DCIT, Cir-3(1), Hyderabad V. M/s. Seven Hills Business Solutions, Hyderabad

ITA 819/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66242 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALKA R JAIN
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Deemed export
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEM BER ITA NO.796/HYD/2011 : ASSESSMENT YEAR 2007-08 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD., HYDERABAD ( PAN - AAECS 1694 K) V/S. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.819/HYD/2011 : ASSESSMENT YEAR 2007-08 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 3(1), HYDERABAD V/S. M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD, HYDERABAD ( PAN - AAECS 1694 K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.MURALI MOHANA RAO DEPARTMENT BY : SMT. ALKA R.JAIN DATE OF HEARING 24.7.2012 DATE OF PRONOUNCEMENT 14.9.2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE- ARE DIRECTED AGAINST THE ORDER OF THE COMM ISSIONER OF INCOME- TAX(APPEALS) GUNTUR, DATED 2.3.2011. SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 2 ASSESSEES APPEAL : ITA 796/HYD/2011: 2. THE ONLY ISSUE INVOLVED IN THE ASSESSEES APPEA L IS WITH REGARD TO DISALLOWANCE OF EXPENDITURE IN TERMS OF S.40A(IA) O F THE ACT, IN VIEW OF NON- DEDUCTION OF TAX AT SOURCE UNDER S.194J OF THE ACT. 3. ASSESSING OFFICER DISALLOWED A SUM OF RS.10,92, 886, AS THE ASSESSEE FAILED TO COMPLY WITH THE REQUIREMENTS OF S.194J OF THE ACT, BY APPLYING THE PROVISIONS OF S.40A(IA) OF THE ACT. ON APPEAL, THE CIT(A) CONFIRMED SUCH DISALLOWANCE MADE BY THE ASSESSING OFFICER. HENCE, ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. WE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RECORD. IN OUR OPINION, THE ISSUE INVOLVED IN THIS APPEAL OF T HE ASSESSEE IS COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNA L(VISAKHAPATNAM) DATED 29 TH MARCH, 2012 IN THE CASE OF MERILYN SHIPPING & TRA NSPORTS VISAKHAPATNAM V/S. ACIT RANGE-I, HYDERABAD IN ITA NO.477/VIZ./2008 FOR ASSESSMENT YEAR 2005-06 IN FAVOUR OF THE ASSESS EE AND AGAINST THE REVENUE. RELEVANT PORTION OF THE SAID DECISION IS R EPRODUCED BELOW- . I HAVE GONE THROUGH THE DETAILED REASONS GI VEN BY SHRI MAHAVIR SINGH WHILE COMING TO THE CONCLUSION THAT THE WORD PAYAB LE USED IN SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 HAS TO BE GIVEN ITS NAT URAL MEANING, AND, GOING BY STRICT INTERPRETATION, I AM OF THE FIRM VIEW THAT S ECTION 40(A)(IA) OF THE ACT IS APPLICABLE ONLY TO EXPENDITURE WHICH IS PAYABLE AS ON 31ST MARCH OF EVERY YEAR AND CANNOT BE INVOKED TO DISALLOW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE PREVIOUS YEAR, WITHOUT DEDUCTING TAX AT SOURCE. I THEREFORE, AGREE WITH THE VIEW TAKEN BY SHRI MAHAVAIR SINGH, JM AND ANSWER THE QUESTION ACCORDINGLY. THE MATTER MAY NOW BE PLACED BEFORE TH E DIVISION BENCH FOR PASSING APPROPRIATE ORDERS, IN THE ABOVE LISTED CAS ES, IN THE LIGHT OF THE MAJORITY VIEW OF THE MEMBERS CONSISTING OF THE SPEC IAL BENCH. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE HOLD THAT THE PROVISIONS OF S.40A(IA) ARE APPLICABLE ONLY IN RESPECT OF THE EXP ENDITURE WHICH REMAINS ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 3 PAYABLE AS ON 31 ST OF THE MARCH OF THE RELEVANT PREVIOUS YEAR, AND SU CH DISALLOWANCE CANNOT BE MADE IN RESPECT OF THE EXPEN DITURE WHICH HAS ALREADY BEEN PAID DURING THE RELEVANT PREVIOUS YEAR, THOUGH WITHOUT DEDUCTING TAX AT SOURCE. WE THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE IMPUGNED EXPENDI TURE TO THE EXTENT ALREADY PAID DURING THE RELEVANT PREVIOUS YEAR AND ACCORDIN GLY RESTRICT THE DISALLOWANCE ONLY TO THE AMOUNT REMAINING OUTSTANDING AS AT THE END OF THE RELEVANT PREVIOUS YEAR. 5. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. REVENUES APPEAL : ITA 819/HYD/2011: 6. THE FIRST GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL IS WITH REGARD TO GRANTING OF DEDUCTION UNDER S.10A OF THE INCOME- TAX ACT BY THE CIT(A), IN THE ABSENCE OF REQUISITE PROOF AND DETAILS FURNISHE D BY THE ASSESSEE. 7. THE ASSESSEE COMPANY CLAIMED DEDUCTION UNDER S. 10A OF THE ACT TO THE TUNE OF RS.1,00,89,335. THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER FOR THE REASONS THAT THE ASSESSEE HAS NOT FURNISHED THE EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED THE AMOUNT IN QUESTION IN CONVERTIBLE FOREIGN EXCHANGE, AND HAS ALSO NOT FURNISHED THE REQUISITE DETAILS IN FORM 56F. BEFORE THE CIT(A), ASSESSEE FURNISHED THE RELEVANT DETAILS TO SUBSTANTIATE ITS CLAIM OF ELIGIBILITY OF EXEMPTION UNDER S.10A OF THE ACT. T HE ASSESSEE FURNISHED THE DETAILS OF THE US BRANCH SALES AND THE BANK ACCOUNT COPY CONFIRMING THE RECEIPTS OF SALES. TAKING NOTE OF THE SAME, THE C IT(A) OBSERVED THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE IS A SOFTWARE DEVEL OPER AND THE ASSESSEE MADE EXPORTS TO USA THE ENTIRE VOLUME OF SOFTWARE DEVELO PED DURING THE YEAR UNDER CONSIDERATION. HE FURTHER OBSERVED THAT THIS IS NO T THE FIRST YEAR OF OPERATIONS ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 4 CLAIMING EXEMPTION UNDER S.10A OF THE ACT. THE CIT (A) ACCORDINGLY GRANTED DEDUCTION UNDER S.10A OF THE ACT IN ACCORDANCE WIT H FORM NO.56F FURNISHED BY THE ASSESSEE. 8. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), REVENUE IS IN APPEAL BEFORE US ON THIS ISSUE. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS A SOFTWARE DEVELOPER AND TH IS IS NOT THE FIRST YEAR OF OPERATION. IN EARLIER YEARS ALSO, THE ASSESSEE HAS CLAIMED EXEMPTION UNDER S.10A, AND AS IS EVIDENT FROM THE COPIES OF THE ASS ESSMENT ORDERS FOR EARLIER YEARS FURNISHED BEFORE US, THE SAME HAS BEEN HAS BE EN ALLOWED BY THE ASSESSING OFFICER AS WELL. THE ASSESSEE HAS FILED ALL THE REQUISITE DETAILS AS REQUIRED UNDER S10A OF THE ACT BEFORE THE CIT(A). BEING SO, WE DO NOT SEE ANY INFIRMITY IN THE ACTION OF THE CIT(A) IN GRANTI NG DEDUCTION UNDER S.10A ACT. THE ASSESSING OFFICER CANNOT DISTURB THE EXEMPTION UNDER S.10A IN THE MIDDLE OF THE PERIOD, HAVING GRANTED THE SAME IN THE EARLI ER YEARS, UNLESS HE HAS MATERIAL TO SHOW THAT THE ASSESSEE HAS VIOLATED AN Y OF THE PROVISIONS OF S.10A OF THE ACT, DURING THE YEAR UNDER APPEAL. THEREFORE , IN OUR OPINION, THE CIT(A) IS JUSTIFIED IN GRANTING DEDUCTION UNDER S.10A. ACC ORDINGLY, WE UPHOLD THE IMPUGNED ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE REVENUE ON THIS ISSUE. 10. THE NEXT GRIEVANCE OF THE REVENUE IN THIS APPE AL IS WITH REGARD TO DISALLOWANCE OF US BRANCH EXPENDITURE TO THE TUNE O F RS.11,96,91,582. 11. BEFORE THE ASSESSING OFFICER, WHO DISALLOWED T HE EXPENDITURE IN QUESTION, THE ASSESSEE HAS NOT FURNISHED THE DETAIL S OF THE EXPENDITURE INCURRED IN RESPECT OF US BRANCH. HOWEVER, THE ASS ESSEE FURNISHED THE DETAILS ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 5 OF SUCH EXPENDITURE INCURRED ON ON-SIGHT DEVELOPMEN T OF SOFTWARE AND PLEADED BEFORE THE CIT(A) THAT THE SAME HAS TO BE CONSID ERED AS DEEMED EXPORT AND SHOULD TO BE EXCLUDED FROM THE EXPORT OF SOFTWARE. THE ASSESSEE HAS ALSO FILED BEFORE THE CIT(A), THE INCOME TAX RETURN IN RESPECT OF THE US BRANCH AND CLAIMED THAT THE EXPENDITURE IN QUESTION SHOULD BE ALLOWED AS PER EXPLANATION 3 OF S.10A OF THE ACT. THE SAID EXPLANATION RELIED U PON BY THE ASSESSEE BEFORE THE CIT(A) READS AS FOLLOWS- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT THE PROFIT AND GAINS DERIVED FROM ON SITE DEVELOPM ENT OF THE COMPUTER SOFTWARE (INCLUDING SERVICES FOR DEVELOPMENT OF SOFTWARE) OU TSIDE INDIA SHALL BE DEEMED TO BE THE PROFITS AND GAINS DERIVED FROM THE EXPORT OF THE SOFTWARE OUTSIDE INDIA. THE CIT(A), AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE, CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER. IN THE A BSENCE OF ANY REMAND REPORT RECEIVED FROM THE ASSESSING OFFICER IN SPITE OF REP EATED REMINDERS GIVEN TO THE ASSESSING OFFICER ON SUCCESSIVE OCCASIONS BY HIS PR EDECESSOR, THE CIT(A) DRAWING HIS OWN INFERENCE THAT THE ASSESSING OFFICE R HAS NO COMMENTS TO OFFER, TREATED THE EXPENDITURE INCURRED IN FOREIGN BRANCH AS INCURRED FOR BUSINESS PURPOSES. HE ACCORDINGLY TREATED THE SAME AS CORRE CTLY EXPENDED FOR THE PURPOSE OF THE BUSINESS. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO ALLOW THE SAME. 12. AGAINST THE RELIEF GRANTED BY THE ASSESSING O FFICER, REVENUE IS IN APPEAL BEFORE US ON THIS ISSUE. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRON GLY OPPOSED THE ACTION OF THE CIT(A) AND RELIED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF JCIT V/S. SWARUP VEGETABLE PRODUCTS (98 TTJ 420), WHEREIN, VIDE APRA-13, IT IS HELD AS FOLLOWS- ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 6 13. IN VIEW OF THE POSITION ENUNCIATED BY THE JUDG EMENT OF THE APEX COURT, HON'BLE DELHI HIGH COURT AND VARIOUS OT HER HIGH COURTS IN INDIA, THE LEGAL POSITION IS QUITE CLEAR THAT WHILE DECIDING A GROUND OF APPEAL TAKEN BY AN ASSESSEE IT IS INCUM BENT UPON THE CIT(A) TO GIVE A POSITIVE FINDING OF FACT. HE CANNO T DECIDE AN APPEAL ON THE BASIS OF THE NEGATIVE FINDING THAT THE AO HA S NOT INQUIRED INTO THE MATTER FULLY OR THAT HE HAS NOT PROPERLY A RRIVED AT THE FINDING OF FACT. THE CIT(A) HAS TO DECIDE THE MATTE R, ON MERITS ON THE BASIS OF MATERIAL ALREADY AVAILABLE ON RECORD A ND IF FOR THAT PURPOSE IT IS NECESSARY TO MAKE FURTHER INQUIRY, TH E CIT(A) HAS ONLY TWO OPTIONS I.E., EITHER TO MAKE FURTHER INQUI RIES HIMSELF OR TO HAVE SUCH INQUIRY AS HE THINKS FIT MADE BY THE AO. THE EXPRESSION 'MAY' APPEARING IN SECTION 250(4) IS REQUIRED TO BE INTERPRETED AS 'SHALL'. THE POWERS CONFERRED UPON THE CIT(A) UNDER SECTION 250(4) ARE NOT MERELY DECORATIVE OR COSMETIC. THEY CAST UPON THE CIT(A) AN OBLIGATION AND DUTY TO CARRY OUT SUCH FUR THER INQUIRY AS IS NECESSARY TO ARRIVE AT A DECISION ON MERITS ON T HE FACTS OF THE CASE. IN THE INSTANT CASE BEFORE US THE CIT(A) HAS DELETED THE ADDITION OF THE HIGHER AMOUNT OF RS. 35 LAKHS FOR T HE SHORT REASON THAT THE AO HAD MADE AN ASSESSMENT OF RS. 11,00,562 /- ALSO. IT WAS INCUMBENT UPON HIM TO ARRIVE AT A POSITIVE FINDING AS TO WHICH OF THESE TWO ADDITIONS TO THE DECLARED INCOME WERE REA LLY CALLED FOR. WE SEE NO MERIT IN THE CONTENTION OF THE LD. CIT(A) THAT AS THE AMOUNTS HAD BEEN ALLEGED BY THE ASSESSEE AS THE SAL E PROCEEDS OF FIXED ASSETS, THE AO WAS PRECLUDED FROM APPLYING TH E PROVISIONS OF SECTION 68 OF THE ACT. FOR ARRIVING AT THAT VIEW IT WAS FIRST NECESSARY TO COM E TO THE CONCLUSION THAT THERE WAS INDEED SALE OF PLANT AND MACHINERY TO M/S A.S. ENGINEERING WORKS A S ALLEGED BY THE ASSESSEE. THE LD. CIT(A) HAS NOT ADDRESSED HIMS ELF TO THAT ISSUE AT ALL. WE, THEREFORE, CONSIDER IT NECESSARY TO RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) FOR DECISION AF RESH IN THE LIGHT OF THE OBSERVATIONS MADE BY US IN THIS ORDER. LET IT B E CLEARLY UNDERSTOOD THAT FOR THIS PURPOSE THE CIT(A) WOULD C ONSIDER ON MERITS AS TO WHICH ONE OF THE TWO ADDITIONS I.E., R S. 20 LAKHS OR RS. 11,00,562A SHOULD BE RETAINED. HE SHOULD ARRIVE AT SPECIFIC FINDINGS OF FACT AS TO WHETHER OR NOT THE ASSESSEE SOLD PLANT AND MACHINERY TO M/S A.S. ENGINEERING WORKS, KHATOLI AS CLAIMED BY THE ASSESSEE. 14. ON THE OTHER HAND, THE LEARNED AUTHORISED REP RESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS N OT SUBMITTED ANY REMAND REPORT EVEN AFTER LONG WAIT OF THE CIT(A) FOR OVER AN YEAR DULY SENDING ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 7 REMINDERS TO THE ASSESSING OFFICER FOR THE SAME. I T WAS IN THE ABSENCE OF ANY RESPONSE TO THE ASSESSING OFFICER IN SPITE OF REPEA TED REMINDERS, THAT THE CIT(A) DREW HIS OWN INFERENCE, AND ALLOWED THE CLAIM OF TH E ASSESSEE. HE PRAYED THAT THE ORDER OF THE CIT(A) IS PERFECTLY IN ORDER AND S HOULD BE UPHELD. 15. WE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD. ADMITTEDLY, THE CIT(A) IN THE PRESENT CASE CALLED F OR REMAND REPORT OF THE ASSESSING OFFICER ON THE ISSUE INVOLVED, AND WAITED FOR OVER A YEAR. IN SPITE OF REMINDERS SENT TO THE ASSESSING OFFICER FROM TIME T O TIME, THERE WAS NO RESPONSE FROM THE ASSESSING OFFICER. THE APPEAL OF THE ASSESSEE WAS FILED BEFORE THE CIT(A) ON 18.12.2009 AND THE SAME WAS DI SPOSED OFF BY THE ORDER OF THE CIT(A) ON 12.3.2011. THE CIT(A) HAS WRITTEN A L ETTER DATED 1 ST MARCH, 2010 INFORMING THE DCIT THAT ASSESSEE FURNISHED THE ADD ITIONAL EVIDENCE AS PER RULE 46A(1) OF THE INCOME-TAX RULES, AND CALLED FOR HIS REPORT THEREON. FURTHER ON 9 TH AUGUST, 2010, HE SENT A REMINDER, AS THERE WAS NO REPLY FROM THE ASSESSING OFFICER. EVEN THEREAFTER, THERE WAS NO R ESPONSE FROM THE ASSESSING OFFICER. IN THE CIRCUMSTANCES, THE CIT(A) DRAWING HIS OWN INFERENCE THAT THE ASSESSING OFFICER HAS NO COMMENTS TO OFFER, BY FURN ISHING THE REMAND REPORT AS CALLED FOR, PROCEEDED TO DISPOSE OFF THE APPEAL BEF ORE HIM ON MERITS. IN THE CIRCUMSTANCES, WE FIND EFFECTIVE OPPORTUNITY OF HEA RING HAS BEEN GRANTED BY THE CIT(A) TO THE ASSESSING OFFICER, SINCE EFFECTIVE OP PORTUNITY DOES NOT MEAN GIVING INDEFINITE PERIOD OF TIME. BEFORE US, THE R EVENUE HAS NOT PLACED ANY MATERIAL TO SUGGEST THAT THE CIT(A) HAS NOT GIVEN R EASONABLE OPPORTUNITY OF HEARING TO THE ASSESSING OFFICER. IN THE CIRCUMSTAN CES, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(A). IN VIEW OF THIS, THE INFE RENCE DRAWN BY THE CIT(A) THAT THE EXPENSES INCURRED BY THE ASSESSEE IN FOREIGN BR ANCH IS FOR THE PURPOSES OF BUSINESS ONLY AND HAS TO BE TREATED AS EXPENDED FOR THE PURPOSES OF BUSINESS. FURTHER, AS HELD BY THE COORDINATED BENCH OF THE TR IBUNAL IN THE CASE OF DCIT V/S. PLANET ONLINE PRIVATE LIMITED IN ITS ORDER DAT ED 29-8-2008 PASSED IN ITA ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 8 NO.1016/HYD/2007 FOR THE ASSESSMENT YEAR 2004-05, THAT ENHANCED INCOME, IF ANY, ON ACCOUNT OF ANY DISALLOWANCE, IS CONSTRUE D AS INCOME FROM EXPORTS ONLY, CONSEQUENTLY BOOSTING THE INCOME ELIGIBLE FOR EXEMPTION UNDER S.10A OF THE ACT. EVEN ON THAT COUNT ALSO, THE CLAIM OF BE ASSESSEE HAS TO BE ALLOWED. 16. THE NEXT GROUND IS WITH REGARD TO ALLOWANCE O F EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS PRODUCT DEVELOPMENT EXPENDI TURE AS EXPENDITURE IS NOT ALLOWABLE FOR AMORTIZATION. 17, THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.63,9 1,878, BEING EXPENDITURE TOWARDS PRODUCT DEVELOPMENT AND THE SAM E WAS WRITTEN OFF. AS THE DETAILS OF THE EXPENDITURE WERE NOT A FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE SAME. ON APPEAL, THE CIT(A) ALLOWED THE SAME OBSERVING THAT THE ASSESSEE HAS DEVELOPED SUPPLY CH AIN MANAGEMENT SOFTWARE AND THE EXPENDITURE INCURRED ON SUCH PRODUCT DEVELO PMENT IS WRITTEN OFF AT THE RATE OF 10% EVERY YEAR, AS IT IS A CONTINUING PROCE SS. THE ASSESSEE HAS BEEN FOLLOWING THIS SYSTEM YEAR AFTER YEAR AND THE SAME WAS ALLOWED BY THE CIT(A). AGAINST THE RELIEF GRANTED BY THE CIT(A), REVENUE I S IN APPEAL BEFORE US. 18. WE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIALS ON RECORD. AS SEEN FROM THE ORDER OF THE CIT(A), THIS EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE YEAR AFTER YEAR AND 10% OF THE PRODUCT DEV ELOPMENT EXPENDITURE IS WRITTEN OFF IN THE YEAR UNDER CONSIDERATION. THIS B EING EXPENDITURE OF REGULAR NATURE, AND HAS BEEN INCURRED BY THE ASSESSEE FOR T HE PURPOSE OF BUSINESS, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THI S ISSUE. THE SAME IS ACCORDINGLY CONFIRMED, AND THE GROUNDS OF THE REVEN UE ON THIS ISSUE ARE REJECTED. 19. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.796 & 819/HYD/11 M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD. HYDERABAD 9 20. TO SUM UP, WHILE THE APPEAL OF THE ASSESSEE, BEING ITA NO. 796/HYD./2011 IS PARTLY ALLOWED, APPEAL FOR THE REV ENUE BEING ITA NO. 819/HYD/2011 IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 14.09.2012 SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 14 TH SEPTEMBER, 2012 COPY FORWARDED TO: 1. M/S. SEVEN HILLS BUSINESS SOLUTIONS LTD., C/O. M/S.P.MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-6755/2/3, 1ST FLOOR , SOMAJIGUDA, HYDERABAD-82 2. DY. COMMISSIONER OF INCOME - TAX CIRCLE 3 ( 1 ), HYDERABAD. 3. COMMISSIONER OF INCOME - TAX(APPEALS), GUNTUR . 4. COMMISSIONER OF INCOME-TAX III HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.