EVIDENCE AND SUBMITTED THAT IN PAPER BOO K ITEM 11-14 ARE ITA NO.4701/DEL/2011 4 ADDITIONAL EVIDENCES WHICH GO TO THE ROOT OF THE M ATTER AND THESE EVIDENCES WERE ESSENTIAL FOR ESTABLISHING THAT ASSESSEE HAD P UT TO USE THE SOFTWARE IN THE YEAR UNDER CONSIDERATION AND THEREFORE, IT WAS PRAYED THAT THE SAME MAY BE ADMITTED IN VIEW OF THE SUBSTANTIAL JUSTICE. 6. LD. D.R. HAD NO OBJECTION TO THE ADMISSION OF AD DITIONAL EVIDENCES. 7. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. QUA THE FIRST ISSUE, WE FIND THAT THIS IS THE ISSUE REGARDING INCURRENCE OF CERTAIN EXPENSES ON WHICH TDS WAS REQ UIRED TO BE DEDUCTED OTHERWISE THESE WERE LIABLE FOR DISALLOWANCE U/S 40 (A)(IA). SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORT HAS HEL D THAT DISALLOWANCE U/S 40(A)(IA) CAN ONLY BE MADE IF THE AMOUNT WHICH REMA INED PAYABLE AS ON THE CLOSE OF FINANCIAL YEAR. SIMILARLY, HONBLE ALLAHA BAD HIGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES HAS HELD THAT NO DISALL OWANCE CAN BE MADE U/S 40(A)(IA) IF THE PAYMENTS OF EXPENSE WERE MADE IN T HE YEAR ITSELF. THE LD. A.R. HAS CLAIMED THAT NOTHING REMAINED PAYABLE AS O N THE CLOSE OF THE YEAR AND INVITED OUR ATTENTION TO VARIOUS CERTIFICATES A S PLACED IN PAPER BOOK PAGES 37-69 BUT SINCE, THIS ASPECT HAS NOT BEEN EXA MINED BY THE AUTHORITIES BELOW, WE ARE OF THE OPINION THAT THIS ISSUE BE REA DJUDICATED BY A.O. WHO IN THE LIGHT OF DECISION OF SPECIAL BENCH, HONBLE HIG H COURT WILL EXAMINE THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA ) AND THEN DECIDE AS PER LAW AFTER PROVIDING REASONABLE OPPORTUNITY TO ASSESSEE OF BEING HEARD. 8. AS REGARDS THE SECOND ISSUE OF DEPRECIATION ON C OMPUTER SOFTWARE, WE FIND THAT THE ASSESSEE HAD FILED CERTAIN ADDITIONAL EVIDENCES WHICH GO TO THE ROOT OF DECIDING AS TO WHETHER THE ASSESSEE HAD PUT TO USE THE SOFTWARE BEFORE ITA NO.4701/DEL/2011 5 THE CLOSE FOR THE YEAR OR NOT. THE LD.A.R. HAS REF ERRED TO ITEM NO. 11-14 OF THE PAPER BOOK IN SUPPORT OF HIS ARGUMENTS. 9. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE A.O. HAD DISALLOWED TH E DEPRECIATION ON THE BASIS THAT THE SOFTWARE WAS NOT PUT TO USE DURING T HE YEAR UNDER CONSIDERATION. LD. A.R. HAD SUBMITTED VARIOUS AD DITIONAL EVIDENCES TO PROVE THAT SOFTWARE WAS ACTUALLY PUT TO USE IN THE YEAR UNDER CONSIDERATION, THEREFORE, IN OUR OPINION, THE MATTER SHOULD BE REA DJUDICATED BY A.O., IN VIEW OF THE ADDITIONAL EVIDENCES. THE A.O. AFTER G IVING REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD, WILL DE CIDE THE ISSUE AS PER LAW. 11. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH DEC., 2014. SD./- SD./- (A. T. VARKEY ) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 05 TH DEC., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. 6. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.4701/DEL/2011 6 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER