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Income Tax Appellate Tribunal, ‘E‘ BENCH
Before: SHRI AMIT SHUKLA & SHRI M.BALAGANESH
आदेश / O R D E R PER M. BALAGANESH (A.M):
This appeal in A.Y.2017-18 arises out of the order by the ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) in appeal No.CIT(A)-22, Mumbai/10394/2019-20 dated 29/04/2022 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 16/12/2019 by the ld. Asst.
M/s. Experian Credit Information Company of India Pvt. Ltd., Commissioner of Income Tax, Circle 14(1)(2), Mumbai (hereinafter referred to as ld. AO).
The revenue has raised the following grounds before us:- 1. “Whether on the facts and circumstances of the case and in law, the was right in allowing technology recharge, cost to the extent of Rs. 3,49,32,884 /- as revenue expenditure ignoring the fact that the assessee had incurred to set up technology and platform which would help him in conducting the business in the future?"
2. The Appellant prays that the order of the CIT (Appeals) on the above ground be set aside and that of the AO be restored." 3. "The Appellant craves leave to amend or alter any ground or to submit additional new ground, which may be necessary."
We have heard the rival submissions and perused the materials available on record. At the outset, the ld. AR before us stated that the issue is squarely covered in favour of the assessee by the orders passed by this tribunal in assessee’s own case for earlier years. This fact was not controverted by the revenue before us. We have gone through the order of the ld. CIT(A) and find that he had actually followed the tribunal order in assessee’s own case and granted relief to the assessee.
3.1. We find that the assessee is engaged in the business of providing credit information services pursuant to the certificate of registration issued by the Reserve Bank of India (RBI) on 17.2.2010 under Credit Information Companies (Regulations) Act, 2005. The company operates as a credit bureau and collects information from various sources and provides Experian Credit Reports to lenders and consumers to reduce risk and facilitate responsible lending to consumers, in compliance with RBI guidelines. The assessee had filed its return of income for the Asst Year 2017-18 on 29.11.2017 declaring loss of Rs 12,70,71,229/-. During the M/s. Experian Credit Information Company of India Pvt. Ltd., course of assessment proceedings, the assessee filed submissions in support of claiming the technology cost as business expenditure. The details of the same are as under:- a) Computer Hardware Maintenance Cost – Rs 1,55,39,918/- b) CBV2 Support and Maintenance Cost – Rs 2.05,58,579/- c) Technical Services Recharges – Rs 8,22, 72,878/- d) Global Value Added Products (GVAP) Support Services – Rs 50,54,834/- 3.2. Out of the above, the ld. AO allowed the expenditure claimed in a) and b) above and disallowed the sums in c) and d) above by stating that the same is capital in nature and granted depreciation @ 60% amounting to Rs 5,43,94,827/- and thereby making net disallowance of Rs 3,49,32,884/-. The ld. AR before us stated that the correct figure of depreciation would be Rs 5,23,96,627/- and correct figure of disallowance as per AO’s workings would be Rs 3,49,31,085/-. The reasons adduced by the ld. AO for treating the aforesaid expenditure as capital in nature are as under:- i) The expenses relate to creation of intangibles which constitute the primary asset/resource to enable the assessee to conduct its business; ii) The expenses are for set up of a technology and platform to enable the assessee to conduct its business; iii) The expenses are related to intangibles, which are not owned by the assessee, but are key resources for the conduct of its business; iv) The expenses provide expenses of an enduring nature; and M/s. Experian Credit Information Company of India Pvt. Ltd., v) Though the expenses are recurring they help the assessee conduct its business and earn revenue 3.3. The ld. CIT(A) allowed the appeal of the assessee by treating the aforesaid expenditure as revenue in nature by following the tribunal decision for the Asst Years 2011-12 to 2014-15 in (AY 2011-12) and ITA Nos. 4711 to 4713/Mum/2018 (AY 2012-13 to 2014-15 respectively) dated 02/08/2021.
3.4. We find that the assessee had duly furnished the complete details of the expenditure incurred on account of Technical Services Recharges in the sum of Rs 8,73,27,712/- together with the sample invoices as under:- a) Global Corporate System (GCS) Licence Fees – Rs 36,21,701/- GCS comprises of set of services which helps in the maintenance of desktops and computers of the assessee company’s employees. The annual licence fees paid for GCS is towards : -Remote information technology services pertaining to maintenance of the desktops /laptops of the assessee’s employees ; and - Licence fees to enable access to Oracle software for assessee to manage employee records (such as leave applications and expense claims) and also to access accounting and reporting modules.
The sample invoices filed before the lower authorities are also enclosed in pages 95 and 96 of the paper book filed before us. b) Bureau Platform License Fees – Rs 1,35,76,889/- It represents annual license fee for maintaining consumer bureau platform to provide credit information services. The sample invoices filed
M/s. Experian Credit Information Company of India Pvt. Ltd., before the lower authorities are also enclosed in page 97 of the paper book filed before us. c) DB2 software license fees – Rs 9,16,087/- DB2 software is a Relational Database Management Software owned and maintained by Experian Limited for storing, accessing and managing credit bureau data of the customers of the assessee. d) Technical Services Recharge (GVAP Products) – Rs 2,32,61,675/- It represents recharges towards GVAP services provided by Experian Limited such as Triggers, Contact Plus and Account Review. These services enable the assessee to provide value added services to its customers such as providing regular alerts to the lenders about a borrower’s financial status, helping lenders to manage their overall credit limits, helps lenders monitor credit portfolio and view changes in the portfolio, facilitates management of collections and recoveries as well as helps in predicting the propensity for additional borrowing etc. The sample invoices filed before the lower authorities are also enclosed in page 98 of the paper book filed before us. e) TS Recharge – Rs 4,08,96,526/- The recharge comprises of the following components:- i) Data center charges for maintenance and running of CBV2 software which helps the assessee in issuance of credit information reports to its customers. ii) Rack charges for hosting and maintaining database on CBV2 platform required to issue credit information reports. Rack spaces are large cabinets for hosting and maintaining the network equipment like routers, firewalls, switches and bandwidth.
M/s. Experian Credit Information Company of India Pvt. Ltd.,
The sample invoices filed before the lower authorities are also enclosed in pages 99 & 100 of the paper book filed before us. f) GVAP support service fees – Rs 50,54,834/- It represents monthly license and support fees towards GVAP platform for utilizing the GVAP services provided by Experian Limited. The fee is incurred by the assessee for the following additional support to provide value added services to the customers:-
- Maintenance of software including but not limited to technical support for defects and issues faced in regular execution. - Analysis, design and implementation of change requests or enhancements - To ensure regular performance and uptime of the system. The sample invoices filed before the lower authorities are also enclosed in page 101 of the paper book filed before us.
3.5. The aforesaid explanations were duly appreciated by the ld. CIT(A) while treating the aforesaid expenditure as revenue in nature. In any case, we find that the said issue is also covered by the decision of this Tribunal in assessee’s own case for Asst Years 2011-12 to 2014- 15 referred supra vide order dated 02/08/2021 wherein it had appreciated the individual nature of expenses incurred by the assessee together with the technical detailing thereon and held as revenue expenditure by observing as under:-
“14. We have heard both the parties and perused the records. We find that the issue here is whether the assessee's claim of technology recharge
M/s. Experian Credit Information Company of India Pvt. Ltd., cost is revenue expenditure or capital expenditure. The order of the Assessing Officer is again thoroughly based upon surmises and conjecture with no cogent material whatsoever. The opinion of the Assessing Officer that cost and expenses are incurred not to earn income during the year but continue to provide benefit over a period of years is totally a surmises and conjecture. Moreover, in tax laws there is no concept of deferred revenue expenditure. Moreover, we are of the opinion that the Assessing Officer has not brought on record any cogent material how these items are in capital in nature. On the other hand learned CIT(A) has analyaised expenditure in detail and has found that these expenses are basically revenue in nature and they should not be treated as capital expenditure. Here we note that learned CIT(A) was rightly referred to the decision of Hon'ble Supreme Court in the case of Empire Jute Co. Ltd. (124 ITR 1). It may be gainful to refer to the exposition in the case of Empire Jute Co. Ltd. (supra) wherein it was observed that "there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principles laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future." On the touchstone of the above said Hon'ble Supreme Court decision and on the facts and circumstances of the case in our considered opinion learned CIT(A) has taken correct view of the matter and it does not need any interference in our part.”
3.6. The ld. AR made a statement from the Bar that against the aforesaid order of the tribunal, the department had not preferred further appeal to the Hon’ble High Court and hence the finding given in the tribunal order had attained finality.
3.7. Respectfully following the aforesaid judicial precedent, which has been rightly followed by the ld. CIT(A) in the instant case, we do not find any infirmity in the order of the ld. CIT(A). Accordingly, the grounds raised by the revenue are dismissed.
M/s. Experian Credit Information Company of India Pvt. Ltd.,
In the result, the appeal of the revenue is dismissed.
Order pronounced on 24/08/2022 by way of proper mentioning in the notice board.