M/s.Geosoft Technologies(Trivandrum) Ltd, Trivandrum V. ACIT, Trivandrum

ITA 91/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68924 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 19-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: P G JAYASHANKAR
• Keywords: Recovery proceedings; Revenue expenditure
• Section: 263

Judgement Text

1 ITA NO.91/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 91/COCH/2013 (ASSESSMENT YEAR 2006-07) GEOSOFT TECHNOLOGIES (TRIVANDRUM) LTD VS THE A.C.I. T., CIR.1(1) 233-235, NILA, TECHNOPARK CAMPUS TRIVANDRUM TRIVANDRUM PAN : AABCG2095B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.G. JAYASHANKAR RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 01-08-2013 DATE OF PRONOUNCEMENT : 23-08-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), TRIVANDRUM DATED 05-12-2012 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF RS. 48,04,938 AS EXCESS DEFERRED EXPENSES. ACCORDING T O THE LD.COUNSEL SHRI P.G. JAYSHANKAR, THE ASSESSING OFFICER ORIGINALLY A LLOWED THE CLAIM OF DEFERRED EXPENDITURE. HOWEVER, THE ADMINISTRATIVE COMMISSIONER IN 2 ITA NO.91/COCH/2013 EXERCISE OF HIS REVISIONAL JURISDICTION U/S 263 OF THE ACT FOUND THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE OF DEF ERRED EXPENDITURE. ACCORDINGLY, THE ADMINISTRATIVE COMMISSIONER DIRECT ED THE ASSESSING OFFICER TO RE-EXAMINE THE MATTER. THE ASSESSEE FIL ED THE APPEAL BEFORE THIS TRIBUNAL IN ITA NO.279/COCH/2011. THIS TRIBUNAL BY AN ORDER DATED 10-08- 2012 CONFIRMED THE ORDER OF THE ADMINISTRATIVE COMM ISSIONER PASSED U/S 263 OF THE ACT BY HOLDING THAT THE ASSESSMENT ORDER DID NOT CONTAIN ANY REASON AND DID NOT REFLECT THE APPLICATION OF MIND OF THE ASSESSING OFFICER. THE LD.COUNSEL FURTHER SUBMITTED THAT A FURTHER APP EAL WAS FILED BEFORE THE KERALA HIGH COURT IN ITA NO.20 OF JUNE, 2013. THE HIGH COURT BY JUDGMENT DATED 07-06-2013 CONFIRMED THE ORDER OF TH E TRIBUNAL AND DISMISSED THE APPEAL OF THE ASSESSEE IN LIMINE. AC CORDINGLY, THE ASSESSING OFFICER HAS PASSED THE CONSEQUENTIAL ORDE R. REFERRING TO THE MERIT OF THE ADDITION, THE LD.COUNSEL FOR THE ASSES SEE SUBMITTED THAT AS ON 31-03-2006 THE ASSESSEE INCURRED AN EXPENDITURE OF RS.1,00,61,197 FOR TRAINING THE RECRUITED EMPLOYEES. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE AMORTISED THE EXPENDITURE AND CLAIMED 20% OF THE SAME IN RESPECT OF THE EMPLOYEES, WHO CONTINUED IN SERVICE AFTER TRAINING. IN RESPECT OF THE EMPLOYEES WHO LEFT SERVICE AFTER COM PLETION OF TRAINING, THE ENTIRE COST OF TRAINING WAS CLAIMED AS REVENUE EXPE NDITURE. HOWEVER, THE ASSESSING OFFICER FINDING THAT THE ASSESSEE HAS CON SIDERED ONLY 20% OF THE EXPENDITURE AS DEFERRED REVENUE EXPENDITURE IN RESP ECT OF EMPLOYEES WHO 3 ITA NO.91/COCH/2013 LEFT THE COMPANY AFTER TRAINING, THE CLAIM OF THE A SSESSEE FOR THE ENTIRE EXPENDITURE WAS DISALLOWED. ACCORDING TO THE LD.RE PRESENTATIVE, IT IS THE POLICY OF THE COMPANY TO WRITE OFF THE ENTIRE EXPEN DITURE INCURRED ON TRAINING IN CASE THE RECRUITED EMPLOYEES LEFT THE C OMPANY AFTER COMPLETION OF TRAINING. IN RESPECT OF THOSE EMPLOYEES, WHO CO NTINUED IN SERVICE, THE EXPENDITURE WAS AMORTISED AND WHAT WAS CLAIMED IS O NLY 20% OF THE EXPENDITURE. THEREFORE, ACCORDING TO THE LD.REPRES ENTATIVE, THE DISALLOWANCE OF THE EXPENDITURE RELATING TO THE EMP LOYEES, WHO LEFT THE SERVICE IS NOT JUSTIFIED. 3. ON THE CONTRARY, SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT IN THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS ON 16-04-2006 THERE WAS NO SPECIFIC DATE OR FINANCIAL YEAR TO INDICATE FROM WHICH YEAR OR DATE THE CHANGE IN POLICY WAS BROUGHT IN. REFERRING TO THE ORDER OF THE CIT(A), MORE PARTICULARLY PAGE 10, THE LD.DR SUBMITTED THAT AS P ER THE NOTES ON ACCOUNTS IT WAS CLAIMED THAT THE EXPENSES OF STAFF TRAINING WAS TREATED AS DEFERRED REVENUE EXPENDITURE AND CHARGED TO PROFIT & LOSS ACCOUNT FOR FIVE YEARS. IN THE EARLIER YEAR, THE ABOVE SAID EXPENSE S HAVE BEEN CLAIMED AT 25% OF THE BALANCE AS DEFERRED REVENUE EXPENDITURE AND 20% OF THE EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDER ATION. ACCORDING TO THE LD.DR, THE RESOLUTION SAID TO BE PASSED DOES NOT RE LATE TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, IT IS NOT APP LICABLE. ACCORDING TO THE 4 ITA NO.91/COCH/2013 LD.DR WHEN THE ASSESSEE IS CONSISTENTLY CLAIMING 20 % IN RESPECT OF THE EXPENDITURE, THE ASSESSEE CANNOT CLAIM THE ENTIRE E XPENDITURE FOR TRAINING OF THE EMPLOYEES WHO LEFT THE COMPANY ON THE GROUND THAT THERE WAS A CHANGE IN POLICY. ACCORDING TO THE LD.DR, THE CHAN GE IN POLICY CANNOT BE A REASON TO ALLOW THE ENTIRE EXPENDITURE ON TRAINING. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE ARISES FOR CONSIDERATION IS EXPENDITURE INCURRED BY THE ASSESS EE ON TRAINING THE RECRUITED EMPLOYEES. THE EXPENDITURE INCURRED BY T HE ASSESSEE IS NOT DISPUTED. THE ASSESSEE INITIALLY CLAIMED 20% OF TH E TOTAL EXPENDITURE AND THE BALANCE WAS CLAIMED IN THE SUBSEQUENT FOUR YEAR S. DURING THE YEAR UNDER CONSIDERATION BY A RESOLUTION OF THE BOARD TH E ASSESSEE CLAIMED 20% OF THE EXPENDITURE IN RESPECT OF THE EMPLOYEES, WHO CONTINUED IN SERVICE AND THE ENTIRE EXPENDITURE IN RESPECT OF TH E EMPLOYEES, WHO LEFT THE COMPANY. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE IS ENTITLED FOR CLAIM OF ALL THE EXPENDITU RE INCURRED ON TRAINING OF THE EMPLOYEES AS REVENUE EXPENDITURE OR NOT? ADMIT TEDLY, THE REVENUE ALLOWED THE CLAIM OF THE ASSESSEE @20%. THEREFORE, THERE IS NO DISPUTE THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE TOWARD S TRAINING OF THE RECRUITED EMPLOYEES AS REVENUE EXPENDITURE HAS TO B E ALLOWED. NOW THE QUESTION IS WHAT IS THE PERCENTAGE? THIS TRIBUNAL IS OF THE CONSIDERED 5 ITA NO.91/COCH/2013 OPINION THAT THE ASSESSEE IS ENTITLED TO CLAIM THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE AND ONLY BECAUSE OF THE SO-CALL ED POLICY OF THE ASSESSEE COMPANY THE CLAIM WAS RESTRICTED AT 20%. INCOME-TAX ACT IS A SPECIAL ENACTMENT FOR COMPUTATION OF TOTAL INCOME, ASSESSMENT OF TAXABLE INCOME AND RECOVERY OF TAX. THEREFORE, THE POLICY OF THE ASSESSEE COMPANY OR THE SO-CALLED RESOLUTION PASSED BY THE B OARD OF DIRECTORS OF THE ASSESSEE COMPANY IS IRRELEVANT WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE UNDER THE INCOME-TAX ACT. HENCE, WHEN THE ASSESSEE IS ENTITLED FOR THE CLAIM AS REVENUE EXPENDITURE IN RESPECT OF THE EXPENDITURE INCURRED FOR TRAINING THE EMPLOYEES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAME HAS TO BE ALLOWED. IN THIS CASE, THE ASSE SSEE HAS RESTRICTED THE EXPENDITURE IN RESPECT OF THE EMPLOYEES, WHO CONTIN UED IN SERVICE AT 20% AND IN RESPECT OF THE OTHER EMPLOYEES, WHO LEFT THE SERVICES OF THE ASSESSEE COMPANY, THE ENTIRE EXPENDITURE WAS CLAIME D AS REVENUE EXPENDITURE. SINCE THE ASSESSEE IS ENTITLED TO CLA IM THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE THIS TRIBUNAL DO NOT FIND AN Y REASON TO RESTRICT THE CLAIM MADE BY THE ASSESSEE. THEREFORE, WE HOLD THA T THE DISALLOWANCE OF RS.48,04,938 IS NOT JUSTIFIED. ACCORDINGLY, THE OR DERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALL OWED. 6 ITA NO.91/COCH/2013 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD AUGUST, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 23 RD AUGUST, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH