New Delhi Television Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 852/DEL/2012

• Counselvise Citation: 85220114 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GUNJAN P RASAD
• Keywords: Depreciation; Revised return; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO. .. .852/DEL/2012 852/DEL/2012 852/DEL/2012 852/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2006 2006 2006 2006- -- -07 0707 07 M/S NEW DELHI TELEVISION M/S NEW DELHI TELEVISION M/S NEW DELHI TELEVISION M/S NEW DELHI TELEVISION LIMITED, LIMITED, LIMITED, LIMITED, 207, OKHLA INDUSTRIAL ESTATE 207, OKHLA INDUSTRIAL ESTATE 207, OKHLA INDUSTRIAL ESTATE 207, OKHLA INDUSTRIAL ESTATE, ,, , PHASE PHASE PHASE PHASE- -- -III, III,III, III, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 020. 110 020. 110 020. 110 020. PAN : PAN : PAN : PAN : AAACN0865D. AAACN0865D. AAACN0865D. AAACN0865D. VS. VS. VS. VS. ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF ADDITIONAL COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, RANGE RANGE RANGE RANGE- -- -13, 13, 13, 13, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NO.942/DEL/2012 .942/DEL/2012 .942/DEL/2012 .942/DEL/2012 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2006 2006 2006 2006- -- -07 0707 07 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -13(1), 13(1), 13(1), 13(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S NEW DELHI TELEVISION LIMITED, M/S NEW DELHI TELEVISION LIMITED, M/S NEW DELHI TELEVISION LIMITED, M/S NEW DELHI TELEVISION LIMITED, 207, OKHLA INDUSTRIAL ESTATE, 207, OKHLA INDUSTRIAL ESTATE, 207, OKHLA INDUSTRIAL ESTATE, 207, OKHLA INDUSTRIAL ESTATE, PHASE PHASE PHASE PHASE- -- -III, III,III, III, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 020. 110 020. 110 020. 110 020. PAN : AAACN0865D. PAN : AAACN0865D. PAN : AAACN0865D. PAN : AAACN0865D. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARANDEEP SINGH, CA. REVENUE BY : SHRI GUNJAN PRASAD, CIT-DR. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : ITA NO.852/DEL/2012 ITA NO.852/DEL/2012 ITA NO.852/DEL/2012 ITA NO.852/DEL/2012 :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XVI, NEW DELHI DATED 30 TH SEPTEMBER, 2011 FOR THE AY 2006-07. ITA-852 & 942/D/2012 2 2. THE ONLY GROUND RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF ` 12,52,71,933/- WHICH WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF EMPLOYEE STOCK OPTION PLAN EXPENSES. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL PLACED BEFORE US. WE FIND THAT THIS ISSUE IS NOW COVERED BY TH E DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF BIOCON LIMITED VS. DCIT(LTU), BANGALORE [2013] 35 TAXMANN.COM 335 (BANGALORE-TR IB.)(SB). AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES, WE ARE OF THE OPINION THAT IT WOULD MEET THE ENDS OF JUSTICE IF THIS ISSUE IS SET A SIDE AND RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATIO N IN THE LIGHT OF THE ABOVE DECISION OF SPECIAL BENCH OF ITAT. WE ORDER A CCORDINGLY AND DIRECT THE ASSESSING OFFICER TO ALLOW ADEQUATE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE WHILE GIVING EFFECT TO THIS ORDER . ITA NO.942/DEL/2012 ITA NO.942/DEL/2012 ITA NO.942/DEL/2012 ITA NO.942/DEL/2012 :- 4. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN HOLDING THAT SOFTWARE EXPENSES REGARDING ACCOUNTING AN UPGRADATION SOFTWARE ARE REV ENUE IN NATURE AND HENCE ALLOWABLE AS EXPENSES. RELIANCE I S PLACED ON THE JUDGEMENT OF THE HON'BLE SUPREME COUR T IN THE CASE OF TATA CONSULTANCY SERVICES VS. STATE OF ANDH RA PRADESH (2004) 271 ITR 401. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN IGNORING THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (2006) 284 ITR 323 (SC), WHEREIN IT HAS BEEN HELD TH AT THE AO HAS NO POWER TO ENTERTAIN A CLAIM MADE OTHERWISE T HAN BY FILING A REVISED RETURN OF INCOME AND DIRECTING T HE AO ENTERTAIN THE CLAIM OF THE ASSESSEE FOR ADDITIONAL UNABSORBED BUSINESS LOSS WHICH WAS NOT CLAIMED IN THE RETURN FILED. ITA-852 & 942/D/2012 3 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRE SH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 5. THE FACTS OF THE CASE ARE THAT DURING THE YEAR UND ER CONSIDERATION, THE ASSESSEE CLAIMED DEDUCTION OF ` 30,08,440/- ON ACCOUNT OF SOFTWARE. THE ASSESSING OFFICER TREATED THE SAME AS CAPITAL EXPENDITURE AND, AFTER ALLOWING DEPRECIATION THEREO N AT THE RATE OF 60%, DISALLOWED ` 12,03,376/-. ON APPEAL, LEARNED CIT(A) ACCEPTED TH E CLAIM OF THE ASSESSEE AND HELD THE EXPENSES TO BE REVENUE EXPENDITURE. THE REVENUE, AGGRIEVED WITH THE ORDER OF LEARNED CIT(A), IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING BEFORE US, LEARNED CIT-DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE DECISION OF HONBLE APEX COURT IN THE CASE OF TATA CONSULTANCY SERVICES VS. STAT E OF ANDHRA PRADESH [2004] 271 ITR 401. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HA ND, RELIED UPON THE FOLLOWING DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT :- (I) CIT VS. K & CO. [2003] 181 CTR (DEL) 378. (II) CIT VS. G.E. CAPITAL SERVICES LTD. ITA NO.560/2007 ORDER DATED 10 TH JULY, 2007. (III) CIT VS. ASAHI INDIA SAFETY GLASS LTD. [2011] 245 CTR 529 (DELHI). (IV) CIT VS. AMWAY INDIA ENTERPRISES [2012] 346 ITR 341 (DELHI). 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND P ERUSED THE MATERIAL PLACED BEFORE US. THE LEARNED DR HAS RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF TATA CO NSULTANCY ITA-852 & 942/D/2012 4 SERVICES (SUPRA). HOWEVER, WE FIND THAT THE ABOVE DE CISION WAS UNDER THE ANDHRA PRADESH GENERAL SALES TAX ACT, 1957 AND TH E DISPUTE WAS WHETHER THE SOFTWARE PACKAGES ARE GOODS WITHIN THE MEA NING OF ANDHRA PRADESH GENERAL SALES TAX ACT. THE ISSUE WHETHE R THE EXPENSES ON SOFTWARE PACKAGES ARE CAPITAL OR REVENUE W AS NOT BEFORE THE HONBLE APEX COURT. THEREFORE, IN OUR OPINION, THE ABOVE DECISION OF HONBLE APEX COURT WOULD BE OF NO HELP TO THE RE VENUE IN THE PRESENT CASE. ON PERUSAL OF THE DECISIONS RELIED UPON B Y THE LEARNED COUNSEL, WE FIND THAT HON'BLE JURISDICTIONAL HIGH COU RT IN A SERIES OF DECISIONS HAS HELD THAT THE EXPENDITURE INCURRED BY TH E ASSESSEE ON PURCHASE OF SOFTWARE APPLICATION IS A REVENUE EXPENDIT URE. IN THE CASE OF ASAHI INDIA SAFETY GLASS LTD. (SUPRA), HON'BLE JURISD ICTIONAL HIGH COURT DISCUSSED THIS ISSUE AT LENGTH AND HELD AS UNDER:- SOFTWARE IS NOTHING BUT ANOTHER WORD FOR COMPUTER PROGRAMMES, I.E., INSTRUCTIONS, THAT MAKE THE HARDWARE WORK. SOFTWARE IS BROADLY OF TWO TYPES, I.E., THE SYSTEMS SOFTWARE, WHICH IS ALSO KNOWN AS THE OPERATING SYSTEM WHICH CONTROLS THE WORKING OF THE COMPUTER; WHILE TH E OTHER BEING APPLICATIONS SUCH AS WORD PROCESSING PROGRAMS, SPREAD SHEETS AND DATABASE WHICH PERFORM THE TASKS FOR WHICH PEOPLE USE COMPUTERS. BESIDES THESE, THERE ARE TWO OTHER CATEGORIES OF SOFTWARE, THESE BEING: NET WORK SOFTWARE AND LANGUAGE SOFTWARE. THE NETWORK SOFTWARE ENABLES GROUPS OF COMPUTERS TO COMMUNICATE WITH EACH OTHER, WHILE LANGUAGE SOFTWARE PROVIDES WITH TOOLS REQ UIRED TO WRITE PROGRAMMES. [PARA 11] THE AFORESAID WOULD SHOW THAT WHAT THE ASSESSEE ACQUIRED THROUGH A WAS AN APPLICATION SOFTWARE WHICH ENABLED I T TO EXECUTE TASKS IN THE FIELD OF ACCOUNTING, PURCHASES AND INVENTORY MAINTENANCE. THE FACT THAT THE APPLICATIO N SOFTWARE 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 DU E TO STATUTORY AMENDMENTS BY LAW OR BY PROFESSIONAL BODIES LIKE THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, WHICH ITA-852 & 942/D/2012 5 ARE GIVEN THE RESPONSIBILITY OF CONCEIVING AND FORMUL ATING THE ACCOUNTING STANDARDS FROM TIME TO TIME, AND PERHA PS ALSO, BY REASON OF THE FACT THAT EXPENSES MAY HAVE TO BE INCURRED ON ACCOUNT OF CORRUPTION OF THE SOFTWARE DU E TO UNINTENDED OR INTENDED INGRESS INTO THE SYSTEM - OUGHT NOT GIVE A COLOUR TO THE EXPENDITURE INCURRED AS ONE EXP ENDED ON CAPITAL ACCOUNT. GIVEN THE FACT THAT THERE ARE M YRIAD FACTORS WHICH MAY CALL FOR EXPENSES TO BE INCURRED IN THE FIELD OF SOFTWARE APPLICATIONS, IT CANNOT BE SAID THAT EITHER THE EXTENT OF THE EXPENSE OR THE EXPENSE BEING INCURR ED IN CLOSE PROXIMITY, IN THE SUBSEQUENT YEARS, WOULD BE CONCLUSIVELY DETERMINATIVE OF ITS NATURE. THE ASSESSING OFFICER HAS ERRED PRECISELY FOR THESE VERY REASONS. [PAR A 12] THE CONTENTION OF THE REVENUE THAT IN THE BOOKS OF A CCOUNT, THE ASSESSEE HAD NOT WRITTEN OFF THE EXPENSE IN ISSUE, WHILE IN THE SUCCEEDING ASSESSMENT YEAR ONLY A PART OF T HE EXPENSE HAD BEEN WRITTEN OFF AND, THEREFORE, THE ASSESSEE'S OWN UNDERSTANDING OF THE NATURE OF THE EXPENSE INVOLVED WAS THAT IT WAS EXPENDED ON CAPITAL ACCOUNT IS BE REJECTED. THE REASON BEING: THAT THE TREATMENT OF A PARTICULAR EXPENSE OR A PROVISION IN THE BOOKS OF ACCO UNT CAN NEVER BE CONCLUSIVELY DETERMINATIVE OF THE NATUR E OF THE EXPENSE. AN ASSESSEE CANNOT BE DENIED A CLAIM FOR DEDUCTION WHICH IS OTHERWISE TENABLE IN LAW ON THE GR OUND THAT THE ASSESSEE HAD TREATED IT DIFFERENTLY IN ITS BOO KS. [PARA 13 & 13.1] THEREFORE, THE AFORESAID CONTENTION IS OF NO AVAIL TO THE REVENUE. [PARA 13.2] THEREFORE, THE TRIBUNAL WAS CORRECT IN LAW IN HOLDIN G THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF SOFTWARE AND PROFESSIONAL EXPENSES WAS A REVENUE EXPENDITURE. 9. SIMILAR VIEW IS TAKEN BY THEIR LORDSHIPS OF HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. K & C O. (SUPRA), G.E. CAPITAL SERVICES LTD. (SUPRA) AND AMWAY INDIA EN TERPRISES (SUPRA). RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF HON'BLE ITA-852 & 942/D/2012 6 JURISDICTIONAL HIGH COURT, WE UPHOLD THE ORDER OF LE ARNED CIT(A) AND DISMISS THE REVENUES APPEAL. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES WHILE THE APPEAL OF TH E REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2013. SD/- SD/- ( (( (A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 20.12.2013 VK. COPY FORWARDED TO: - 1. ASSESSEE : M/S NE M/S NE M/S NE M/S NEW DELHI TELEVISION LIMITED, W DELHI TELEVISION LIMITED, W DELHI TELEVISION LIMITED, W DELHI TELEVISION LIMITED, 207, OKHLA INDUSTRIAL ESTATE, 207, OKHLA INDUSTRIAL ESTATE, 207, OKHLA INDUSTRIAL ESTATE, 207, OKHLA INDUSTRIAL ESTATE, PHASE PHASE PHASE PHASE- -- -III, NEW DELHI III, NEW DELHI III, NEW DELHI III, NEW DELHI 110 020. 110 020. 110 020. 110 020. 2. REVENUE : ASSISTANT COMMISSIONER OF INCOME TA X, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -13(1), NEW DELHI. 13(1), NEW DELHI. 13(1), NEW DELHI. 13(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR