ONWARD E-SERVICES LTD, MUMBAI V. DCIT CIR 7(1), MUMBAI

ITA 9134/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4083 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-01-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Revenue expenditure
• Section: 43B; 154

Judgement Text

ITA NO. 9134/MUM/201 0 M/S ONWARDS E-SERVICES LTD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SANJAY GARG JUDICIAL MEMBER ITA NO. 9134/MUM/2010 ASSESSMENT YEAR 2006-07 DATE OF HEARING: 25/7/2013 DATE OF PRONOUNCEMENT: /7/2013 O R D E R PER RAJENDRA SINGH, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 11.8.2010 OF CIT (A) FOR THE ASSESSMENT YEAR 2006-0 7. THE DISPUTES RAISED BY THE ASSESSEE IN THIS APPEAL RELATE TO ALLOWABILITY OF EXPENDITURE ON ACCOUNT OF RESEARCH AND DEVELOPMENT AND DISALLOWANCE OF EXPENS ES U/S 43B. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE AS SESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD CAPITALIZED A SUM OF R S. 2,57,96,274/- ON ACCOUNT OF RESEARCH AND DEVELOPMENT EXPENDITURE IN THE BALA NCE SHEET. THE ASSESSEE HAD NOT AMORTIZED THE EXPENDITURE IN THE ACCOUNT NO R CLAIMED ANY DEPRECIATION. HOWEVER THE ENTIRE EXPENDITURE WAS CL AIMED AS REVENUE EXPENDITURE IN THE COMPUTATION OF INCOME. THE AO DI D NOT ACCEPT THE CLAIM OF ONWARD E-SERVICES LTD. 2 ND FLOOR, STERLING CENTER, WORLI MUMBAI 400 018 PAN:- AAACO6297N DCIT, CIRCLE 7(1), MUMBAI APPELLANT RESPONDENT DEPARTMENT BY. SHRI A.C. TAJPAL ASSESSEE BY: SHRI PARESH SAPARIA ITA NO. 9134/MUM/201 0 M/S ONWARDS E-SERVICES LTD. PAGE 2 OF 4 REVENUE EXPENDITURE CONSIDERING THE FACTS AND CIRCU MSTANCES OF THE CASE AND ALSO DID NOT ALLOW DEPRECIATION. IN APPEAL CIT (A) AGREED WITH AO THAT THE EXPENDITURE WHICH RELATE TO SOFTWARE DEVELOPMENT WA S CAPITAL IN NATURE AND ACCORDINGLY CONFIRMED THE DISALLOWANCE AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL IN WHICH IT HAS ALSO RAISED AN ALTERNATE GROUND FOR ALLOWING DEPRECIATION IN CASE THE CLAIM WAS DISALLO WED. 3. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECOR DS AND CONSIDERED MATTER CAREFULLY. WE FIND THAT THE TRIBUNAL IN ASSE SSEES OWN CASE IN ASSESSMENT YEAR 2007-08 IN ITA NO. 2974/MUM/2010 VI DE ORDER DATED 9.5.2012 HAS ALREADY DECIDED THIS ISSUE AND HELD TH AT THE EXPENDITURE WAS CAPITAL IN NATURE. THEREFORE FOLLOWING THE SAID DEC ISION THE ORDER OF CIT(A) ON THIS POINT IS UPHELD. 3.1 AS REGARDS THE ALLOWING THE CLAIM OF DEPRECIATI ON WE FIND THIS ISSUE HAS ALSO BEEN DECIDED BY THE TRIBUNAL IN ASSESSMENT YEA R2007-08 VIDE ORDER DATED 9.5.2012 AND ALSO IN ASSESSMENT YEAR 2008-09 VIDE O RDER DATED 6.6.2012 IN WHICH THE ORDER OF CIT(A) DIRECTING THE AO TO ALLOW THE CLAIM OF DEPRECIATION WAS UPHELD. IT HAS ALSO BEEN BROUGHT TO THE NOTICE SUBSEQUENTLY THE AO ALLOWED THE CLAIM OF THE ASSESSEE U/S 154 IN ASSESS MENT YEAR 2007-08 AND 2008-09. THE RELEVANT COPIES OF THE AO ORDERS HAVE BEEN PLACED ON RECORD. WE, THEREFORE ALLOW THE CLAIM OF THE ASSESSEE OF DEPREC IATION. 4. THE NEXT DISPUTE IS REGARDING DISALLOWANCE OF PF AND ESIC ON ACCOUNT OF LATE PAYMENT U/S 43B. THE AO NOTED THAT THE ASSESS EE HAD CLAIMED A SUM OF RS. 35,19,840/- ON ACCOUNT OF CONTRIBUTION TO PF AN D ESIC. AO OBSERVED THAT IT WAS NOT CLEAR FROM THE DETAILS WHETHER THE PAYMENTS HAD BEEN MADE WITHIN THE DUE DATE OR EVEN WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME. HE, THEREFORE, DISALLOWED A SUM OF RS. 35,79,840/- AND ADDED TO THE TOTAL INCOME. ITA NO. 9134/MUM/201 0 M/S ONWARDS E-SERVICES LTD. PAGE 3 OF 4 4.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SU BMITTED BEFORE CIT(A) THAT THE ASSESSEE IN THE COMPUTATION OF INCOME HAD ALREADY DISALLOWED A SUM OF RS. 3057680 ON ACCOUNT OF PF AND A SUM OF RS. 41,670/- ON ACCOUNT OF ESIC AGGREGATING TO RS. 30,99,290/- U/S 2(24)(X). THERE WAS, THEREFORE, DOUBLE DEDUCTION. CIT(A) HOWEVER DID NOT ACCEPT THE CONTEN TIONS RAISED. IT WAS OBSERVED BY HIM THAT THE PAYMENTS HAD NOT BEEN MADE WITHIN THE DUE DATE PRESCRIBED UNDER THE RELEVANT STATUTES. HE, THEREFO RE, CONFIRMED THE DISALLOWANCE, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4.2 BEFORE US LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE CLAIM OF RS. 3579840/- ON ACCOUNT OF EMPLOYERS CONTRIBUTION TO P F AND ESIC AND THE SUM OF RS. 3099290/- WAS ON ACCOUNT OF EMPLOYEES CONTRIBUT ION TO PF AND ESIC. IT WAS SUBMITTED THAT EMPLOYERS CONTRIBUTION AND EMPLOYEES CONTRIBUTION BOTH HAVE BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN O F INCOME AND, THEREFORE, CLAIMS ARE ALLOWABLE. THE LEARNED DR ON THE OTHER H AND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING DISALLOWABILITY OF DEDUCTION O N ACCOUNT OF EMPLOYERS CONTRIBUTION TO PF AND ESIC AND EMPLOYEES CONTRIBUT ION TO PF AND ESIC. IN VIEW OF THE AMENDMENT OF SECTION 43B BY THE FINANCE ACT 2003 W.E.F 1.4.2004 CONTRIBUTION TO PF AND ESIC IS ALLOWABLE AS DEDUCTI ON IN CASE THE SAME IS PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. THEREFORE, THE CONTRIBUTION TO PF AND ESIC IF MADE BEFORE THE DUE DATE OF FILING O F RETURN OF INCOME IS ALLOWABLE AS DEDUCTION. THE HONBLE HIGH COURT OF D ELHI IN CASE OF AIMIL LTD (321 ITR 508) HAVE ALSO HELD THAT EMPLOYEES CONTRIB UTION WILL ALSO BE COVERED BY THE AMENDED PROVISIONS OF SECTION 43 B. THEREFOR E, IN CASE CONTRIBUTIONS HAVE BEEN PAID BEFORE THE DUE DATE OF FILING OF RET URN OF INCOME THE SAME ARE ALLOWABLE AS DEDUCTION. THE ASSESSEE HAS CLAIMED TH AT THE PAYMENTS WERE MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INC OME. HOWEVER, THERE IS NO ITA NO. 9134/MUM/201 0 M/S ONWARDS E-SERVICES LTD. PAGE 4 OF 4 FINDING OF AUTHORITIES BELOW ON THIS POINT. WE, THE REFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE IN THIS ORDER AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED ON 31 -7-2013 SD/- SD/- (SANJAY GARG) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SK SR. P.S, MUMBAI DATED 31 .7.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI