Centurylink Technologies India Private Limited , Bangalore V. Deputy Commissioner of Income Tax Circle-2(1)(1), Bangalore

ITA 745/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3208 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 10-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: H PADAMCHAN D KHINCHA
• Keywords: Capital asset; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 244A; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENTAND SHRI B.R. BASKARAN, ACCOUTANT MEMBER ITA NOS.745&746/BANG/2019 ASSESSMENTYEAR: 2012-13& 2013-14 CENTURY LINK TECHNOLOGIES INDIA PVT. LTD. BLOCK B, 002 B WINGH SURVEY NO.15/3 AND 16 SALAPURIA HALLMARK KADUBEESANAHALLI, VARTHURHOBLI BENGALURU-560103 PAN NO : AAHCS7683M VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-2(1)(1) BENGALURU APPELLANT RESPONDENT A PPELLANT BY : SHRI H. PADAMCHAND KHINCHA, A.R. RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, D.R. DATE OF HEARING : 19.02.2020 DATE OF PRONOUNCEMENT : 11.03.2020 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST ORDERS PASSED BY LD. CIT(A)-2, BENGALURU AN D THEY RELATE TO THE ASSESSMENT YEARS 2012-13 AND 201 3-14. BOTH THE APPEALS WERE HEARD TOGETHER AND HENCE THEY ARE ITANO.1401/BANG/2018 PAGE 2 OF 8 BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAK E OF CONVENIENCE. 2. THE COMMON ISSUES URGED IN BOTH THE APPEALS RELA TE TO FOLLOWING: A) ADDITION MADE U/S 80JJAA OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). B) DISALLOWANCE OF EXPENDITURE INCURRED IN LEASE HOLD PREMISES TREATING THE SAME AS CAPITAL EXPENDITURE. C) CLAIM OF MAT CREDIT. 3. IN ASSESSMENT YEAR 2012-13, ASSESSEE HAS RAISED ISSUES RELATING TO ASSESSMENT OF INTEREST U/S 244A OF THE ACT AND NON-GRANTING OF TDS CREDIT. 4. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING COMPUTER SOFTWARE. 5. THE FIRST ISSUE RELATES TO DISALLOWANCE OF DEDUC TION CLAIMED U/S 80JJAA OF THE ACT. THE LD. A.R. SUBMIT TED THAT THE PROVISIONS OF SECTION 80JJAA OF THE ACT HA VE UNDERGONE CHANGES FROM TIME TO TIME. HE SUBMITTED THAT THE A.O., IN BOTH THE YEARS UNDER CONSIDERATION, HA S ITANO.1401/BANG/2018 PAGE 3 OF 8 APPLIED THE AMENDED PROVISIONS, WHICH ARE APPLICABL E TO ASSESSMENT YEAR 2014-15 BY OBSERVING THAT THE AMENDMENT HAS BEEN MADE IN ORDER TO DISCOURAGE SOFTWARE COMPANIES FROM CLAIMING DEDUCTION U/S 80JJ AA OF THE ACT. ACCORDINGLY THE AO HAS DISALLOWED THE DEDUCTION CLAIMED U/S 80JJAA OF THE ACT IN BOTH THE YEARS HE SUBMITTED THAT LD. CIT(A) HAS ALSO CONFI RMED THE DISALLOWANCE MADE IN BOTH THE YEARS. THE LD A. R SUBMITTED THAT THE PROVISIONS OF SEC.80JJAA AS APPL ICABLE TO THE YEARS UNDER CONSIDERATION SHOULD HAVE BEEN APPLIED BY THE TAX AUTHORITIES. ACCORDINGLY, HE PRA YED THAT THIS ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. WITH A DIRECTION TO APPLY CORRECT PROVISIONS OF LAW AS APP LICABLE TO THE YEARS UNDER CONSIDERATION. 6. WE HEARD LD. D.R. AND PERUSED THE RECORD. WE NOTICE FROM THE ASSESSMENT ORDER THAT THE A.O. HAS INCORPORATED THE PROVISIONS OF SECTION 80JJAA OF TH E ACT RELATING TO ASSESSMENT YEAR 2014-15 AND HAS APPLIED THE SAME TO BOTH THE YEARS UNDER CONSIDERATION. IT IS PERTINENT TO NOTE THAT SUB-SECTION (3) OF SECTION 8 0JJAA OF THE ACT, AS AMENDED BY FINANCE ACT 2016 MAKES IT CL EAR THAT THE PROVISIONS THAT EXISTED BEFORE 1 ST DAY OF APRIL, 2016 SHALL APPLY TO THE EARLIER YEARS, MEANING THER EBY, ITANO.1401/BANG/2018 PAGE 4 OF 8 THE PROVISIONS, WHICH ARE APPLICABLE TO A PARTICULA R YEAR, SHOULD BE APPLIED FOR DETERMINING THE ELIGIBILITY O F THE ASSESSEE TO CLAIM THIS DEDUCTION. ACCORDINGLY, WE S ET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE A.O. WITH THE D IRECTION TO APPLY WITH THE PROVISIONS OF SECTION 80JJAA OF T HE ACT AS APPLICABLE TO THE YEARS UNDER CONSIDERATION. 7. THE NEXT ISSUE RELATES TO DISALLOWANCE OF CLAIM OF REPAIR EXPENSES INCURRED ON LEASE HOLD BUILDING, TR EATING THE SAME AS CAPITAL EXPENDITURE. THE LD. A.R. SUBM ITTED THAT THE ASSESSEE HAS INCURRED CERTAIN EXPENSES ON LEASE HOLD PREMISES AND CLAIMED THE SAME AS REVENUE EXPENDITURE. HOWEVER, IN THE BOOKS OF ACCOUNTS, TH E ABOVE EXPENDITURE HAS BEEN CAPITALIZED BY THE ASSES SEE. THE LD. A.R. SUBMITTED THAT THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS SHALL NOT BIND THE INCOME TAX ACT. HE SUBMITTED THAT MOST OF THE EXPENSES INCURRED BY THE ASSESSEE DO NOT GIVE RISE TO ANY CAPITAL ASSET. HE SUBMITTED THAT ASSESSEE HAS FURNISHED DETAILS OF AL L EXPENSES BEFORE THE TAX AUTHORITIES. HOWEVER, THE SAID DETAILS HAVE NOT BEEN CRITICALLY EXAMINED BY THE TA X AUTHORITIES. HE SUBMITTED THAT THE LD. CIT(A) HAS APPLIED PROVISIONS OF EXPLANATION 1 TO SECTION 32(1) OF THE ACT ITANO.1401/BANG/2018 PAGE 5 OF 8 WITHOUT GIVING A FINDING AS TO WHETHER THE IMPUGNED EXPENDITURE IS IN THE NATURE OF CAPITAL EXPENDITURE OR NOT. ACCORDINGLY, HE PRAYED THAT THIS ISSUE MAY ALSO BE RESTORED TO THE FILE OF THE A.O. FOR EXAMINING IT A FRESH. 8. THE LD. D.R. ON THE CONTRARY SUPPORTED THE ORDER PASSED BY LD. CIT(A). LD. D.R. FURTHER SUBMITTED T HAT THE ASSESSEE ITSELF HAS CAPITALIZED THIS EXPENDITURE IN ITS BOOKS OF ACCOUNTS, WHICH CLEARLY PROVE THE NATURE O F EXPENDITURE. ACCORDINGLY HE SUBMITTED THAT THIS EXPENDITURE WAS RIGHTLY TREATED AS CAPITAL EXPENDIT URE BY THE LD. CIT(A). 9. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. THERE SHOULD NOT BE ANY DISPUTE THAT UNDER EXPLANATION 1 TO SECTION 32(1) OF THE ACT, DEPRECIA TION IS GRANTED ON THE CAPITAL EXPENDITURE INCURRED BY ANY ASSESSEE ON LEASE HOLD BUILDING. AS RIGHTLY POINTE D OUT BY LD. A.R., IN ORDER TO INVOKE THE PROVISIONS OF EXPL ANATION 1 TO SEC. 32(1), A FINDING HAS TO BE GIVEN FIRST AS TO THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE. IF THE NATURE OF EXPENDITURE IS CAPITAL IN NATURE, THEN TH E PROVISIONS OF EXPLANATION 1 TO SECTION 32(1) OF THE ACT SHALL APPLY. IT IS THE CASE OF THE ASSESSEE THAT M OST OF THE ITANO.1401/BANG/2018 PAGE 6 OF 8 EXPENDITURE INCURRED BY IT ON LEASE HOLD PREMISES A RE REVENUE IN NATURE. WE NOTICE THAT THE TAX AUTHORIT IES HAVE NOT EXAMINED THE NATURE OF EXPENDITURE INCURRE D BY THE ASSESSEE. WE ALSO NOTICE THAT THE ASSESSEE HAS FURNISHED THE VARIOUS DETAILS OF EXPENDITURE INCURR ED BY IT ON LEASE HOLD PREMISES. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE E ND OF THE A.O., SINCE THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE IS REQUIRED TO BE EXAMINED IN ORDER TO APP LY THE PROVISIONS OF EXPLANATION 1 TO SECTION 32(1) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE L D. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FI LE OF THE A.O. FOR EXAMINING IT AFRESH. 10. THE NEXT COMMON ISSUE RELATES TO CLAIM FOR CRED IT OF MAT AS PER PROVISIONS OF SECTION 115JAA OF THE ACT. SINCE THE CLAIM OF THE ASSESSEE REQUIRES EXAMINATION AT T HE END OF THE A.O., WE RESTORE THIS ISSUE TO THE FILE OF T HE A.O. 11. IN ASSESSMENT YEAR 2012-13, THE ASSESSEE HAS RA ISED ISSUE RELATING TO ASSESSMENT OF INTEREST OF INCOME TAX REFUND U/S 244A OF THE ACT AND NON-CREDIT OF TDS AMOUNT. BOTH THESE CLAIMS REQUIRE EXAMINATION AT T HE END OF THE A.O. ACCORDINGLY, WE SET ASIDE BOTH THE ISSUES ITANO.1401/BANG/2018 PAGE 7 OF 8 TO THE FILE OF THE A.O. FOR EXAMINING THEM IN ACCOR DANCE WITH LAW. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11.3.2020 SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 11 TH MARCH, 2020. /VG/ COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.