ACIT, Chatrapatti V. M/s. Chona Financial Services Pvt. ltd., CHENNAI

MA 383/CHNY/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2556 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2000-2001
• Appeal Filed On: 16-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHIT AGRAWAL
• Keywords: Audit objection; Tax effect; Revenue expenditure; Capital expenditure
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI ... , . !'# ! , $ !% BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER && / M.P. NO.383/CHNY/2017 (IN I.T.A. NO.3039/MDS/2016) ' (' / ASSESSMENT YEAR : 2000-01 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 1(2), CHENNAI - 600 034. V. M/S CHONA FINANCIAL SERVICES PVT. LTD., NEW NO.46, OLD NO.19, PRAKASAM STREET, T. NAGAR, CHENNAI - 600 017. PAN : AAACC 3031 C (*+' /PETITIONER) (*,+-/ RESPONDENT) *+' / 0 /PETITIONER BY : SHRI AR.V. SREENIVASAN, JCI T *,+- / 0 / RESPONDENT BY : SHRI ASHIT AGRAWAL, CA 1 / 2$ / DATE OF HEARING : 02.11.2018 3'( / 2$ / DATE OF PRONOUNCEMENT : 02.11.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE REVENUE HAS FILED THE PRESENT MISCELLANEOUS P ETITION PRAYING FOR RECALL OF ORDER OF THIS TRIBUNAL DATED 31.05.2017 ON THE GROUND THAT THE APPEAL WAS FILED BEFORE THIS TRIBUN AL DUE TO AUDIT OBJECTION. 2 M.P. NO.383/CHNY/17 2. SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THIS TRIBUNAL DECIDE D THE APPEAL ON THE GROUND THAT THE TAX EFFECT WAS LESS THAN 10 LAKHS. HOWEVER, ACCORDING TO THE LD. D.R., WHEN THERE IS AUDIT OBJE CTION, THE CIRCULAR OF THE CBDT FIXING THE MONETARY LIMIT FOR FILING BE FORE THIS TRIBUNAL MAY NOT BE APPLICABLE. REFERRING TO THE AUDIT REPO RT, THE LD. D.R. SUBMITTED THAT A SUM OF 16,16,000/- WAS CLAIMED AS REVENUE EXPENDITURE TOWARDS SOFTWARE LICENSE. THE ASSESSIN G OFFICER ALLOWED THE CLAIM OF THE ASSESSEE. HOWEVER, THE AU DIT WING OF THE DEPARTMENT FOUND THAT IT HAS TO BE TREATED AS CAPIT AL IN NATURE. DUE TO THIS AUDIT OBJECTION, ACCORDING TO THE LD. D.R., THERE IS AN ADDITIONAL DEMAND OF 9,06,767/-, HENCE, THE APPEAL HAS TO BE DECIDED ON MERIT. 3. WE HEARD SHRI ASHIT AGRAWAL, THE LD. REPRESENTAT IVE FOR THE ASSESSEE ALSO. THE ASSESSEE ADMITTEDLY CLAIMED 16,16,000/- DURING THE YEAR UNDER CONSIDERATION TOWARDS SOFTWAR E LICENCE FEE AND CLAIMED THE SAME AS REVENUE EXPENDITURE. IN FA CT, THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE ASSESSEE AS REVENUE EXPENDITURE. THE AUDIT WING OF THE DEPARTMENT EXAM INED THE RECORDS OF THE ASSESSEE AND FOUND THAT THE LICENCE FEE PAID FOR SOFTWARE IS NOT A REVENUE EXPENDITURE AND IT HAS TO BE CLASSIFIED AS 3 M.P. NO.383/CHNY/17 CAPITAL EXPENDITURE. THE QUESTION ARISES FOR CONSI DERATION IS WHETHER THE CLASSIFICATION OF INCOME UNDER THE HEAD REVENUE EXPENDITURE OR CAPITAL EXPENDITURE COULD BE DECI DED BY THE ASSESSING OFFICER OR BY THE AUDIT WING OF THE DEPAR TMENT? THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CLAS SIFICATION OF EXPENDITURE HAS TO BE DECIDED ONLY BY THE ASSESSING OFFICER. AT THE BEST, THE WRONG CLASSIFICATION CAN BE BROUGHT TO TH E NOTICE OF THE ASSESSING OFFICER BY THE AUDIT WING OF THE DEPARTME NT. IN THIS CASE, WHEN THE AUDIT WING OF THE DEPARTMENT FOUND T HAT IT HAS TO BE CLASSIFIED AS CAPITAL EXPENDITURE, THE ASSESSING OF FICER REITERATED HIS VIEW BY WAY OF A REPLY TO THE AUDIT WING OF THE DEP ARTMENT. SINCE THE AUDIT WING HAS NOT ACCEPTED THE REPLY FILED BY THE ASSESSEE, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY ISSUIN G NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 (IN SHORT ' THE ACT'). THEREFORE, THE COMMISSIONER DIRECTED THE ASSESSING OFFICER TO FILE AN APPEAL. THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT LICENCE FEE PAID TO OBTAIN SOFTWARE IS NOTHING BUT REVENUE EXPENDITURE. MOREOVER, THE ASSESSING OFFICER HAS RIGHTLY REITER ATED THAT IT HAS TO BE TREATED ONLY AS REVENUE EXPENDITURE. IN THOSE C IRCUMSTANCES, THIS TRIBUNAL DO NOT FIND ANY MERIT IN THE MISCELLA NEOUS PETITION FILED BY THE REVENUE. ACCORDINGLY, THE SAME IS DISMISSED . 4 M.P. NO.383/CHNY/17 4. WITH THE ABOVE OBSERVATION, THE MISCELLANEOUS PE TITION FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 2 ND NOVEMBER, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( ... ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 2 ND NOVEMBER, 2018. KRI. / *26& 7&(2 /COPY TO: 1. *+' / PETITIONER 2. *,+- /RESPONDENT 3. 1 82 () /CIT(A) 4. 1 82 /CIT 5. &9 *2 /DR 6. :' ; /GF.