M/s. CMC LTD., MUMBAI V. ADL. CIT. Rg. - 10(1), MUMBAI

ITA 922/MUM/2006

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9861 (ITAT-MUMBAI)
• Duration Of Justice: 12 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 18-05-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 07-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI B.R.BASKARAN, AM AND SHRI RAM LAL NEGI, JM ITA NO.922/MUM/2006 : ASST.YEAR 2002-2003 M/S.TATA CONSULTANCY SERVICES LTD. (UPON MERGER OF CMC LIMITED WITH TATA CONSULTANCY SERVICES LIMITED) 9 TH FLOOR, NIRMAL BUILDING NARIMAN POINT, MUMBAI-400 021. PAN : AAACR4849R. / VS. THE ASST.COMMISSIONER OF INCOME TAX, RANGE 10(1) MUMBAI. ( / APPELLANT) ( / RESPONDENT) ITA NO.197/MUM/2006 : ASST.YEAR 2002-2003 THE ASST.COMMISSIONER OF INCOME TAX, RANGE 10(1) MUMBAI. / VS. M/S.TATA CONSULTANCY SERVICES LTD. (UPON MERGER OF CMC LIMITED WITH TATA CONSULTANCY SERVICES LIMITED) 9 TH FLOOR, NIRMAL BUILDING NARIMAN POINT, MUMBAI-400 021. ( / APPELLANT) ( / RESPONDENT) REVENUE BY : S/SHRI PERCY PARDIWALA & HARSH KOTHARI ASSESSEE BY : S/SHRI H.M.SINGH, CIT-DR, ABI RAMA K ARTIKIYAN, DR / DATE OF HEARING : 05.09.2018 / DATE OF PRONOUNCEMENT : 03.12.2018 / O R D E R PER B.R.BASKARAN (AM) : THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 22.11.2005 PASSED BY LD CIT(A)-X, MUMBAI AND THEY RELATE TO TH E ASSESSMENT YEAR 2002-03. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DESIGN & DEVELOPMENT OF SOFTWARE, SALE OF COMPUTER AND OTHER ALLIED ACTIVITIES. IT WAS ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 2 OWNED BY GOVERNMENT OF INDIA UP TO 15.10.2001. UND ER THE DISINVESTMENT POLICY, THE GOVERNMENT SOLD 51% STAKE IN THE COMPAN Y TO M/S TATA SONS LTD ON 16.10.2001. 3. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE A SSESSEE. THE FIRST ISSUE RELATES TO THE ADDITION PERTAINING TO THE ASSESSMEN T OF RECEIPTS ALLOCATED TOWARDS WARRANTY PERIOD. THE ASSESSEE WAS EARLIER FOLLOWING THE SYSTEM OF ACCOUNTING ENTIRE SALE PRICE AS ITS INCOME. AS PER THE TERMS OF SALE, THE ASSESSEE PROVIDES WARRANTY TO THE COMPUTERS SOLD BY IT FOR A CERTAIN PERIOD. THE EXISTING ACCOUNTING SYSTEM OF DECLARING ENTIRE SALES AMOUNT AS REVENUE IN THE YEAR OF SALE WAS FOUND TO BE NOT IN CONSONAN CE WITH THE REQUIREMENT OF ACCOUNTING STANDARDS, SINCE THE ASSESSEE WOULD BE C LAIMING WARRANTY EXPENSES IN THE SUBSEQUENT YEARS. HENCE THE ASSESS EE CHANGED ITS METHOD OF ACCOUNTING FROM AY 1992-93 ONWARDS AND ACCORDING LY IT ALLOCATED 10% OF SALES REVENUE AS PERTAINING TO WARRANTY PERIOD. AC CORDINGLY THE SAME WAS NOT OFFERED AS INCOME IN THE YEAR OF RECEIPT AND TH E SAME WAS SHOWN AS LIABILITY IN THE BALANCE SHEET. THE ASSESSEE WAS O FFERING THE SAID LIABILITY AS ITS INCOME ON PROPORTIONATE BASIS, I.E., PROPORTION ATE TO THE PERIOD OF WARRANTY. THE SAID CHANGE OF ACCOUNTING SYSTEM WAS NOT ACCEPTED BY THE AO SINCE 1992-93 ONWARDS AND ACCORDINGLY HE ASSESSE D THE SALES REVENUE SO ASSIGNED TOWARDS WARRANTY PERIOD ALSO AS INCOME OF THE ASSESSEE IN THE YEAR OF RECEIPT. FOLLOWING THE SAME, IN THE INSTAN T YEAR ALSO, THE AO ASSESSED THE SALES AMOUNT ALLOCATED TOWARDS WARRANT Y PERIOD AS INCOME OF THE ASSESSEE. IN THE EARLIER YEARS, THE LD CIT(A) H AD DIRECTED THAT THE WARRANTY RECEIPTS ASSESSED IN THE IMMEDIATELY PRECE DING YEAR SHOULD BE SET OFF AGAINST THE INCOME ASSESSED DURING THE CURRENT YEAR. ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 3 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD ALLOCATED RS.1227.75 LAKHS AS RECEIPTS PERTAINING TO WARRANTY PERIOD AND SHOWN IT AS LIABILITY IN THE BALANCE SHEET. AS FOLLOWED IN THE EARLIER YEARS, THE AO ASSESSED THE SAME AS INCOME OF THE CURRENT YEAR. I N THE IMMEDIATELY PRECEDING YEAR, THE WARRANTY PERIOD RECEIPTS AMOUNT ING TO RS.1094.36 LAKHS WAS ASSESSED AS INCOME. THE AO ALLOWED SET OFF OF THE SAME AGAINST THE ABOVE SAID AMOUNT OF RS.1227.75 LAKHS AND ACCORDING LY ASSESSED NET INCOME OF RS.133.38 LAKHS AS INCOME OF THE ASSESSEE . THE LD CIT(A), FOLLOWING HIS EARLIER ORDERS, CONFIRMED THE SAME. 5. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS CHANG ED ITS METHOD OF ACCOUNTING THE RECEIPTS PERTAINING TO WARRANTY PERI OD AS PER THE REQUIREMENT OF ACCOUNTING STANDARDS AND ACCOUNTING PRINCIPLES. HE SUBMITTED THAT THE EARLIER METHOD OF ACCOUNTING FOLLOWED BY THE ASSESS EE DID NOT COMPLY WITH THE ACCOUNTING PRINCIPLE OF REVENUE COST MATCHING PRINCIPLE, AS THE REVENUE WAS ACCOUNTED IN ONE YEAR AND THE COSTS WERE ACCOUN TED IN OTHER YEARS. HE SUBMITTED THAT THE ASSESSEE COULD NOT CHALLENGE THE ORDER PASSED BY LD CIT(A) IN THE EARLIER YEARS, AS THE ASSESSEE WAS GO VERNMENT COMPANY IN THOSE YEARS AND DID NOT GET APPROVAL FROM COMMITTEE ON DISPUTES. HE FURTHER SUBMITTED THAT THE PRESENT METHOD OF ACCOUN TING WAS FOLLOWED SINCE AY 1992-93, I.E., ALMOST FOR 10 YEARS. HE SUBMITTE D THAT THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY IT SHOULD NOT B E DISTURBED. HE FURTHER SUBMITTED THAT THE SAID METHOD OF ACCOUNTING IS ALS O SUPPORTED BY THE FOLLOWING DECISIONS, WHERE IN PROPORTIONATE METHOD OF ACCOUNTING OF INCOME CORRESPONDING TO THE PERIOD OF LIABILITY IS UPHELD: - ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 4 (A) ACIT VS. MAHINDRA HOLIDAYS AND RESORTS (INDI A) LTD (39 SOT 438)(SB)(CHENNAI) (B) DIRECTOR OF INCOME TAX (IT)-II VS. BNP PARIBA S SA (214 TAXMAN 548) (C) CIT VS. BANK OF TOKYO LTD (1993)(71 TAXMAN 85) (CAL) (D) CIT VS. PUNJAB TRACTORS CO-OP MULTIPURPOSE SO CIETY LTD (234 ITR 105)(P & H) 6. THE LEARNED DR, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS COLLECTED AMOUNT AS SALES REVENUE BY RAISING INVOIC ES ON ITS CUSTOMERS AND THEREAFTER ACCOUNTED FOR ONLY 90% OF THE SAME AS IT S SALES REVENUE. THE BALANCE 10% WAS ALLOCATED BY THE ASSESSEE AS WARRA NTY PERIOD RECEIPTS. THE LD D.R SUBMITTED THAT THE ASSESSEE DID NOT OFFE R THE AMOUNT ALLOCATED AS WARRANTY PERIOD RECEIPTS AS ITS INCOME. THE ASS ESSEE HAS CHANGED ITS METHOD OF ACCOUNTING AS STATED ABOVE FROM AY 1992-9 3 ONWARDS. SINCE THE ENTIRE AMOUNT WAS COLLECTED AS SALES REVENUE ONLY , THE THE ASSESSING OFFICER DID NOT ACCEPT THE CHANGE IN METHOD OF ACCO UNTING SINCE THE ASSESSMENT YEAR 1992-93 ONWARDS. THE LD D.R SUBMIT TED THAT THE VIEW SO TAKEN BY THE AO IS JUSTIFIED, SINCE IT IS THE ASSES SEE WHO IS CHANGING THE CHARACTER OF RECEIPT, I.E, IT IS THE ASSESSEE WHO I S SEGREGATING THE SALES REVENUE INTO SALES REVENUE AND WARRANTY PERIOD RECE IPTS. HE SUBMITTED THAT THE CUSTOMERS OF THE ASSESSEE HAVE PAID THE AMOUNT AS PER SALES INVOICE RAISED UPON THEM. THE LEARNED DR FURTHER SUBMITTED THAT THE REVENUE HAS TAKEN A CONSISTENT VIEW IN THIS MATTER AND HENCE TH E SAME SHOULD BE CONSIDERED AS SETTLED ISSUE. ACCORDINGLY HE SUBMITT ED THAT THE ORDER PASSED BY THE LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFE RENCE. THE LEARNED DR FURTHER SUBMITTED THAT THE VARIOUS CASE LAWS RELIED ON BY THE ASSESSEE ARE ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 5 DISTINGUISHABLE ON FACTS IN AS MUCH AS THE NATURE O F INCOME CONSIDERED THEREIN WAS COLLECTED AS RECEIPT PERTAINING TO A CE RTAIN PERIOD, WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAS COLLECTED THE AMOUNT AS SALES REVENUE BUT APPORTIONED A PORTION OF THE SAME AS WARRANTY RECEI PTS. 7. IN THE REJOINDER, THE LEARNED AR SUBMITTED THAT THE ASSESSEE COULD HAVE ACCOUNTED THE ENTIRE SALES AMOUNT AS ITS SALES REVENUE AND THEN PROVIDED FOR 10% OF THE SAME AS PROVISION FOR WAR RANTY EXPENSES. INSTEAD OF FOLLOWING THE ABOVE SAID METHODOLOGY, THE ASSESS EE HAS ACCOUNTED 90% OF THE SALES BILL AMOUNT AS ITS REVENUE AND TAKEN 1 0% OF THE AMOUNT AS WARRANTEE RECEIPTS AND SHOWN THE SAME AS LIABILITY. THE LEARNED AR SUBMITTED THAT THE NET EFFECT OF BOTH THE METHOD OF ACCOUNTINGS IS ONE AND THE SAME, I.E., ONLY 90% OF THE SALES INVOICE SHALL BE TAKEN AS REVENUE RECEIPT. THE LEARNED AR FURTHER SUBMITTED THAT THE ASSESSEE WAS CONSTRAINED TO CHANGE ITS METHOD OF ACCOUNTING FROM THE ASSESSMENT YEAR 1992-93 ONWARDS IN ORDER TO COMPLY WITH THE REQUIRE MENTS OF ACCOUNTING PRINCIPLES AND ACCOUNTING STANDARDS. IN THE EARLI ER YEARS, THE ASSESSEE COULD NOT CHALLENGE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE, AS IT DID NOT GET APPROVAL FROM THE COMMITTEE ON DISPU TE, THEN EXISTING. HE SUBMITTED THAT THE CHANGE IN METHOD OF ACCOUNTING W AS FOR GENUINE REASONS AND THE SAME WOULD COMPLY WITH REAL INCOME PRINCIPL ES. HE SUBMITTED THAT THE AMOUNT ALLOCATED AS WARRANTY PERIOD RECEIPTS IS ALSO OFFERED BY THE ASSESSEE ON PROPORTIONATE BASIS OVER THE PERIOD. T HE LEARNED AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER HIMSELF IS ALL OWING SET OFF OF AMOUNT ASSESSED IN THE EARLIER YEARS AGAINST THE AMOUNT AS SESSABLE DURING THE CURRENT YEAR. ACCORDINGLY, THE LEARNED AR SUBMITTE D THAT THE ORDER PASSED ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 6 BY THE ASSESSING OFFICER ONLY SHIFTS THE YEAR OF AS SESSING THE INCOME WHEREAS THE METHODOLOGY ADOPTED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES AND ACCOUNTING STANDARDS. ACC ORDINGLY, THE LEARNED AR SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING O FFICER SHOULD BE DELETED. 8. WE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE RECORDS. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E ASSESSEE HAS OBLIGED TO PROVIDE WARRANTEE ON THE COMPUTER SOLD BY IT FOR CE RTAIN PERIOD. WE FIND MERIT IN THE SAID SUBMISSION OF THE LEARNED AR. THE METHODOLOGY ADOPTED BY THE A.O., IN EFFECT, ONLY SHIFTS THE YEAR OF ASSESS ING THE AMOUNT ALLOCATED TOWARDS WARRANTY RECEIPTS. THE CONTENTION OF THE AS SESSEE IS THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE COMPLIES WIT H THE ACCOUNTING PRINCIPLE OF REVENUE COST MATCHING PRINCIPLE, I.E ., THE REVENUE IS BEING SPREAD BY THE ASSESSEE OVER THE WARRANTY PERIOD, SI NCE WARRANTY EXPENDITURE SHALL BE INCURRED BY THE ASSESSEE DURING THE WARRAN TY PERIOD. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CHANGE IN METHOD OF ACC OUNTING MADE BY THE ASSESSEE IN THE ASSESSMENT YEAR 1992-93 WAS ON ACCO UNT OF GENUINE REASONS AND NOT WITH THE PURPOSE OF AVOIDING ANY TA X LIABILITY. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE GENUINE CHANGE IN THE M ETHOD OF ACCOUNTING TO COMPLY WITH THE REQUIREMENT OF THE ACCOUNTING PRINC IPLES AND ACCOUNTING STANDARDS SHOULD BE ACCEPTED. AS REGARDS THE METHOD OLOGY ADOPTED BY THE AO, WE NOTICE THE SAME ONLY SHIFTS THE YEAR OF ASSE SSING THE INCOME, WHEREAS THE METHODOLOGY ADOPTED BY THE ASSESSEE WOU LD COMPLY WITH THE REQUIREMENT OF THE ACCOUNTING PRINCIPLES AND THE AC COUNTING STANDARDS. ACCORDINGLY WE ARE OF THE VIEW THAT THERE IS NO REQ UIREMENT TO DISTURB THE METHODOLOGY ADOPTED BY THE ASSESSEE IN ACCOUNTING F OR WARRANTY PERIOD ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 7 RECEIPTS. ACCORDINGLY WE SET ASIDE THE ORDER PASSE D BY THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITION MADE BY HIM ON THIS ISSUE. 9. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES TO THE ASSESSMENT OF GRANT IN AID OF RS.565.50 LAKH RECEIVED BY THE ASSE SSEE. THE ASSESSEE CONTENDED THAT THE ABOVE SAID RECEIPT IS GRATUITOUS IN NATURE AND HENCE IT DOES NOT PARTAKE THE CHARACTER OF THE INCOME. THE A .O. DID NOT ACCEPT THE SAME AND ACCORDINGLY ASSESSED THE SAME AS INCOME OF THE ASSESSEE. THE LEARNED CIT(A) ALSO CONFIRMED THE SAME BY FOLLOWING THE ORDERS PASSED BY HIM IN THE EARLIER YEARS. 10. THE LEARNED AR SUBMITTED THAT AN IDENTICAL ISSU E WAS CONSIDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSMENT YEAR1988-89 IN ITA NO.1845/BOM/1992 AND THE TRIBUNAL, VIDE ITS ORDER D ATED 10.01.2003, HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OF FICER FOR ADJUDICATING THE SAME AFRESH. THE LEARNED AR SUBMITTED THAT THE ASSE SSING OFFICER HAS NOT GIVEN EFFECT TO THE ORDER OF THE ITAT TILL DATE. TH E LEARNED AR FURTHER SUBMITTED THAT THE GRANT IN AID RECEIVED BY THE ASS ESSEE IN ASSESSMENT YEAR 1987-88 HAS BEEN HELD BY THE TRIBUNAL AS NOT TAXABL E. ACCORDINGLY, THE LEARNED AR SUBMITTED THAT THE TRIBUNAL MAY TAKE AN INDIVIDUAL VIEW ON THIS MATTER IN THE YEAR UNDER CONSIDERATION. THE LD A.R PLACED HIS RELIANCE ON THE DECISION RENDERED IN THE CASE OF SIEMENTS LTD (390 ITR 1). 11. ON THE CONTRARY, THE LEARNED DR SUBMITTED THAT THE ASSESSEE WAS ACTING AS IMPLEMENTING AGENCY FOR MANY OF THE GOVER NMENT PROJECTS AND THE IMPUGNED GRANT IN AID WAS GIVEN BY THE GOVERNMENT A S PER THE AGREEMENT ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 8 ENTERED BETWEEN THE GOVERNMENT AND THE ASSESSEE TO MEET PART OF COST OF EXPENDITURE. ACCORDINGLY THE LEARNED DR SUBMITTED T HAT THE GRANT IN AID SHALL FORM PART OF TRADING RECEIPTS OF THE ASSESSEE, AS T HE SAME WAS GIVEN TO MEET THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE COU RSE OF CONDUCTING OF THE BUSINESS. HE FURTHER SUBMITTED THAT THE DECISION R ENDERED IN THE CASE OF SIEMENS LTD (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. ACCORDINGLY, THE LEARNED DR SUBMITTED THAT THE TAX AUTHORITIES HAVE RIGHTLY ASSESSED THE SAME AS INCOME OF THE ASSESSEE. 12. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE NOTICED THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS REST ORED AN IDENTICAL ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR ASSESSMENT YE AR 1988-89 AND ALSO IN ASSESSMENT YEAR 1989-90 IN ITA NO.1682/MUM/1993 DAT ED 24.04.2003. FOLLOWING THE SAME, WE RESTORE THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATING THE ISSUE AFRESH BY DULY CONSIDERING T HE RELEVANT DOCUMENTS. AFTER HEARING THE ASSESSEE, THE ASSESSING OFFICER M AY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 13. THE NEXT ISSUE CONTESTED BY THE ASSESSEE RE LATES TO THE DEDUCTION CLAIMED U/S 80HHE OF THE ACT. THE ASSESSEE HAD CLA IMED DEDUCTION U/S 80HHE OF THE ACT TO THE TUNE OF RS.86,35,105/-. TH E AO TOOK THE VIEW THAT THE DEDUCTION IS NOT AVAILABLE ON THE FOLLOWING REC EIPTS, AS THEY ARE INDEPENDENT INCOME NOT RELATED TO THE ACTIVITIES OF EXPORT OF SOFTWARE:- (A) PROJECT GRANTS FROM GOVT. (B) PROFIT ON SALE OF ASSETS (C) DIVIDEND FROM SUBSIDIARY ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 9 (D) TRANSFER FROM CAPITAL RESERVE (E) PROVISION WRITTEN BACK (F) MISCELLANEOUS INCOME ACCORDINGLY THE AO RECOMPUTED THE DEDUCTION AT RS.5 7,56,781/- AS AGAINST THE CLAIM OF RS.86.35 LAKHS MADE BY THE ASSESSEE. 14. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THA T IT DID NOT INCLUDE INCOMES, VIZ., PROFIT ON SALE OF ASSETS, DIVIDEND F ROM SUBSIDIARY, TRANSFER FROM CAPITAL RESERVE AND PROJECT GRANT FROM GOVERNMENT F OR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHE OF THE ACT. ACCORDIN GLY IT WAS SUBMITTED THAT THE AO WAS NOT CORRECT IN EXCLUDING THE ABOVE SAID INCOME AGAIN. HOWEVER, SINCE THE LD CIT(A) HAD HELD THAT THE PROJ ECT GRANT FROM GOVERNMENT IS TAXABLE, THE ASSESSEE PUT A FRESH CLA IM BEFORE LD CIT(A) THAT THE SAME SHALL FORM PART OF PROFITS OF BUSINESS AND HENCE THE SAME SHALL BE CONSIDERED FOR THE PURPOSE OF COMPUTING DEDUCTION U /S 80HHE OF THE ACT. IT WAS ALSO CONTENDED THAT THE PROVISIONS WRITTEN BACK AND MISCELLANEOUS INCOME ARE RELATED TO THE BUSINESS ACTIVITIES OF TH E BUSINESS AND HENCE THEY SHOULD ALSO BE CONSIDERED AS PART OF PROFITS OF BUS INESS. 15. THE LD CIT(A) REJECTED THE CLAIM OF THE ASSE SSEE WITH REGARD TO PROJECT GRANT FROM GOVERNMENT BY HOLDING THAT THE SAME DOES NOT FORM PART OF ITS OPERATING BUSINESS. THE LD CIT(A) ALSO HELD THAT T HE PROVISIONS WRITTEN BACK ALSO CANNOT BE CONSIDERED AS PART OF OPERATIN G PROFIT. WITH REGARD TO MISCELLANEOUS INCOME, THE LD CIT(A) NOTICED THAT TH E ASSESSEE HAS FAILED TO FURNISH THE DETAILS THEREOF. ACCORDINGLY HE REJECT ED THE SAID CLAIM ALSO. ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 10 16. WE HEARD THE PARTIES AND PERUSED THE RECOR D. WE HAVE EARLIER RESTORED THE ISSUE RELATING TO GRANTS IN AID TO THE FILE OF THE AO FOR EXAMINING ITS TAXABILITY AFRESH BY DULY CONSIDERING THE AGREE MENT ENTERED BY THE ASSESSEE WITH THE GOVERNMENT. HENCE THE CLAIM OF T HE ASSESSEE FOR DEDUCTION U/S 80HHE IN RESPECT OF THIS INCOME WOULD DEPEND UPON THE VIEW THAT WILL BE TAKEN BY THE AO IN THE SET ASIDE PROCE EDINGS. AS CONTENDED BY LD D.R, IF IT IS FOUND THAT THE GOVERNMENT HAS GIVE N GRANT IN AID TO MEET THE EXPENSES INCURRED IN DEVELOPMENT AND IMPLEMENTATION OF GOVERNMENT PROGRAMS AND ACCORDINGLY IF IT WAS HELD THAT THE SA ME IS TAXABLE, THEN WE ARE OF THE VIEW THAT THE GRANT IN AID SHALL FORM PART O F OPERATING INCOME AND WOULD BE ELIGIBLE FOR DEDUCTION U/S 80HHE OF THE ACT. 17. THE NEXT ITEM IS PROVISIONS WRITTEN BACK. THE LD CIT(A) TOOK THE VIEW THAT THE AMOUNT SO WRITTEN BACK MAY REPRESENT EXPEN SES CLAIMED IN THE YEAR IN WHICH THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTIO N U/S 80HHE OF THE ACT. HE FURTHER TOOK THE VIEW THAT THE WRITING BACK OF L IABILITY CANNOT BE REGARDED AS OPERATING PROFIT ELIGIBLE FOR DEDUCTION U/S 80HH E OF THE ACT. ACCORDINGLY, THE LD CIT(A) CONFIRMED THE ORDER OF THE AO PASSED ON THIS ISSUE. 18. THE LD A.R SUBMITTED THAT THE WRITING BACK O F LIABILITY IS NOT A SEPARATE SOURCE OF INCOME, AS IT IS NOT A RECEIPT CONTEMPL ATED IN THE DEFINITION OF PROFITS OF BUSINESS GIVEN IN SEC. 80HHE OF THE ACT. WE AGREE WITH THE SAID SUBMISSION OF THE ASSESSEE. IT IS QUITE NORMAL IN ANY BUSINESS TO CREATE PROVISIONS FOR KNOWN LIABILITIES AND TO WRITE BACK THE SAME WHEN THE LIABILITY IS NO LONGER PAYABLE. THE AMOUNT SO WRITTEN BACK IS U SUALLY TREATED AS INCOME OF THE YEAR IN WHICH IT IS SO WRITTEN BACK. HENCE, WE DO NOT FIND ANY MERIT IN ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 11 THE APPREHENSION OF LD CIT(A). ACCORDINGLY WE AGRE E WITH THE CONTENTIONS OF THE ASSESSEE THAT THE AMOUNT SO WRITTEN BACK SHOULD BE TREATED AS PART OF OPERATING PROFIT OF THE ASSESSEE, AS IT IS NOT AN I NDEPENDENT SOURCE OF INCOME. ACCORDINGLY WE DIRECT THE AO TO INCLUDE TH E AMOUNT WRITTEN BACK BY THE ASSESSEE IN PROFITS OF BUSINESS AND ALLOW DED UCTION U/S 80HHE OF THE ACT. 19. THE NEXT ITEM RELATES TO THE MISCELLANEOUS IN COME. THE ASSESSEE COULD NOT FURNISH BREAK-UP DETAILS OF MISCELLANEOUS INCOME AND HENCE THE LD CIT(A) REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUC TION U/S 80HHE OF THE ACT. THE LD A.R SUBMITTED THAT THE MISCELLANEOUS I NCOME CONSISTED OF VARIOUS TYPES OF INCOME RECEIVED DURING THE COURSE OF BUSINESS LIKE REGISTRATION CHARGES, BOND MONEY RECOVERIES, SALE O F SCRAP ETC. HE SUBMITTED THAT DUE TO PASSAGE OF TIME, THE ASSESSEE IS NOT ABLE TO FURNISH THE BREAK-UP DETAILS. ACCORDINGLY HE SUBMITTED THAT TH E ASSESSEE MAY BE ALLOWED DEDUCTION U/S 80HHE OF THE ACT ON MISCELLAN EOUS INCOME ALSO. 20. THE LD D.R, ON THE CONTRARY, SUPPORTED THE ORDER OF LD CIT(A). WE HEARD THE PARTIES ON THIS ISSUE. SINCE THE ASSESSE E COULD NOT FURNISH BREAK- UP DETAILS OF MISCELLANEOUS INCOME, THE LD CIT(A) R EJECTED THE CLAIM OF THE ASSESSEE. HOWEVER, THERE IS SOME MERIT IN THE SUBM ISSION OF THE ASSESSEE THAT THE MISCELLANEOUS INCOME CONSISTED OF RECEIPTS ARISING DURING THE COURSE OF CARRYING ON OF BUSINESS. HOWEVER, IN THE ABSENC E OF ACTUAL DETAILS, IN OUR VIEW, IT WOULD BE DIFFICULT TO ACCEPT THE CLAIM OF THE ASSESSEE. HENCE, IN ORDER TO PUT THIS ISSUE AT REST, WE DIRECT THE AO T O TAKE 50% OF THE ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 12 MISCELLANEOUS INCOME AS INCOME ELIGIBLE FOR DEDUCTI ON U/S 80HHE OF THE ACT AND ALLOW DEDUCTION ACCORDINGLY. 21. THE LAST ISSUE RELATES TO THE LEVY OF INTER EST U/S 234D OF THE ACT. THE LD A.R FAIRLY ADMITTED THAT THIS ISSUE HAS BEEN DEC IDED AGAINST THE ASSESSEE BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INDIAN OIL CORPORATION LTD (2012)(25 TAXMANN.COM 284)(BOM). WE NOTICE TH AT THE LD CIT(A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE. HOWEVER, HE HAS DIRECTED THE AO TO VERIFY THE COMPUTATIONAL ERROR POINTED BY THE AS SESSEE. IN VIEW OF THE ABOVE SAID BINDING DECISION, WE CONFIRM THE ORDER P ASSED BY LD CIT(A). 22. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE. THE SOLITARY ISSUE URGED THEREIN IS WHETHER THE LD CIT(A) WAS JU STIFIED IN DELETING THE ADDITION OF LEASE RENTALS CLAIMED BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PAID LEASE RENTALS TO T HE TUNE OF RS.84.14 LACS TO VARIOUS FINANCE COMPANIES IN RESPECT OF LEASE TRANS ACTIONS ENTERED IN THE EARLIER YEARS. THE AO NOTICED THAT, DURING THE COU RSE OF ASSESSMENT PROCEEDINGS RELATING TO AY 1999-2000, THESE LEASE T RANSACTIONS WERE CONSIDERED AS FINANCE LEASE BY THE ASSESSING OFFICE R AND ACCORDINGLY THE CLAIM FOR DEDUCTION OF LEASE RENTALS WAS REJECTED. THE AO ALSO NOTICED THAT THE DISALLOWANCE SO MADE BY THE AO WAS DELETED BY L D CIT(A) IN THOSE YEAR, BUT THE REVENUE HAS PREFERRED APPEAL BEFORE ITAT. ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF LEASE RENTALS OF RS.84.14 L AKHS MADE BY THE ASSESSEE. HOWEVER, THE AO ALLOWED DEDUCTION OF DEP RECIATION OF RS.29.28 LAKHS AND INTEREST COMPONENT OF RS.31.79 LAKHS IN R ESPECT OF THESE LEASE TRANSACTIONS. HENCE NET ADDITION MADE BY THE ASSESS EE WORKED OUT TO RS.23.07 LAKHS. ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 13 23. THE LD CIT(A), BY FOLLOWING HIS EARLIER ORDE RS, DELETED THE ADDITION MADE BY THE AO. THE REVENUE IS AGGRIEVED. 24. WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. WE NOTICE THAT THE AO HAS MAINLY TREATED THE LEASE TRANSACTIO NS AS FINANCE TRANSACTIONS, ONLY FOR THE REASON THAT THE LESSOR H AS PURCHASED THE COMPUTERS AS IDENTIFIED BY THE ASSESSEE AND FURTHER THE RELEVANT INVOICES ALSO CONTAINED THE NAME OF THE ASSESSEE AS LESSEE . WE NOTICE THAT THE LD CIT(A), IN THE ORDER PASSED FOR AY 1997-98, HAS EXAMINED THE IDENTICAL ISSUE AND DECIDED THE SAME IN FAVOUR OF THE ASSESSE E. WE NOTICE THAT THE LD CIT(A) HAS TAKEN SUPPORT OF THE DECISION RENDERED B Y HONBLE BOMBAY HIGH COURT IN THE CASE OF DEVELOPMENT CREDIT BANK VS. PR AKASH INDUSTRIES LTD (CIVIL SUIT NO.3196 OF 1998) AND HELD THAT THE LESS OR IS THE REAL OWNER OF THE ASSETS. THE LD CIT(A) ALSO HELD THAT SO LONG AS TH E INVOICES BEAR THE NAME OF LESSOR, THEN THE LESSOR SHALL BE CONSIDERED TO B E THE OWNER OF THE ASSETS. HE HAS FURTHER OBSERVED THAT THE LESSOR SHOULD HAVE CLAIMED DEPRECIATION ON THE ASSETS AND HENCE ALLOWING DEPRECIATION AGAIN TO THE ASSESSEE WOULD RESULT IN DOUBLE ALLOWANCE. ACCORDINGLY THE LD CIT (A) HELD THAT THE GENUINENESS OF THE LEASE TRANSACTIONS SHOULD ACCEPT ED. ACCORDINGLY HE DIRECTED THE AO TO ALLOW THE LEASE RENTALS CLAIMED BY THE ASSESSEE. THE ABOVE SAID ORDER WAS FOLLOWED IN SUBSEQUENT YEARS B Y LD CIT(A). 25. WE HEARD THE PARTIES AND PERUSED THE RECORD . WE NOTICE THAT THE LD CIT(A) HAS CONSIDERED THE ISSUE IN DETAIL IN AY 199 7-98 AND HAS GIVEN A FINDING THAT THE LESSOR IS THE OWNER OF THE ASSETS. IT WAS NOT SHOWN TO US THAT THE ABOVE SAID FINDING OF LD CIT(A) WAS REVERSED BY THE TRIBUNAL OR HIGH ITA NOS.922 & 197/MUM/2006. M/S.TATA CONSULTANCY SERVICES LTD. 14 COURT, MEANING THEREBY, THE SAID FINDING SHALL HOLD THE FIELD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT ENTERED I NTO ANY FRESH LEASE TRANSACTIONS AND HAS PAID ONLY THE LEASE RENTALS ON THE LEASE AGREEMENT ENTERED IN THE EARLIER YEARS. HENCE THE LD CIT(A) WAS JUSTIFIED IN FOLLOWING HIS ORDER PASSED IN THE EARLIER YEARS ON THE VERY S AME ISSUE. ACCORDINGLY WE UPHOLD THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER HAS BEEN PRONOUNCED IN THE COURT ON 03.12.2 018 SD/- SD/- (RAM LAL NEGI) (B.R.BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03 RD DECEMBER, 2018. DEVDAS* !'#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ! ' ( ) / THE CIT, MUMBAI. 4. ! ! ' / CIT(A)-X, MUMBAI 5. %&' (()* , ! )* , / DR, ITAT, MUMBAI 6. ',-. / GUARD FILE. / BY ORDER, %( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI