Siemens Products Lifecycle Management Software (India) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5148/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87034 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDRA
• Keywords: Capital asset; Depreciation; Question of law; Capital expenditure
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G NEW DELHI BEFORE SHRI G.D.AGRAWAL, V.P. AND SMT. DIVA SINGH, J.M. ITA NO.5148/DEL/2011 ASSESSMENT YEAR : 2007 - 08 SIEMENS PRODUCTS LIFECYCLE MANAGEMENT VS. DCIT, CIRCLE 8(1) SOFTWARE (INDIA) PVT.LTD. C.R.BDLG., IP ESTATE (NOW KNOWN AS SIEMENS INDUSTRY NEW DELHI SOFTWARE INDIA PVT.LTD. E 20, 1 ST AND 2 ND FLOOR, HAUZ KHAS NEW DELHI PAN: AABCS 7638 E (APPELLANT) (RE SPONDENT ) APPELLANT BY : - SH. RAVI SHARMA, ADV. RESPONDENT BY : - SH. RAMESH CHANDRA, CIT, D.R. DATE OF HEARING 10.03.2015 DATE OF PRONOUNCEMENT .03.2015 O R D E R PER DIVA SINGH, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT ORDER DT. 16.9.2011 PASSED BY THE A.O. IN PURSUANCE TO THE DIRECTIONS OF THE DRP PERTAINING TO THE ASSESSMENT YEAR 2007 - 08. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER. 1. THAT THE LD. DRP ERRED IN CONFIRMING AN AD - HOC ADDITION OF RS. 4,08,32,659 ON ACCOUNT OF INCOME FROM MAINTENANCE ENHANCEMENT AND SUPPORT SERVICES(ADVANCE BILLING I DEFERRED REVENUE) BY THE LD. AO WITHOUT APPRECIATING THAT NO INCOME HAS ACCRUED TO THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION, AND ALSO WITHOUT APPRECIATING THAT ON SIMILAR FACTS THE HON'BLE TRIBUNAL DELETED SUCH ADDITIONS IN EARLIER YEARS. 1.1 THE LD. AO/DRP HAS ALSO ERRED ON FACTS AND IN LAW IN DISREGARDING THE REGULAR AND THE CONSISTENT METHOD OF ACCOUNTING BEING FOLLOWED BY THE APPELLANT IN RECOGNIZING THE ITA NO. 5148/DEL/2011 A.Y. 2007 - 08 M/S SIEMENS PRODUCTS LIFECYCLE MANAGEMENT SOFTWARE (INDIA) PVT.LTD. (NOW KNOWN AS SIEMENS INDUSTRY SOFTWARE INDIA P.LTD.) NEW DELHI 2 REVENUE FROM MAINTENANCE, ENHANCEMENT AND SUPPORT SERVICES PROVIDED BY THE APPELLANT TO ITS CUSTOMERS. 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD A.O./DRP IS GROSSLY ERRED IN DISALLOWING THE SUM OF RS 1,08,33,210 ON ACCOUNT OF FOREIGN EXCHANGE LOSS INCURRED ON ACCOUNT OF RESTATEMENT OF TRADING LIABILITY ON THE ALLEGED GROUND THAT SUCH LOSS MIGHT BE INCURRED ON PURCHASE OF CAPITAL ASSET (COMPUTER SOFTWARE). THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND OR WITHDRAW ALL OR ANY GROUNDS HEREIN OR ADD ANY FURTHER GROUNDS AS MAY BE CO NSIDERED NECESSARY EITHER BEFORE OR DURING THE HEARING. 2 . RIGHT AT THE OUTSET THE LD.A.R. SUBMITTED THAT THE POINTS AT ISSUE ARE FULLY COVERED IN ASSESSEE S FAVOUR BY VIRTUE OF THE ORDERS OF THE TRIBUNAL RENDERED IN THE EARLIER A.YS AND THE ISSUE ADDRESSED IN GROUND NO. 2 HAS BEEN FURTHER AGITATED BY THE REVENUE BEFORE THE HON BLE HIGH COURT AND THE REVENUE S APPEAL , T HEREON WAS DISMISSED. IN THE SAID BACKGROUND LD.A.R. INVITING ATTENTION TO THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE AS PER PARA 2 HAS BEEN TAKEN TO BE ENGAGED IN THE BUSINESS OF SALE AND SERVICE OF COMPUTER AND SOFTWARE DEVELOPMENT AND RENDERING SOFTWARE CONSULTANCY AND OTHER SERVICES. INVITING ATTENTION TO PARA 5, INTERNAL PAGE 3 OF THE ASSESSMENT ORDER, IT WAS HIS SUBMISSION THAT THE A.O. REQUIRED THE ASSESSEE TO EXPLAIN HOW THE AMOUNT OF RS.9,07,39, 242/ - SHOWN AS ADVANCE BILLING IS SHOWN AS A LIABILITY AS PER SCHEDULE 6 TO THE BALANCE SHEET , AND WHY IT SHOULD NOT BE TREATED AS INCOME FOR THE CURRENT YEAR AS THERE IS NO CONCEPT OF A PROVISION FOR DEFERRED INCOME. INVITING ATTENTION TO THE REPLY DATED 26.10.2010 AND 3 RD DECEMBER,2010 WHICH H AS BEEN EXTRACTED IN THE ASSESSMENT ORDER, IT WAS SUBMITTED BY THE LD.A.R. THAT ON BEHALF OF THE ASSESSEE IT HAD BEEN EXPLAINED THAT THE ASSESSEE PRIMARILY SELLS SOFTWARE IN TWO WAYS AND THE REVENUE RECOGNITION IN RESPECT THEREOF WAS IN THE FOLLOWING MAN NER: - (I) SALE OF SOFTWARE WITH FREE WARRANTY THE PRICE OF WARRANTY SERVICES TO THE CUSTOMER DURING THE STANDARD PERIOD OF WARRANTY IS INCLUDED IN THE COST OF THE SOFTWARE LICENSE SOLD. FULL INVOICE AMOUNT IS RECOGNIZED ITA NO. 5148/DEL/2011 A.Y. 2007 - 08 M/S SIEMENS PRODUCTS LIFECYCLE MANAGEMENT SOFTWARE (INDIA) PVT.LTD. (NOW KNOWN AS SIEMENS INDUSTRY SOFTWARE INDIA P.LTD.) NEW DELHI 3 AS REVENUE AT THE TIME OF SUCH SALE. THE TERMS OF THE WARRANTY ARE AS UNDER: - 'WARRANTY: SDRC (NOW SIEMENS PLMS) WARRANTS THAT FOR A PERIOD OF 90 DAYS AFTER DELIVERY OF LICENSED PROGRAM(S) TO CUSTOMER, THE LICENSED PROGRAMS WILL PERFORM SUBSTANTIALLY IN ACCORDANCE WITH THE SDRC USER DOCUMENTA TION. IN THE EVENT THE LICENSED PROGRAM(S) DO NOT PERFORM IN ACCORDANCE WITH THE USER DOCUMENTATION, THEN DURING THE 90 DAY WARRANTY PERIOD, SDRC SHALL AT ITS OPTION (I) CORRECT ANY MATERIAL VARIANCE BETWEEN THE PERFORMANCE OF THE LICENSED PROGRAM(S) AND THE SPECIFICATIONS FOR THE LICENSED PROGRAMS(S) CONTAINED IN THE APPLICABLE USER DOCUMENTATION; OR (II) REPLACE THE LICENSED PROGRAM(S) MEDIA. THE FOREGOING SHALL BE CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR ERROR OR DEFECT IN THE LICENSED PROGRAM(S). ' (I I) SALE OF SOFTWARE WITH FREE WARRANTY AND EXTENDED PERIOD PAID MAINTENANCE, E NHANCEMENT AND SUPPORT SERVICES. IN ADDITION TO THE WARRANTY FOR 3 MONTHS, IN CASE A CUSTOMER DESIRES, HE CAN AGREE WITH THE ASSESSEE FOR EXTENDED MAINTENANCE, ENHANCEMENT AND SU PPORT SERVICES AFTER THE WARRANTY PERIOD FOR AN EXTENDED PERIOD E.G. 9 MONTHS, 12 MONTHS, 18 MONTHS ETC. IN THE EXTENDED PERIOD, THE ASSESSEE WILL CORRECT MATERIAL VARIANCE BETWEEN THE PERFORMANCE OF THE LICENSED PROGRAM(S) AND THE SPECIFICATIONS FOR THE L ICENSED PROGRAM(S) CONTAINED IN THE APPLICABLE USER DOCUMENTATION AND / OR SOFTWARE CODES. THE ASSESSEE WILL DISTRIBUTE TO THE CUSTOMER ENHANCEMENTS TO THE LICENSED PROGRAM(S) RELEASED WITHOUT RESTRICTION BY SIEMENS PLMS TO OTHER LICENSES. ENHANCEMENT INCL UDES UPDATES OF LICENSED PROGRAM(S), UPDATES OF USER DOCUMENTATION AND SYSTEMS UPDATES. ALSO THE ASSESSEE WOULD PROVIDE SUPPORT SERVICES WHICH INCLUDE TELEPHONE SUPPORT IN ANSWERING CUSTOMER'S QUERIES. FOR SUCH EXTENDED SERVICES, CUSTOMER PAYS AN ADDITIONA L AMOUNT TO THE ASSESSEE WHICH IS INCLUDED IN THE TOTAL INVOICE PRICE AND NOT SHOWN SEPARATELY IN THE INVOICE. REVENUE FOR EXTENDED MAINTENANCE, ENHANCEMENT AND SUPPORT SERVICES IS RECOGNIZED OVER THE PERIOD ON A MONTHLY BASIS. AT THE TIME OF SALE OF COMP UTER SOFTWARE AND MAINTENANCE SERVICES TO CUSTOMERS, THE ASSESSEE RAISES AN INVOICE FOR THE ENTIRE VALUE I.E. VALUE OF THE COMPUTER SOFTWARE AND CHARGES TOWARDS MAINTENANCE, ENHANCEMENTS AND SUPPORT SERVICES. HOWEVER IN ACCORDANCE WITH THE ACCOUNTING PRIN CIPLES AND STANDARDS, THE ASSESSEE RECOGNIZES A PORTION OF THE REVENUE TOWARDS THE VALUE OF THE COMPUTER SOFTWARE AS SALES IN ITS BOOKS OF ACCOUNTS AND THE OTHER PORTION OF REVENUE VIZ. CHARGES TOWARDS MAINTENANCE, ITA NO. 5148/DEL/2011 A.Y. 2007 - 08 M/S SIEMENS PRODUCTS LIFECYCLE MANAGEMENT SOFTWARE (INDIA) PVT.LTD. (NOW KNOWN AS SIEMENS INDUSTRY SOFTWARE INDIA P.LTD.) NEW DELHI 4 ENHANCEMENT AND SUPPORT SERVICES IS RECOG NIZED IN THE BOOKS OF ACCOUNTS OVER THE PERIOD OF MAINTENANCE CONTRACT ON AN ACCRUAL BASIS. THE ABOVE ACCOUNTING POLICY HAS BEEN APPLIED BY THE ASSESSEE ON A CONSISTENT BASIS. 2.1 . HOWEVER THE A.O. WAS NOT CONVINCED WITH THE EXPLANATION OFFERED AND RELYING UPON THE POSITION FOR A.Y. 2003 - 04 WHICH WAS CONFIRMED BY THE CIT (A) IN APPEAL HE PROCEEDED TO FOLLOW THE VIEW TAKEN IN THE EARLIER YEARS. CONSEQUENTLY AFTER REDUCING 55% AS EXPENSES THE REMAINING 45% OF ADVANCE BILLING OF RS.9,07,39,242/ - WH ICH WORKED OUT TO RS.4,08,36,659/ - WAS ADDED AS ASSESSEE S INCOME. THE SAID ADDITION HAS BEEN UPHELD BY THE D.R.P. 2.2. IN THE SAID BACKGROUND TO SUPPORT HIS SUBMISSION THAT THE ISSUE IS COVERED IN ASSESSEE S FAVOUR OUR ATTENTION WAS INVITED TO COPY O F THE CONSOLIDATED ORDER DT. 1 ST MAY,2007 IN ITA 584, 585/DEL/2006 AND ITA 322/DEL/2007 IN THE CASE OF THE ASSESSEE FOR THE A.YS 2001 - 02 TO 2003 - 04 A COPY OF WHICH IS PLACED AT PAGES 8 TO 26 OF THE PAPER BOOK . R EFERRING TO THE SAME IT WAS SUBMITTED THAT THE ASSESSEE S NAME IN THE SAID ORDER IS RECORDED AS M/S UGS INDIA PVT.LTD. AND A PERUSAL OF THE ASSESSMENT ORDER UNDER CONSIDERATION WOULD SHOW THAT IT IS IN THE CASE OF M/S SIEMENS PRODUCTS LIFE CYCLE MANAGEMENT SOFTWARE INDIA PVT.LTD. (FORMERLY KNOWN AS M/S U.G.S. INDIA LTD.). REFERRING TO INTERNAL PAGE 13 OF THE CONSOLIDATED ORDER IT WAS SUBMITTED THAT THE TRIBUNAL AFTER REPRODUCING THE IDENTICAL GROUND ARISING IN THE A.Y. 2001 - 02 VIDE GROUND NO.1 TOOK COGNIZANCE OF THE FACT THAT THIS GROUND WAS SIMILAR TO GROUND NO.4 IN THE A.Y. 2002 - 03 AND GROUND NO.2 IN THE A.Y. 2003 - 04 AND IN THE SAID BACKGROUND COMMON FINDING ON FACTS WERE RECORDED THEREBY DECIDING THE ISSUE IN ASSESSEE S FAVOUR VIDE PARA 6 IN THE FOLLOWING MANNER . 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS. ON THE BASIS O F SUBMISSIONS MADE BEFORE AO AND BEFORE US, IT CAN BE HELD THAT WHERE THE ASSESSEE SELLS THE SOFTWARE/LICENSE WITH FREE WARRANTY, FULL INVOICE AMOUNT IS RECOGNIZED AS REVENUE. HOWEVER, WHERE THE SALE OF SOFTWARE LICENSE IS WITH EXTENDED PERIOD OF WARRANTY OR WITH THE PAID MAINTENANCE ENHANCEMENT AND SUPPORT SERVICES, EXTRA AMOUNT IS BEING CHARGED THOUGH NOT SEPARATELY MENTIONED IN THE INVOICE. HOWEVER, THE SAME CAN BE MEASURED COMPARED TO INVOICES FOR SALE OS SAME SOFTWARE ITA NO. 5148/DEL/2011 A.Y. 2007 - 08 M/S SIEMENS PRODUCTS LIFECYCLE MANAGEMENT SOFTWARE (INDIA) PVT.LTD. (NOW KNOWN AS SIEMENS INDUSTRY SOFTWARE INDIA P.LTD.) NEW DELHI 5 WHETHER MES SERVICES ARE INCLUDE D OR NOT. THUS, WHEN THE ASSESSEE CHARGES EXTRA SUM FOR MES SERVICES, THE REVENUE IN THIS REGARD CAN BE RECOGNIZED ONLY AFTER SUCH SERVICES ARE RENDERED OR THE PERIOD OF CONTRACT IS OVER. HON BLE DELHI HIGH COURT IN THE CASE OF UTTAM SINGH DUGGAL & CO. VS CIT, 127 ITR 21 RECOGNIZED THIS PRINCIPLE OF MATCHING REVENUE WITH COST. ON GENERAL PRINCIPLE, IT WAS HELD THAT IF NO WORK IS DONE IN THE YEAR OF RECEIPT OF SUM, IT HAS TO BE TREATED AS KIND OF A ADVANCE PAYMENT AND WHEN THE WORK WAS DONE TAXABLE IN TH E SUBSEQUENT YEAR. EVEN IF THE AMOUNT IS NOT SEPARATELY SHOWN IN INVOICE THE EFFECT REMAIN THAT ADDITION SUM WAS CHARGED FOR ME&S SERVICES. THE AMOUNT IS NOT UNCERTAIN NOT TO BE CALCULATED. THE AMOUNT CAN VERY W E LL BE ARRIVED AT BEST ON THE SALE PRICE O F SOFTWARE SOLD WITH OR WITHOUT ME&S SERVICES. THE SALES - TAX RETURN CANN O T BE A CRITERIA TO DETERMINE WHAT IS THE INCOME ACCRUING OR ARISING TO THE ASSESSEE. EVEN IF THE PAYER DO NOT DEDUCT TAX AT SOURCE, IT WILL NOT DETERMINE THE TAXABILITY OR OTHERWIS E OF THE SUM CHARGEABLE TO TAX. THUS, THERE IS NOTHING LIKE DEVICE TO DEFER PAYMENT OF TAXES DUE BUT AS PER THE RECOGNIZED METHOD OF ACCOUNTING OF MATCHING REVENUE WITH COST, THE INCOME ACCRUES ONLY IN THE SUBSEQUENT YEAR WHEN SUCH SERVICES ARE PROVIDED. THIS IS IN FORM OF A PROVISION FOR WARRANTY CLAIMS WHICH IS ALSO RECOGNIZED BY HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS VINTEX CORPORATION P. LTD. 278 ITR 337 WHEREIN IT WAS HELD THAT PROVISION FOR WARRANTIES EMBEDDED IN THE SALE PRICE IS AN ASCERT AINED LIABILITY AND TO THAT EXTENT, REVENUE NEED NOT BE RECOGNIZED. WE ACCORDINGLY HOLD THAT THE AMOUNT TREATED AS DEFERRED REVENUE BY THE ASSESSEE IS NOT TO BE BROUGHT TO TAX IN THE YEAR UNDER CONSIDERATION BUT TO BE TAXED IN THE YEAR WHEN SUCH SERVICES ARE RENDERED OR RECOGNIZED AS INCOME BY THE ASSESSSEEE. 2.3 . INVITING ATTENTION TO PAPER BOOK PAGES 27 TO 32 WHICH CONTAINS THE ORDER DT. 20 TH NOVEMBER,2009 IN A.Y. 2004 - 05 WHEREIN THE COORDINATE BENCH IN ITA 943/DEL/2010 FOLLOWING THE VIEW TAKEN IN THE E ARLIER YEARS DISMISSED THE DEPARTMENTAL GROUND , IT WAS HIS SUBMISSION THAT IN THE PRESENT A.Y. ALSO THE ASSESSEE HAS OFFERED THE INCOME WHEN THE SERVICES HAVE BEEN RENDERED AND FOLLOWING THE PRECEDENT THE ADDITION SUSTAINED DESERVES TO BE DELETED. 3 . THE LD.CIT, D.R. PLACES RELIANCE UPON THE ASSESSMENT ORDER. HOWEVER IN THE FACE OF THE CONSISTENT ORDERS OF THE TRIBUNAL ON THE SAID ISSUE NO SUBMISSIONS WERE ADVANCED CANVASSING A CONTRARY VIEW. 4 . IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES WE FIND NO GOOD REASON TO DEVIATE FROM THE VIEW TAKEN AS FACTS REMAIN THE SAME. ACCORDINGLY ITA NO. 5148/DEL/2011 A.Y. 2007 - 08 M/S SIEMENS PRODUCTS LIFECYCLE MANAGEMENT SOFTWARE (INDIA) PVT.LTD. (NOW KNOWN AS SIEMENS INDUSTRY SOFTWARE INDIA P.LTD.) NEW DELHI 6 FOLLOWING THE PRECEDENT, WE HOLD THAT THE AMOUNT TREATED AS DEFERRED REVENUE IS NOT TO BE BROUGHT TO TAX IN THE YEAR UNDER CONSIDERATION AND IS TO BE TAXED IN THE YEAR WHE N SUCH SERVICES ARE RENDERED OR RECOGNISED AS INCOME BY THE ASSESSEE. GROUND NO.1 ACCORDINGLY IS ALLOWED. 5 . THE SECOND ISSUE AGITATED BY THE ASSESSEE IN THE PRESENT APPEAL ALSO HAS BEEN A SUBJECT MATTER OF CONSIDERATION IN THE EARLIER ORDERS. THE RELEVANT FACTS EXTRACTED FROM THE ASSESSMENT ORDER READ AS UNDER: - 7.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT HAS BEEN OBSERVED THE ASSESSEE COMPANY HAS DEBITED AN AMOUNT OF RS.1,08,33,210/ - ON ACCOUNT OF FOREIGN EXC HANGE LOSS TO ITS P&L ACCOUNT. FROM THE DETAILS PLACED ON RECORD, IT IS OBSERVED THAT THE EXCHANGE LOSS WAS BOOKED ON ACCOUNT OF PURCHASE OF COMPUTER SOFTWARE WHICH HAS BEEN CAPITALIZED BY THE ASSESSEE AND DEPRECIATION HAS ALSO BEEN CLAIMED THEREUPON. SIN CE THE LOSS HAS BEEN INCURRED ON AN CAPITAL ASSETS AND IN VIEW OF THE FACTS THAT SAME DISALLOWANCE HAS BEEN MADE IN EARLIER YEARS, PROCEEDINGS AGAINST WHICH ARE STILL PENDING BEFORE THE APPELLATE AUTHORITIES, THEREFORE, AN ADDITION OF RS.L,08,33,210/ - IS M ADE ON ACCOUNT OF FOREIGN EXCHANGE LOSS TREATING THE SAME AS CAPITAL EXPENDITURE. THE DRAFT ORDER U/S 144C WAS PASSED AND SERVED UPON THE ASSESSEE, AGAINST WHICH THE ASSESSEE WENT IN DRP. THE HON'BLE DRP, VIDE ITS ORDER DATED 25.08.2011 HAS UPHELD THE ADDI TION MADE ON ACCOUNT OF FOREIGN EXCHANGE LOSS. (ADDITION OF RS.1,08,33,210/ - ) 6 . THE LD.A.R. ADDRESSING THIS ISSUE PLACED RELIANCE ON THE CONSOLIDATED ORDER OF THE TRIBUNAL ( CITED SUPRA) IN THE A.Y. 2001 - 02 TO 2003 - 04 A.YS ( PLACED AT PAGES 8 TO 26 ) WHE REIN THE SAID ISSUE IS DISCUSSED AT SPECIFIC PAGES 12 AND 13 OF THE PAPER BOOK . THE SAID VIEW IT WAS SUBMITTED WAS FOLLOWED BY THE ITAT IN A.Y. 2004 - 05 WHEREIN RELYING UPON CIT VS. WOODWARD GOVERNOR REPORTED IN 312 ITR 254 DISMISSED THE DEPARTMENT S APPEAL VIDE ORDER DT. 20 TH NOVEMBER,2009. HE FURTHER INVITED OUR ATTENTION TO PAGES 2 TO 4 OF THE PAPER BOOK WHEREIN COPY OF THE ORDER OF THE JURISDICTIONAL HIGH COURT DT. 9 TH SEPTEMBER, 2010 IS PLACED AT PAGES 1 TO 7 AND THE HON BLE HIGH COURT TAKING COGNIZANCE OF THE FINDING OF THE TRIBUNAL IN THE A.Y. 2001 - 02 DISMISSED THE DEPARTMENTAL APPEAL HOLDING THAT THE ITA NO. 5148/DEL/2011 A.Y. 2007 - 08 M/S SIEMENS PRODUCTS LIFECYCLE MANAGEMENT SOFTWARE (INDIA) PVT.LTD. (NOW KNOWN AS SIEMENS INDUSTRY SOFTWARE INDIA P.LTD.) NEW DELHI 7 AGREEMENT HAS BEEN RIGHTLY INTERPRETED BY THE TRIBUNAL AND THEREFORE NO QUESTION OF LAW ARISES. 7 . THE LD.CIT, D.R. RELYING UPON THE ASSESSME NT ORDER D ID NOT MAKE ANY SUBMISSION IN ORDER TO CANVASS A CONTRARY VIEW. 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION THEREOF IN THE FACTS AS THEY STAND WE FIND THAT THE ASSESSEE S GROUND HAS TO BE ALLOWED. IT WOULD BE WORTHWHILE TO REPRODUCE THE RELEVANT EXTRACT FROM THE JUDGEMENT AND ORDER OF THE HON BLE HIGH COURT ON THE SAID ISSUE WHICH IS AS UNDER: - 2. FIRST ISSUE PERTAINS TO THE AMOUNT CLAIMED BY THE ASSESSEE ON ACCOUNT OF LOSS DUE TO F OREIGN EXCHANGE RATE FLUCTUATIONS. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH PARENT COMPANY IN USA, ACCORDING TO WHICH THE PURCHASE PRICE FOR COMPUTER SOFTWARE WERE TO BE PAID IN FOREIGN CURRENCY WHICH WAS EQUIVALENT TO 50% OF THE REVENUE GENERATED IN INDIAN CURRENCY FROM SALES OF SUCH SOFTWARE. THE ASSESSING OFFICER HAD RELIED UPON CLAUSE 6 OF THE AGREEMENT, ON THE BASIS OF WHICH HE GOT THE IMPRESSION THAT THE PURCHASE PRICE FOR THE COMPUTER SOFTWARE WERE TO BE PAID IN INDIAN CURRENCY AND BECAUSE O F THIS HE DISALLOWED THE PURPORTED LOSS DUE TO FOREIGN EXCHANGE RATE FLUCTUATION. HOWEVER, ON THE READING OF THE ENTIRE AGREEMENT PARTICULARLY THE SCHEDULE C THEREOF, WHICH CLEARLY SPECIFIED THAT THE AMOUNT IS TO BE PAID IN FOREIGN CURRENCY ALTHOUGH IT WOULD BE EQUIVALENT TO 50% OF THE REVENUE GENERATED IN INDIAN CURRENCY, THE ITAT HAS COME TO THE CONCLUSION THAT SINCE THE AMOUNT PAYABLE IS IN FOREIGN CURRENCY AND NOT IN INDIA RUPEES, THEREFORE, LOSS OCCASIONED DUE TO UPWARD REVISION IN THE RATE OF EXCH ANGE WAS TO BE BORNE BY THE ASSESSEE WAS ALLOWABLE. ON THE READING OF THE AGREEMENT, WE FIND THAT IT IS RIGHTLY INTERPRETED BY THE TRIBUNAL AND, THEREFORE, NO QUESTIONS OF LAW ARISES. 8.1 IN THE LIGHT OF THE AFORE MENTIONED PECULIAR FACTS AND CIRCUMSTANC ES, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL WHEREIN IN THE A.Y. 2001 - 02 THE VIEW OF THE TRIBUNAL HAS BEEN CONFIRMED BY THE HON BLE HIGH COURT, WE HOLD THAT THE ASSESSEE S CLAIM DESERVES TO BE ALLOWED. ITA NO. 5148/DEL/2011 A.Y. 2007 - 08 M/S SIEMENS PRODUCTS LIFECYCLE MANAGEMENT SOFTWARE (INDIA) PVT.LTD. (NOW KNOWN AS SIEMENS INDUSTRY SOFTWARE INDIA P.LTD.) NEW DELHI 8 9 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. THE SAID ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE PARTIES ON 13 MARCH, 2015. SD/ - SD/ - (G.D.AGRAWAL) (DIVA SINGH) VICE PRESIDENT JUDICIAL MEMBER DATED: THE 13 TH MARCH, 2015 *MANGA /AMIT KUMAR* COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR