M/s. Usha International Ltd., New Delhi V. DCIT, New Delhi

ITA 5932/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2904 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SSH V P GUPTA; ANUNAV KUMAR S
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D , NEW DELHI BEFORE SH. H.S. SIDHU , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO . 5932 /DE L/ 2014 ASSESSMENT YEAR: 2010 - 11 M/S. USHA INTERNATIONAL LTD., ROOM NO. 1005, 10 TH FLOOR, SURYA KIRAN BUILDING, 19, KASTURBA GANDHI MARG, NEW DELHI VS. DCIT, CIRCLE - 18(1 ), NEW DELHI PAN : AAACT0066A ( APPELLANT ) (RESPONDENT) AND ITA NO .6611 /DEL/ 2014 ASSESSMENT YEAR: 2010 - 11 DCIT, CIRCLE - 18(1 ), NEW DELHI VS. M/S. USHA INTERNATIONAL LTD., SURYA KIRAN BUILDING, 19, KASTURBA GANDHI MARG, NEW DELHI PAN : AAACT0066A (APPELLANT) (RESPONDENT) ASSESSEE BY S/SH. V.P. GUPTA & ANUNAV KUMAR, ADVOCATES DEPARTMENT BY SH. AMIT JAIN, SR.DR DATE OF HEARING 14.03.2018 DATE OF PRONOUNCEMENT 21.03.2018 ORDER PER O.P. KANT , A. M. : THESE CROSS APPEALS BY THE REVENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 10/09/2014 PASSED BY THE LD. 2 COMMISSIONER OF INCOME - TAX (APPEALS), XXI, NEW DELHI [ IN SHORT THE LD. CIT(A) ] FOR ASSESSMENT YEAR 2010 - 11. SINCE BOTH THE APPEALS HAVE EMANATED FROM THE SAME IMPUGNED ORDER, BOTH THESE APPEALS WERE HEARD TOGETHER AND DISPOSE D OFF BY WAY OF THIS CONSOLIDATED ORDER FOR CONVENIENCE. 2. THE G ROUNDS OF A PPEAL RAISED BY THE R EVENUE IN ITA NO. 6611/DEL/2014 ARE REPRODUCED AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION/DISALLOWANCE OF RS.13,15,248/ - MADE BY THE AO ON ACCOUNT OF MUTATION OF LAND. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION/DISALLOWANCE OF RS.3,90,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SAP SOFTWARE LICENSE. LD. CIT(A) HAD ALSO ERRED IN ALLOWING THE DEPRECIATION OF SAP SOFTWARE @60% INSTEAD OF 25%. 3. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, LD. C IT(A) ERRED IN DELETING THE ADDITION/DISALLOWANCE OF RS.50,35,000/ - MADE BY THE AO U/S 14A 4. THE APPELLANT CRAVES, LEAVE OR RESERVING THE RIGHT TO AMEND, MODIFY, A LTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL. 2.1 THE G ROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO. 5932/DEL/2014 ARE REPRODUCED AS UNDER: 1. THAT THE CIT(A) ERRED IN HOLDING THAT THE APPELLANT COMP ANY IS NOT ENTITLED FOR REFUND OF EXCESS DIVIDEND DISTRIBUTION TAX PAID OF RS.44.05 LACS FOR THE REASON THAT THERE IS NO PROVISION IN THE ACT FOR CANCELLATION OF THE DIVIDEND OR REFUND OF DIVIDEND DISTRIBUTION TAX PURSUANT TO AMALGAMATION. HE FAILED TO APP RECIATE THAT SINCE AMALGAMATION WAS EFFECTIVE FROM 01.04.2009 ALL SUBSEQUENT ENTRIES BETWEEN THE COMPANIES AMALGAMATED DURING PENDENCY OF APPROVAL OF AMALGAMATION SCHEME HAVE TO BE REVERSED / CANCELLED AS ONE CANNOT MAKE PAYMENT TO SELF. THE CIT(A) ALSO ER RED IN 3 TAKING THE VIEW THAT THE ISSUE WAS NOT ARISING FOR THE ASSESSMENT ORDER FOR THE REASON THAT THERE WAS NO MENTION OF THE SAME IN THE ASSESSMENT ORDER. 2. THAT THE CIT(A) ALSO ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO ALLOW CREDIT FOR DIVIDEND DISTRIBUTION TAX OF RS.17,11,365/ - PAID BY M/S. GREENFIELDS COMMERCIAL PVT. LTD., WHICH HAD AMALGAMATED WITH THE APPELLANT COMPANY. HE FAILED TO APPRECIATE THAT CREDIT FOR TAX DEPOSITED BY ABOVE NAMED COMPANY WAS TO BE ALLOWED TO THE APPELLANT COMPANY IN D ETERMINATION OF ITS LIABILITY. 3. THAT THE CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF RS.4 LACS, BEING THE PAYMENT MADE BY THE COMPANY TO DLF GOLF CLUB TOWARDS CORPORATE MEMBERSHIP OF THE CLUB ON THE GROUND THAT SAME WAS REPRESENTING MONEY REFUNDABLE AND, THEREFORE, CANNOT BE SAID TO BE INCURRED FOR THE PURPOSE OF BUSINESS. THAT THE APPELLANT COMPANY CRAVE LEAVE TO AMEND, ALTER OR ADD ANY OF THE GROUNDS OF APPEAL AT ANY TIME HEREINAFTER OR DURING THE COURSE OF HEARING OF APPEAL. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND SALES OF ELECTRIC FANS, WATER COOLER ETC . CONSUMER DURABLE PRODUCTS UNDER THE BRAND NAME USHA . THE ASSESSEE COMPANY FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 25/09/2 01 0 DECLARING TOTAL INCOME OF RS. 44,03,13, 563/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME - TAX A CT, 1961 (IN SHORT THE A CT ) WAS ISSUED AND COMPLIED WITH. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE A CT O N 20/03/2013, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWANCES AND ASSESSED THE TOTAL INCOME AT RS.44,83,91,310/ - . AGGRIEVED WITH ADDITIONS/DISALLOWANCES, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO ALLOWED THE APPEAL PARTLY VIDE THE IMP UGNED ORDER. 4 3.1 AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL BEFORE THE T RIBUNAL, RAISING THE GROUNDS A S REPRODUCED ABOVE. 4. THE GRO UND NO. 1 OF THE APPEAL OF THE R EVENUE RELATES T O ADDITION/DISALLOWANCES OF RS. 13,15, 248/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MUTATION OF LAND. 4.1 BEFORE US, THE LD. DR SUBMITTED THAT LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER ON THE ISSUE IN DISPUTE AND , THUS , THE ISSUE MIGHT BE RESTORED BACK TO THE FILE OF THE LD. CIT(A) FOR DECIDING A FRESH. 4.2 ON THE CONTRARY, TH E LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS WRONGLY DISALLOWED THE EXPENSES CONSIDERING THE SAME IN THE NATURE OF MUTATION CHARGES. ACCORDING TO THE LD. COUNSEL , THE PAYMENT WAS IN THE NATURE OF LAND REVENUE E XCEPT FOR A SMALL AMOUNT OF RS.10, 20 0/ - WHICH WAS PAID FOR CHANGING THE NAME OF THE COMPANY FROM JAY ENGINEERING W ORKS (OLD NAME) TO USHA INTERNATIONAL LTD . THE LD. COUNSEL FILED A PAPER BOOK CONTAINING PAGES 1 T O 82 AND REFERRED PAGES 6 TO 16 , WHICH ARE RECEIPT OF LAND REVENUE CHARGES PAID IN RESPECT OF THE LAND. THE LD. COUNSEL CONTENDED THAT THE LD. CIT(A) CONSIDERING THE NATURE OF EXPENDITURE AS LAND REVENUE EXPENSES, HE HAS ALLOWED THE DEDUCTION FOR THE SAME. 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD INCLUDING THE PAGES OF THE PAPER BOOK REFERRED BY THE LD. C OUNSEL. WE FIND THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS MENTIONED THAT DURING ASSESSMENT PROCEEDING , THE ASSESSEE SUBMITTED A REPLY DATED 18/02/2013 AND , ACCORDING TO WHIC H , THE EXPENSES WERE INCURRED FOR MUTATION OF THE LAND IN THE NAME OF THE COMPANY. ACCORDING TO THE 5 ASSESSING OFFICER , THE EXPENSES RELATES TO ACQUISITION OF LAND, WHICH BEING A CAPITAL ASSET, HENCE NOT ALLOWABLE AND ACCORDINGLY , HE ADDED THE EXPENDITURE O F RS. 13,15,248/ - TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) DELETED THE ADDITION WITH FOLLOWING OBSERVATIONS: 3.2 THE ASSESSEE IS IN APPE AL AGAINST THE ORDER OF THE AO A ND IT IS SUBMITTED THAT THE AO IS NOT JUSTIFIED TO DISALLOW THE LAND REVENUE EXPENSES WHICH ARE CALLED KHAJNA IN WEST BENGAL AND THERE WERE SOME EXPENSES WHICH WERE PAID TO THE GOVERNMENT FOR THE CHANGE OF THE NAME FROM THE OLD NAME JAY ENGINEERING WORKS LTD. TO THE PRESENT NAME USHA IN TERNATIONAL LTD. 3.3 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I FIND CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT THERE IS NO PROPER JUSTIFICATION IN THE ORDER OF THE ASSESSING OFFICER FOR DISALLOWING THE LAND REVENUE EXPENSES WHICH WERE PAID TO THE GOVERNMENT OF WEST BENGAL AND ACCORDINGLY MADE BY THE ASSESSING OFFICER IS DELETED. 4.4 ON PERUSAL OF THE ABOVE FINDING OF THE LD. CIT( A), IT IS EVIDENT THAT HE HAS NOT CONSIDERED THE RECEIPTS OF LAND REVENUE EXPENSES AND HE HAS ALSO NOT GIVEN ANY REASONING , AS WHY SAID EXPENSES ARE NOT IN THE NATURE OF CAPITAL EXPENDITURE AS HELD BY ASSESSING OFFICER 4.5 BEFORE US , THE LD. COUNSEL HAS S UBMITTED DETAIL OF THE EXPENSES INCURRED OF RS. 13, 15, 248/ - , WHICH IS AVAILABLE ON PAGE 6 OF THE PAPER BOOK. THE RELEVANT DETAIL OF THE EXPENSES IS REPRODUCED AS UNDER: 6 DATE OF PAYMENT AMOUNT NATURE OF PAYMENT 07.07.2009 5,34,820 LAND REVENUE CHARGES 07.07.2009 2,35,180 - DO - 07.07.2009 1,71,380 - DO - 11.01.2010 3,61,462 - DO - 13.01.2010 10,200 PROCESS FEE TOWARDS MUTATION PROCEEDINGS FOR CHANGE IN NAME OF C OMPANY. 24.03.2010 2,206 PROFESSIONAL CHARGES FOR A VALUER FOR RECONCILIATION OF LAND MEASUREMENT. 4.6 THE LD. COUNSEL HAS ALSO ENCLOSED LETTERS ADDRESSED BY THE ASSESSEE COMPANY TO LAND AND LAND REFORMS OFFICER FOR PAYMENT TOWARDS LAND REVENUE CHARGES OF LAND SITUATED IN ROYNAGAR MOUZA . ALL THESE LETTERS A RE AVAILABLE FROM PAGES 7 TO 12 OF THE PAPER BOOK. CONT ENTS OF ONE SUCH LETTER DATED 7 TH JUL Y, 2009 REGARDING PAYMENT OF RS.5, 34,820/ - ARE REPRODUCED AS UNDER: WE HEREBY TENDER THE LAND REVENUE VIDE CHEQUE NO.056620 DT . 06.07.2009 FOR RS.5,34,820/ - (RUPEES FIVE LACS THIRTY FOUR THOUSAND EIGHT HUNDRED AND TWENTY ONLY) TOWARDS PAYMENT OF LAND REVENUE FOR BANGLA SAN 1416 IN RESPECT OF OUR VARIOUS PREMISES TOTALING 27.80 ACRES IN ROYNAGAR MOUZA. 4.7 THUS , IT IS MANIFESTED THAT, THESE PAYMENTS ARE IN THE NATURE OF LAND REVENUE CHARGES OF LANDS, WHICH PR I M A FACIE APPEARS TO BE RELATED TO AGRICULTURAL LAND. IF THESE EXPENSES ARE INCURRED REL ATED TO AGRICULTURAL LAND, THEN , IN OUR OPINION, SUCH LAND REVENUE CHARGES PAID ARE NO T IN ANY MANNER INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS , AS INCOME FROM AGRICULTURAL ACTIVITY IS EXEMPTED FROM INCOME - TAX. THE LETTERS 7 ISSUED BY THE LAND REVENUE AUT HORITIES DEMANDING LAND REVENUE , WHICH ARE AVAILABLE ON PAGES 8, 10 , 12 , HAVE BEEN WRITTEN IN BENGALI LANGUAGE & SCRIPT AND NO ENG LISH TRANSLATION HAS BEEN FILED , THUS, WE ARE NOT ABLE TO DECIDE WITH CERTAINTY WHETHER THE LAND IN RESPECT OF WHICH PAYMENT HAS BEEN MADE, IS AGRICULTURAL LAND . THE LD. CIT( A) HAS ALSO NOT DISCUSSED THESE DOCUMENTS IN HIS ORDER BEFORE ARRIVING AT CONCLUSION THAT THESE EXPENSES ARE REVENUE IN NATURE. IN SUCH CIRCUMSTANCES, WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING A FRESH. THE ASSE SSEE IS DIRECTED TO PRODUCE ALL NECESSARY DOCUMENTS IN SUPPORT OF PAYMENT OF LAND REVENUE CHARGES INCLUDING THE ENGLISH TRANSLATION OF LETTERS ISSUED BY THE LAND REVENUE AUTHORITIES DEMANDING THE LAND REVENUE IN RESP ECT OF THE LAND OF THE ASSESSEE. FURTHER , IF REQUIRED, THE ASSESSING OFFICER MAY VERIFY NATURE OF LAND AND PAYMENT FROM THE RESPECTIVE LAND REVENUE AUTHORITIES ALSO . THE ASSESSEE IS AT LIBERTY TO PRODUCE ANY OTHER EVIDENCES IN SUPPORT OF ITS CLAIM THAT THE EXPENSES ARE IN THE NATURE OF REVENUE EXPENDIT URE. ACCORDINGLY, THE GROUND NO. 1 OF THE APPEAL OF THE R EVENUE IS ALLOWED FOR THE STATISTICAL PURPOSES. 5. THE GROUND NO. 2 OF THE APPEAL OF THE R EVENUE RELATES TO SOFTWARE EXPENSES, WHICH HAVE BEEN TREATED BY THE ASSESSING OFFICER A S CAPITAL EXPENDITURE ELIGIBLE FOR DEPRE CIATION AT THE RATE OF 25%, WHEREAS THE LD. CIT(A) HELD THE EXPENSES AS REVENUE IN NATURE AS CLAIMED BY THE ASSESSEE. 5.1 ACCORDING TO THE ASSESSING OFFICER, AMOUNT OF RS.5,20,000 / - HAS BEEN PAID AS CUSTOM DUTY ON IMPORT OF SAP LICENSE AN D WHICH WAS TREATED BY THE ASSESSEE AS REVENUE EXPENDITURE. IN VIEW OF 8 THE ASSESSING OFFICER , THE ASSESSEE ACQUIRED A TANGIBLE ASSET, AND ACCORDINGLY, HE HELD THE EXPENDITURE INCURRED AS CAPITAL EXPENDITURE AND ALLOWED THE APPLICATION AT THE RATE OF 25% AN D ADDED BACK THE BALANCE AMOUNT OF RS. 3, 90,000/ - TO THE INCOME OF THE ASSESSEE. 5.2 THE LD. CIT(A) HELD THE EXPENSES AS REVENUE IN NATURE WITH FOLLOWING FINDING: 4.3 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND FIND CONSIDERABLE MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT THE COMPUTER SOFTWARE IS A NECESSARY BUSINESS TOO! IN THE PRESENT AGE FOR ANY BUSINESS ACTIVITY AND AS SUCH TH ERE IS NO PROPER JUSTIFICATION FOR DISALLOWING THE EXPENSES. EVEN OTHERWISE THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION AT THE HIGHEST RATE OF 60% IN THE COMPUTER AND THE COMPUTER ACCESSORIES AND NO FRUITFUL PURPOSE WILL BE SERVED BY TREATING THE SAME AS CAP ITAL EXPENDITURE AND ALLOWING THE DEPRECIATION @ 60%. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE EXPENSES ARE OF THE REVENUE IN NATURE AND ALSO NOT OF MUCH REVENUE SIGNIFICANCE AND ACCORDINGLY THE ADDITION MADE BY THE AO IS DELETED. 5.3 B EFORE US, LD. DR SUBMITTED THAT THE EXPENDITURE ON SOFTWARE WOULD BE REVENUE , IF THE SOFTWARE HELPS IN RUNNING THE BUSINESS MORE EFFICIENTLY WITHOUT TOUCHING THE PROFIT - MAKING STRUCTURE OF THE ASSESSEE AND IT WOULD BE CAPITAL EXPENDITURE , IF IT HA S ENHANCED CAPACITY OF PROFIT - MAKING APPARATUS OF THE ASSESS EE. ACCORDING TO LD. DR, T HE LOWER AUTHORITY HAS NOT VISITED THE SAID EXPENSES FROM THIS ANGLE AND , THEREFORE , THE ISSUE MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING A FRESH. 9 5.4 ON THE CONTRARY, LD. COUNSEL SUBMITTED THAT COMPUTER SOFTWARE LICENSE CHARGES ARE IN THE NATURE OF REVENUE EXPENDITURE AS HELD BY THE HON BLE DELHI HIGH COURT IN T HE CASE OF CIT VS. ASAHI INDIA SAFETY GLASS L IMITED , (2012) 346 ITR 329(DELHI). 5.5 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD , INCLU DING THE DECISION RELIED UPON BY THE LD. COUNSEL OF THE ASSESS EE. IN THE CASE OF ASAHI INDIA SAFETY GLASS L IMITED (S UPRA), THE ASSESSEE ACQUIRED AN APPLICATION SOFTWARE TO EXECUTE TASKS IN THE FIELD OF FINANCIAL ACCOUNTING, INVENTORY AND PURCHASE AND THAT APPLICATION SOFTWARE WAS REQUIRED TO BE UPDATED FROM TIME TO TIME , BASED ON STATUTORY REQUIREMENTS. THE HON BLE DELHI HIGH COURT IN BACKGROUND OF ABOVE FACTS HELD THAT IF THE EXPENDITURE INCURRED IN ENABLES PROFIT - MAKING STRUCTURE TO WORK MORE EFFICIENTLY LEAVING SOURCE OF PROFIT MAKING STRUCTURE UNTOUCHED, THE EXPENDITURE WOULD BE IN THE NATURE OF REVENUE EXPENDITURE EVEN THOUGH ADVANTAGE MIGHT BE OF ENTERING NATURE . THE RELEVANT FINDING OF THE HON BLE DELHI HIGH COURT IS REPRODUCED AS UNDER: 12. THE AFORESAID WOULD SHOW THAT WHAT THE ASSESSEE ACQUIRED THROUGH ARTHUR ANDERSON AND ASSOCIATES WAS AN APPLICATION SOFTWARE WHICH, ENABLED IT TO EXECUTE TASKS IN THE FIELD OF ACCOUNTING, PURCHASES AND INVENTORY MAINTENANCE. THE FACT THAT THE APPLICATION SOFTW ARE WOULD HAVE TO BE UPDATED FROM TIME TO TIME BASED ON THE REQUIREMENTS OF THE ASSESSEE IN THE CONTEXT OF THE ADVANCEMENT OF ITS BUSINESS AND/OR ITS DIVERSIFICATION, IF ANY; THE CHANGES BROUGHT ABOUT DUE TO STATUTORY AMENDMENTS BY LAW OR BY PROFESSIONAL B ODIES LIKE THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, WHICH ARE GIVEN THE RESPONSIBILITY OF CONCEIVING AND FORMULATING THE ACCOUNTING STANDARDS FROM TIME TO TIME, AND PERHAPS ALSO, 10 BY REASON OF THE FACT THAT EXPENSES MAY HAVE TO BE INCURRED ON ACCOUN T OF CORRUPTION OF THE SOFTWARE DUE TO UNINTENDED OR INTENDED INGRESS INTO THE SYSTEM - OUGHT NOT GIVE A COLOUR TO THE EXPENDITURE INCURRED AS ONE EXPENDED ON CAPITAL ACCOUNT. GIVEN THE FACT THAT THERE ARE MYRIAD FACTORS WHICH MAY CALL FOR EXPENSES TO BE I NCURRED IN THE FIELD OF SOFTWARE APPLICATIONS, IT CANNOT BE SAID THAT EITHER THE EXTENT OF THE EXPENSE OR THE EXPENSE BEING INCURRED IN CLOSE PROXIMITY, IN THE SUBSEQUENT YEARS, WOULD BE CONCLUSIVELY DETERMINATIVE OF ITS NATURE. THE ASSESSING OFFICER HAS, IN OUR VIEW, ERRED PRECISELY FOR THESE VERY REASONS. 5.6 IN THE INSTANT CASE, WE FIND THAT THE ISSUE BEFORE US IS IN RESPECT OF THE CUSTOM DUTY OF SAP SOFTWARE PURCHASED BY THE ASSESSEE. NO DETAILS HAVE EITHER BEEN PROVIDED BY THE LOWER AUTHORITIES OR B Y THE ASSESSEE AS HOW THE EXPENDITURE INCURRED ON PURCHASE OF SAP HAS BEEN DEALT BY THE ASSESSING OFFICER . FURTHER, THERE ARE NO FACTS AVAILABLE ON RECORD AS IN WHICH FIELDS OF THE BUSINESS ACTIVITY, THE SAID SAP SOFTWARE HAS BEEN USED BY THE ASSESSEE. FOR DETERMINING, WHETHER THE EXPENDITURE INCURRED ON THE SOFTWARE IS CAPITAL EXPENDITURE OF REVENUE EXPENDITURE IN VIEW OF THE DECISION OF THE HON BLE DELHI HIGH CO URT IN THE CASE OF ASAHI INDIA SAFETY GLASS L IMITED (SUPRA) , ABOVE FACTS ARE CRUCIAL AND IN ABS ENCE OF WHICH , THE ISSUE CANNOT BE DECIDED JUDICIOUSLY. 5.7 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FEEL IT APPROPRIATE TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER F O R DECID I N G A FRESH IN ACCORDANCE WITH LAW. THE ASSESSEE IS DIRECTED TO FURNISH ALL NECESSARY DOCUMENT S FOR DECIDING THE ISSUE IN VIEW OF THE DECISION OF THE HON BLE DELHI HIGH COURT DISCUSSED ABOVE. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE 11 PROVIDED ADEQUATE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, THE GROUND NO. 2 OF THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 6. THE GROUND NO. 3 O F THE APPEAL OF THE R EVENUE RELATES TO DISALLOWANCE OF RS.50,35,000/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 14 A OF THE ACT READ WITH R ULE 8D OF INCOME - TAX R ULES, WHICH HAS BEEN RESTRICTED BY THE CIT(A) TO THE DIVIDEND INCOME EARNED OF RS. 6,08,000/ - . 6.1 THE LD. SR. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER , WHEREAS, THE LD. COUNSEL RELIED ON THE ORDER OF LD. CIT(A) AND THE DECISION DATED 25.02.2015 OF T HE HON BLE D ELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PVT. L IMITED VS CIT IN ITA NO. 117/2015. 6.2 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT ASSESSEE DURING THE YEAR UNDER CONSIDERATIO N EARNED DIVI DEND INCOME OF RS.6,08, 000/ - AND ITSELF MADE DISALLOWANCE OF AMOUNT EQUAL TO THE DIVIDEND INCOME EARNED. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE DISALLOWANCE MADE BY THE ASS ESSEE AND ACCORDINGLY, INVOKED RULE 8D OF INCOME TAX R ULES, 1962 AND COMPU TED DISALLOWANCE OF RS. 50,35,000/ - . THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.6,08, 000/ - . WE FIND THAT HON BLE J URISDICTI ONAL HIGH COURT IN THE CASE OF J OINT I NVESTMENT PRIVATE L IMITED (SUPRA) HAS HELD THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE A CT MORE THAN THE DIVIDEND INCOME EARNED, ACCORDINGLY , FOLLOWING THE ABOVE FINDING OF THE HON BLE DELHI HIGH COURT, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND WE , 12 ACCORDINGLY , UPHOLD THE SAME. THE GROUND NO. 3 OF THE APPEAL OF THE R EVENUE IS DISMISSED. 7 THE GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE RELATES TO CLAIM OF REFUND OF DIVIDEND DISTRIBUTION TAX PAID OF RS. 44.05 LAKHS BY THE COMPANY AMALGAMATED WITH THE ASSESSEE. 7. 1 THE LD. C OUNSEL OF THE ASSESSEE SUBMITTED THAT FOUR COMPANIES AMALGAMATED WITH THE ASSESSEE COMPANY W.E.F. 01/04/2009 IN TERMS OF SCHEME OF ARRANGEMENT SANCTIONED BY THE HON BLE DELHI HIGH COUR T BY THE ORDER DATED 19/07/2010 . BUT BEFORE THE ORDER WAS PASSED BY THE HON BL E HIGH COURT, THE AMALGAMATING COM PANY AND THE AMALGAMATED COMPANIES DECLARED AND PAID DIVIDEND. ACCORDING TO THE LD. C OUNSEL, WHEN THE PROFIT OF ALL THE COMPANIES GOT CONSOLIDATED, INTER ALIA TRANSACTION OF INTER - SE DIVIDEND GOT NULLIFIED BECAUSE PERSONS CANNOT TRANSACT WITH THEMSELVES AND , H ENC E , DIVIDEND TAX TO THE EXTENT OF RS. 44.05 L ACS BEING EX CESS PAYMENT, IS REFUNDABLE . THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAD FILED AN APPLICATION BEFORE THE ASSESSING OFFICER ON 18/04/2012 , BUT SAME WAS NOT DECIDED BY HIM. HE FURTHER SUBMITTED THAT LD. CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE HOLDING THAT THERE WAS NO CAUSE OF ACTION AS THE ISSUE WAS NOT EMANATING OR ARISING FROM THE ORDER OF THE ASSESSING OFFICER . 7. 2 THE LD. COUNSEL SUBMITTED THA T ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER DATED 15/01/2013 OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF TORRENT PRIVATE L IMITED VS. CIT , S PECIAL C IVIL A PPLICATION NO. 5857 OF 2004. 7. 3 ON THE CONTRARY, LD. DR RELYING ON THE ORDER OF THE LD. CIT(A) SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY NOT ADJUDICATED 13 THE ISSUE AS IT WAS NOT EMANATING FROM THE ORDER OF THE ASSESSING OFFICER 7. 4 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL DRAWN OUR ATTENTION TO PAGE NO. 30 AND 31 OF THE PAPER BOOK , WHICH IS AN APPLICATION FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER ON 18/04/2012 AND SUBMITTED THAT THE ASSESSING OFFICER DID NOT DECIDE THE ISSUE OF REFUND OF DIVIDEND DISTRIBUTION TAX RAISED IN T HE SAID APPLICATION. WE NOTE THAT SINCE THE ASSESSING OFFICER DID NOT DECIDE THE ISSUE IN THE ASSESSMENT ORDER, THE LD. CIT(A) DID NOT ADJUDICATE ON THE ISSUE. IN OUR OPINION, IF THE ASSESSING OFFICER HAD NOT ADJUDICATED THE ISSUE, THE CIT( A) SHOULD HAVE DIRECTED HIM TO DISPOSE OFF THE APPLICATION OF THE ASSESSEE. THOUGH THE ISSUE IN DISPUTE IS NOT PART OF THE INCOME ASSESSMENT OF THE ASSESSEE, HOWEVER , IN THE INTEREST OF NATURAL J USTICE, WE DIRECT THE ASSESSING OFFICER TO DISPOSE OFF THE AP PLICATION OF THE ASSESSEE DATED 18/04/2012 , SEEKING A REFUND OF EXCESS PAYMENT OF DIVIDEND DISTRIBUTION TAX, IN ACCORDANCE WITH LAW. ACCORDINGLY , GROUND NO. 1 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. THE GROUND NO. 2 OF THE APPEAL OF THE ASS ESSEE RELATES TO NOT ALLOWING CREDIT OF DIVIDE ND DISTRIBUTION TAX PAID OF RS.17,11,365/ - 8.1 THE LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN CREDIT OF DIVI DEND DISTRIBUTION TAX OF RS. 17,11,365/ - PAI D BY M/S GREENFIELD COMMERCIAL PRIVATE L IMITED I.E A COMPANY, WHICH HAS BEEN AMALGAMATED WITH THE ASSESSEE COMPANY, AND ACCORDINGLY, THE ASSESSING OFFICER MAY BE DIRECTED TO GIVE DUE CREDIT OF THE DIVIDEND DISTRIBUTION TAX PAID BY THE ASSESSEE COMPANY. 14 8.2 ON THE CONTRARY, LD. SR. DR SUBMITTE D THAT THIS ISSUE IS NOT ARISING FROM THE ORDER OF THE LD. CIT(A) AND THE ASSESSEE SHOULD HAVE PREFERRED APPLIC ATION UNDER SECTION 154 OF THE A CT SEEKING CREDIT OF THE DIVIDEND DISTRIBUTION TAX. 8.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVA NT MATERIAL ON RECORD. THIS ISSUE OF CREDIT OF THE DIVIDEND DISTRIBUT ION TAX PAID BY M/S GREENFIELD C OMMERCIAL PRIVATE L IMITED HAS BEEN RAISED FIRST TIME BEFORE US AND NO FACTS ARE AVAILABLE ON RECORD. WE ARE OF THE OPINION THAT IF THE TAX HAS BEEN PAID BY THE ASSESSEE THAN IT IS ELIGIBLE FOR GETTING CREDIT OF THE TAX PAID IN ACCORDANCE W ITH LAW AND THE REVENUE CANNOT HOLD THE AMOUNT IN UNJUST MANNER WITH IT. THOUGH THE ISSUE IS NOT EMANATING FROM THE IMPU GNED ORDER, IN THE INTEREST OF J USTICE, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE REQUEST OF THE ASSESSEE FOR ALLOWING CREDIT OF THE DIVIDEND DISTRIBUTION TAX PAID BY M/S GREENFIELD COMMERCIAL PRIVATE LIMITED, IN ACCORDANCE WITH LAW. THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. THE GROUND NO. 3 OF THE APPEAL OF THE AS SESSEE RELATES TO AMOUNT OF RS.4,00, 000/ - PAID TO DLF G OLF C LUB TOWARDS MEMBERSHIP AS REFUNDABLE SECURITY. 9.1 THE ASSESSING OFFICER AND THE LD. CIT(A) REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE AMOUNT OF REFUNDABLE SECURITY DEPOSIT CANNOT BE ALLOWED AS DEDUCTION AS IT WAS NOT INCURRED WHOLLY AND NATURALLY FOR THE PURPOSE OF BUSINESS. 9.2 BEFORE US , THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AMOUNT WILL REMAIN CONTINUED TO BE DEPOSITED TILL THE MEMBERSHIP OF THE COMPANY WOULD CONTINUE AND AT THE END , THE 15 COMPANY, MAY NOT GET REFUND OF THE SAME. THE LD. COUNSEL SUBMITTED THAT CONSIDERING THE OPERATION AND A S TATUS OF THE COMPANY, THIS IS A SMALL AMOUNT AND IF REFUND IS RECEIVED SAME SHALL BE CONSIDERED AS INCOME AT THAT STAGE. THE LD. COUNSEL IN SUPPORT OF HIS CONTENTION RELIED ON THE CBDT C IRCULAR DATED 27/10/1993 IN REGARD TO SECURITY DEPOSIT FOR TELEPHONE C ONNECTION. THE LD. COUNSEL SUBMITTED THAT CLUB EXPENSES IN ANY CASE ARE ALLOWABLE AS PER THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. UNITED GLASS M ANUFACTURING COMPANY L IMITED (2012) TIOL - 102 - SC - IT. 9.3 WE HAVE HEARD THE RIVAL SUBMISSION AN D PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACT THAT THE AMOUNT PAID IS REFUNDABLE SECURITY DEPOSIT MADE TO THE CLUB. IN OUR OPINION , ANY SE CURITY DEPOSIT MADE CANNOT BE A REVENUE EXPENDITURE ALLOWABLE UNDER SECTION 37 OF THE A CT . T HE AMOUNT IS LYING AS A SECURITY ONLY AND NOT GET TING EXTINGUISHED. THE AMOUNT WOULD BE REFUNDED BACK ON TERMINATION OF MEMBERSHIP AND IT IS NOT EXPENDITURE IN THE HANDS OF THE ASSESSEE. IN THE CBDT C IRCULAR (SUPRA), THE PART OF THE SECURITY PAID AGAINST TATKAL TELEPHONE DEPOSIT SCHEME WAS NOT REFUNDABLE AND , THUS , SAID CIRCULAR CANNOT BE APPLIED OVER THE FACTS OF THE CASE OF THE ASSESSE E. IN THE CASE OF UNITED GLASS MANUFACTURING COMPANY L IMITED (SUP RA), THE ASSESSEE COMPANY PAID MEMBERSHIP FEE FOR EMPLOYEES AND NOT OBTAINED MEMBERSHIP FOR THE COMPANY AND , THUS , THE FACTS OF THE SAID CASE ARE DIFFERENT FROM THE FACTS OF THE CASE OF THE ASSESSEE. HAD THE DEPOSIT BEEN NON - REFUNDABLE TO THE ASSESSEE, THE AMOUNT COULD HAVE BEEN CONSIDERED ALLOWABLE AS EXPENDITURE , BUT IN THE PRESENT CASE, THE AMOUNT OF SECURITY 16 DEPOSIT HAS BEEN ADMITTED BY THE ASSESSEE A S REFUNDABLE, WHICH IN OUR OPINION CANNOT BE ALLOWED AS REVENUE EXPENDITURE, ACCORDINGLY , WE UPHOLD THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND OF APPEAL OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE R EVENUE AND THE APPEAL OF THE ASSESSEE ARE ALLOWED PARTLY FOR STATISTICAL PURPOSES. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 2 1 S T MARCH . , 201 8 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 1 S T MARCH , 201 8 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI