Portal Player (India) Private Limited, Bangalore V. CIT, Bangalore

ITA 9/BANG/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0285 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 05-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHAVALI S NARAYAN
• Keywords: Depreciation; Wrong claim; Revenue expenditure; Capital expenditure

Judgement Text

ITA.9/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.9/BANG/2016 (ASSESSMENT YEAR : 2003-04) M/S. PORTAL PLAYER (INDIA) P. LTD, (MERGED WITH NVIDIA GRAPHICS P. LTD,) PLOT NO.6A & B, IT PARK LAYOUT, NANAKRAM GUDA, HYDERABAD .. APPELLANT PAN : AABCP7418F V. COMMISSIONER OF INCOME-TAX, APPEALS -5, BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. CHAVALI S. NARAYAN, CA REVENUE BY : SMT. SWAPNA DAS, JCIT HEARD ON : 23.06.2016 PRONOUNCED ON : 15.07.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT ASSAILS PENALT Y LEVIED U/S.271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT IN SHORT). 02. LD. AR STRONGLY ASSAILING THE LEVY OF PENALTY W HICH WAS CONFIRMED BY CIT (A) ON APPEAL BY THE ASSESSEE, SUBMITTED THA T ASSESSEE HAD CLAIMED ITA.9/BANG/2016 PAGE - 2 RS.36,78,988/- AS SOFTWARE EXPENDITURE. AS PER THE LD. AR, AO HAD IN THE ASSESSMENT PROCEEDINGS, AFTER VERIFICATION OF THE B ILLS CAME TO A CONCLUSION THAT THE CLAIM WAS FOR HARDWARE LIKE EXCHANGE SERVE RS AND SOFTWARE KITS. EXPLANATION OF ASSESSEE WAS THAT SUCH EXPENDITURE D ID NOT RESULT IN ENDURING BENEFIT AND WAS REVENUE IN NATURE. HOWEVE R, AO WAS NOT IMPRESSED. HE HELD THAT SOFTWARE AND HARDWARE PURC HASED BY ASSESSEE GAVE ENDURING BENEFIT TO IT AND THEREFORE OUTGO HAS TO B E TREATED AS CAPITAL EXPENDITURE. ADDITION WAS MADE BUT DEPRECIATION WA S ALLOWED. 03. THEREAFTER PROCEEDINGS WERE INITIATED U/S.271(1 )(C) OF THE ACT, FOR MAKING A WRONG CLAIM. AS PER THE AO ASSESSEE HAD F URNISHED INACCURATE PARTICULARS BY CLAIMING RS.36,76,988/- AS A REVENUE OUTGO, WHEN IT WAS A CAPITAL EXPENDITURE. RELYING ON JUDGMENT OF HONBL E APEX COURT IN THE CASE OF UNION OF INDIA V. DHARMENDRA TEXTILES PROCE SSORS AND OTHERS [306 ITR 277], AO LEVIED A PENALTY ON THE SAID AMOUNT AT THE MINIMAL LEVEL. AMOUNT OF PENALTY CAME TO RS.5,40,810/-. 04. APPEAL OF THE ASSESSEE BEFORE CIT (A) DID NOT M EET WITH ANY SUCCESS. ACCORDING TO HIM ASSESSEE COULD NOT GIVE ANY EXPLAN ATION FOR THE CLAIM MADE BY IT. ITA.9/BANG/2016 PAGE - 3 05. NOW BEFORE US, LD. AR SUBMITTED THAT IT WAS TRU E THAT ASSESSEE HAD MADE A CLAIM FOR SOFTWARE EXPENDITURE OF RS.36,76,9 88/-. HOWEVER ACCORDING TO HIM IT WAS A DEBATABLE ISSUE WHETHER S OFTWARE AND HARDWARE EXPENDITURE COULD BE TREATED AS REVENUE OR CAPITAL. RELYING ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT V . RELIANCE PETRO PRODUCTS P LTD, [322 ITR 158], LD. AR SUBMITTED THA T PREFERRING A CLAIM OF EXPENDITURE IN GOOD FAITH CANNOT BE A REASON FOR LE VYING PENALTY, JUST FOR A REASON THAT CLAIM WAS DISALLOWED. 06. PER CONTRA, LD. DR SUPPORTED THE ORDER OF LOWER AUTHORITIES. 07. I HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. CLAIM MADE BY ASSESSEE AS REVENUE EXPENDITURE COMPRISED O F THE FOLLOWING ITEMS: ITA.9/BANG/2016 PAGE - 4 08. THOUGH SOME OF THE ITEMS LISTED ABOVE DO HAVE A FLAVOUR OF HARDWARE, IT IS CLEAR THAT SUBSTANTIAL SOFTWARE CON TENT WOULD ALSO HAVE BEEN IN-BUILT IN SUCH HARDWARE. MANY OF ITEMS WERE SIMP LE SOFTWARE SERVICE TOOLS. THE QUESTION WHETHER EXPENDITURE INCURRED F OR ACQUIRING SOFTWARE WAS CAPITAL OR REVENUE IN NATURE IS NOT FREE FROM D EBATE. JUST BECAUSE ASSESSEE MADE A CLAIM, WE CANNOT SAY THAT IT HAD CO NCEALED ANY PARTICULARS OR FURNISHED INACCURATE PARTICULARS. DISALLOWANCE OF A CLAIM BY ITSELF WOULD NOT ENTAIL A PENALTY. UNLESS THE CLAIM WAS M ADE WITH AN INTENTION TO REDUCE THE TAXABLE INCOME, THERE CANNOT BE A LEVY O F PENALTY. IN MY OPINION THIS WAS NOT A FIT CASE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. PENALTY STANDS DELETED. 09. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF JULY, 2016. SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER MCN ITA.9/BANG/2016 PAGE - 5 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR