NEXGENIX (I) P.LTD, MUMBAI V. JCIT 8(2), MUMBAI

ITA 4722/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9693 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 18-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Depreciation
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI PAWAN SINGH , JUDICIAL MEMBER ITA NO.4722/MUM/2013 ASSESSMENT YEAR : 2009-10 NEXGENIX (INDIA) PVT. LTD UNIT NO.149, SDF V, SEEPZ, ANDHERI (E) MUMBAI 400 096 PAN AABCN3687N VS. JCIT 8(2) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI SUMAN KUMAR DATE OF HEARING : 12.09 .2017 DATE OF PRONOUNCEMENT : 12 .0 9 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-17, MUMBAI, DATED 22.03.2013, FOR A.Y.2009-1 0. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE THOUGH N OTICE WAS DULY SENT THROUGH REGISTERED POST. EARLIER ALSO THE APPEAL H AD BEEN FIXED FROM TIME TO TIME I.E. FROM 13.04.2015 TILL DATE. BUT NOBODY AP PEARED EXCEPT ON 20.10.2016, ON WHICH DATE THE ASSESSEES COUNSEL RE QUESTED FOR ADJOURNMENT. WE, THEREFORE, PROCEED TO DISPOSE OF THE APPEAL ON MERIT AND AFTER HEARING THE LEARNED DR. ITA NO.4722/MUM2013 NEXGENIX (INDIA) PVT. LTD. 2 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (A)-17,MUMB AI ERRED IN CONFIRMING OF THE ADDITIONS MADE BY THE ID. A.O TO THE RETURNED LOSS OF RS.48,25,240/- 2. THE LD. COMMISSIONER OF INCOME TAX (A)-17,MUMB AI ERRED IN CONFIRMING THE ADDITION MADE BY THE ID AO OF A SUM OF RS. 40,73,791/- BEING THE GOODWILL PURCHASED BY THE COM PANY ON ACCOUNT OF PARTIAL PURCHASE OF BUSINESS. THE APPELL ANT RESPECTFULLY SUBMITS THAT THE ADDITIONS MADE MAY KINDLY BE DELET ED 3. THE LD. COMMISSIONER OF INCOME TAX (A)-17, MUM BAI ERRED IN CONFIRMING THE DISALLOWANCES MADE BY THE ID. A.O OF THE CLAIM OF RS. 44,79,718/- BEING DEPRECIATION ON INTELLECTUAL PROPERTY. THE APPELLANT RESPECTFULLY SUBMITS THAT THE DISALLOWANC E MAY KINDLY BE DELETED. 4. THE LD. COMMISSIONER OF INCOME TAX (A)-17, MUM BAI ERRED IN CONFIRMING THE DISALLOWANCES MADE BY THE ID. AO TOW ARDS OPERATING EXPENSES AND ADMINISTRATIVE EXPENSES AMOUNTING TO R S. 94,907/- AND RS. 2 ; 73,385/- RESPECTIVELY. THE APPELLANT RESPECTFULLY S UBMITS THAT THE DISALLOWANCE MAY KINDLY BE DELETED. 4. GROUND NO.1 IS GENERAL IN NATURE AND REQUIRES NO ADJUDICATION. 5. GROUND NO.2 RELATES TO THE ADDITION MADE TO FIXE D ASSETS TO THE TUNE OF ` 40,73,791/- BEING GOODWILL THE NET DIFFERENCE OF V ALUE OF TRANSFER CONSIDERED AS GOOD ON ACCOUNT OF PARTIAL SALE OF BU SINESS. AFTER HEARING THE LEARNED DR AND GOING THROUGH THE FACTS OF THE CASE, WE NOTED THAT THE ASSESSEE HAS DEBITED A SUM OF ` 40,73,791/- IN THE GOODWILL ACCOUNT. THE ASSESSING OFFICER IN THE ABSENCE OF PROPER EXPLANAT ION TREATED THE SAID SUM AS NON-EXPLAINED EXPENDITURE AND MADE ADDITION U/S. 69C OF THE I.T.ACT. ITA NO.4722/MUM2013 NEXGENIX (INDIA) PVT. LTD. 3 WHEN THE MATTER WENT BEFORE THE CIT(A), THE ASSESSE E SUBMITTED THAT IT HAD SOLD PART OF ITS BUSINESS TO NEXGEN TECHNOLOGY SERV ICES AND THIS AMOUNT IS NOTHING BUT REPRESENT THE DIFFERENCE IN THE VALUE O F TRANSFER AND, THEREFORE, IT HAS BEEN DEBITED TO GOODWILL ACCOUNT. THE CIT(A) W AS NOT SATISFIED WITH THE EXPLANATION AND HENCE, CONFIRMED THE ORDER OF THE A SSESSING OFFICER. WE ARE OF THE VIEW THAT THIS IS A CASE WHERE THE ASSESSEE HAS NOT MADE ANY INVESTMENT SO THAT THE AMOUNT CAN BE ADDED U/S. 69C OF THE ACT. THIS IS A CLEAR CASE WHERE THE ASSESSEE HAS PASSED A NORMAL A CCOUNTING ENTRY DEBITING GOODWILL ACCOUNT FOR THE EXCESS CONSIDERATION RECEI VED ON SALE OF ITS PARTIAL BUSINESS. SINCE NO EXTRA CONSIDERATION HAS BEEN RE CEIVED BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT, THERE IS NO QUESTION OF APPLICABILITY OF SECTION 69C. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT (A) ON THIS ISSUE AND DELETE THE ADDITION. 6. GROUND NO.3 RELATES TO THE SUSTENANCE OF THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER OR ` 44,79,718/- BEING DEPRECIATION ON INTELLECTUAL PRO PERTY. FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSIN G OFFICER NOTED THAT THE ASSESSEE CLAIMED DEPRECIATION OF ` 44,79,718/- ON INTELLECTUAL PROPERTY RIGHTS IX PLATFORM. ON THE BASIS OF THE SUBMISSIONS MADE BY THE ASSESSEE, IT WAS NOTED THAT DURING THE A.Y. 2007-08 THE HOLDING COMP ANY OF THE ASSESSEE M/S. NEXGENIX INC OF USA HAD BECOME BANKRUPT AND HAD FIL ED AN APPLICATION FOR BANKRUPTCY IN THE USA UNDER CHAPTER 11 OF THE US BA NKRUPTCY CODE. DUE TO ITA NO.4722/MUM2013 NEXGENIX (INDIA) PVT. LTD. 4 THIS THE BUSINESS OF THE ASSESSEE COMPANY WAS SEVER ELY AFFECTED. THE INTELLECTUAL PROPERTY RIGHT IX PLATFORM WHICH WAS E ARLIER SHOWN UNDER THE CAPITAL WORK-IN-PROGRESS, AND REPRESENTED EXPENDITU RE INCURRED TO DEVELOP A PARTICULAR PLATFORM FOR ITS HOLDING COMPANY, COULD NOT BE MATERIALIZED AS THE HOLDING COMPANY BECAME BANKRUPT. EVEN THEN THE ASS ESSEE CAPITALIZED THE EXPENDITURE AND CLAIMED DEPRECIATION FIRSTLY IN A.Y . 2007-08, WHICH WAS DISALLOWED. THE LEARNED CIT(A) ALSO DISALLOWED THE CLAIM OF DEPRECIATION. 7. AFTER HEARING THE LEARNED DR WE HAVE NOTED THAT THE ASSESSEE HAS TAKEN A PLEA BEFORE THE CIT(A) THAT IT HAD INCURRED EXPENDITURE ON DEVELOPMENT OF SOFTWARE PRODUCT. THE COST SO INCUR RED WAS CAPITALIZED AND THE DEPRECIATION WAS CLAIMED. THE CIT(A) UPHELD TH E DISALLOWANCE OF DEPRECIATION AS IT HAD BEEN DISALLOWED IN THE EARLI ER YEARS ALSO AND THE ASSESSEE HAS NOT FILED ANY APPEAL EVEN THOUGH IT HA D TAKEN A PLEA BEFORE THE CIT(A) THAT IT WAS IN THE PROCESS OF FILING AN APPE AL BEFORE THE TRIBUNAL BY MAKING AN APPLICATION FOR CONDONATION OF DELAY. NE ITHER THE DR NOR ANYBODY FROM THE ASSESSEES SIDE COULD INFORM US WHETHER AN Y APPEAL HAS BEEN FILED IN THE EARLIER YEAR AGAINST THE SAID DISALLOWANCE BEFO RE THE TRIBUNAL AND, IF AT ALL FILED, WHETHER THE TRIBUNAL HAS DECIDED THE APPEAL IN FAVOUR OR AGAINST THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE- DECIDE THIS ISSUE AFTER ASCERTAINING THE FACTS FOR A.YS 2007-08 AND ALSO ITA NO.4722/MUM2013 NEXGENIX (INDIA) PVT. LTD. 5 WHETHER THE ASSESSEE HAS FILED ANY APPEAL BEFORE TH E TRIBUNAL FOR THE SAID YEAR. IN CASE THE ASSESSING OFFICER FINDS THAT SUC H AN APPEAL HAS BEEN FILED AND DECIDED IN FAVOUR OF THE ASSESSEE, THE SAID CLA IM MAY BE ALLOWED FOR THE IMPUGNED ASSESSMENT YEAR ALSO OR IF IT HAS DISALLOW ED THE CLAIM FOR A.Y. 2007-08, THE CLAIM FOR DISALLOWED FOR THIS YEAR ALS O. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.4 RELATES TO SUSTENANCE OF DISALLOWANC E MADE BY THE ASSESSING OFFICER TOWARDS OPERATION AND ADMINISTRAT IVE EXPENSES OF ` 94,907/- AND ` 2,73,385/- RESPECTIVELY. AFTER HEARING THE LEAR NED DR AND GOING THROUGH THE ORDERS OF THE TAX AUTHORITIES BEL OW, WE NOTED THAT THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE A S THE ASSESSEE FAILED TO SUBMIT THE DETAILS OF THEREOF. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE AMOUNT OF ` . 94,907/- WAS INCURRED TOWARDS GENERAL EXPENSES LI KE ELECTRICITY, TRAVELLING ETC. AND ` .2,52,672/- WAS TOWARDS PART PAYMENT OF RENT OF SEEPZ AND ALL THESE EXPENSES WERE INCURRED WHOLL Y FOR THE PURPOSE OF BUSINESS. IN SUPPORT OF THIS CONTENTION, THE ASSES SEE ALSO FILED THE DETAILS AND COPIES OF BILLS OF THESE EXPENSES. FAILURE ON THE PART OF THE TO FILE THE DETAILS BEFORE THE ASSESSING OFFICER AND IN THE ABS ENCE OF ANY APPLICATION FOR FILING OF ADDITION EVIDENCE BEFORE THE CIT(A) AS RE QUIRED UNDER RULE 46A, THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSES SING OFFICER. ITA NO.4722/MUM2013 NEXGENIX (INDIA) PVT. LTD. 6 9. WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FA IR PLAY TO BOTH THE PARTIES, SET ASIDE THE ORDER OF THE CIT(A) AND REST ORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT THE ASS ESSEE SHALL FILE ALL THE DETAILS AS WELL AS COPIES OF THE BILLS AS HAS BEEN FILED BE FORE THE CIT(A) AND THE ASSESSING OFFICER SHALL RE-DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER VERIFYING THE DETAILS AND THE COPIES OF BILLS SO FI LED. THUS, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (PAWAN SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 14 TH SEPTEMBER, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, B BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI