M/S. SCITECH CENTRE,,MUMBAI vs. DCIT CENTRAL CIRCLE-7(3), , MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER;

Mumbai dated 04.12.2018 for Assessment Year 2014-15. The assessee

has raised the following grounds of appeal:

GROUND I: DISALLOWANCE OF PREPAID SOFTWARE EXPENSES OF Rs.3,03,372/-: 1. On the facts & circumstances of the case and in law, the AO erred in disallowing annual maintenance charges for software amounting to Rs.3,03,372/· out of total annual maintenance charges amounting to Rs. 3,37,080/- on the ground that the same do not pertain to the assessment year under consideration without appreciating that the Appellant had reversed prior period expenses amounting to Rs. 252,81- and claimed only the net expenditure. 2. The Appellant humbly prays that the AO be directed to delete the addition of Rs. 3,03,372/- and allow the actual claim made by the Appellant amounting

ITA No. 1226 Mum 2019-M/s Scitech Centre.

to Rs. 50,562/- [3,37,080 (Actual Expense) - 2,52,810 (Reversed) - 33,708 (Allowed during assessment proceedings)]. 2. Brief facts of the case as extracted from the order of the lower

authorities are that the assessee is a company and is engaged in

Scientific & Industrial Research, filed its return of income on

03.11.2014 declaring Nil income for Assessment Year 2014-15. The

case was selected for scrutiny and the assessment was completed under

section 143(3) on 24/10/2016. The assessing officer while passing the

assessment order besides the other additions/ disallowance made

disallowance of Rs. Software expenses of Rs. 3,03,372/-, out of total

claim of Rs.3,37,080/- by taking view that as per invoice dated

10.03.2014 it was paid up to 31.12.2014, thus it was only for one month.

On appeal before ld CIT(A), the disallowance was confirmed by taking

view that no submissions were made by the ld AR for the assessee on

this issue. Thus, further aggrieved the assessee has filed this appeal

before this Tribunal. 3. We have heard the submission of learned authorised representative (ld.

AR) for the assessee and the learned Departmental Representative

(ld. DR) for the revenue and perused the material available on record.

The ld. AR for the assessee submits that the assessee incurred expenses

on annual maintenance of Software and annual licence fees for stress

analysis of components prior to manufacturing. The assessee incurred

ITA No. 1226 Mum 2019-M/s Scitech Centre.

expenses of Rs. 3,37,080/-. The assessee entered in agreement with Anyscad Solution AMC. The contract was for 12 months from 31st December 2013 to 31st December 2014. The assessing officer considered the invoice date 10th March 2014 as beginning of the contract and allowed expenses of one month only. The ld AR for the assessee submits that no details were required by assessing officer before making disallowance. Complete details were furnished to ld CIT(A) for expenses incurred by the assessee. It was explained that the assessee reversed the amount which was prepaid i.e. for the period 1st April 2014 to 31st December 2014 for nine months of Rs. 2,52,810/- (being 3,37,080/12*9). The ld CIT(A) confirmed the action of assessing officer without verifying the facts by holding that no submissions was made by the assessee, though complete details were furnished and written submissions were also filed by the assessee. The ld AR for the assessee also submitted that copy of tax invoice / receipt of maintenance contract is also placed on record along with the copy written submissions, filed before the ld CIT(A) is also placed on record. 4. The ld. Departmental Representative (DR) for the revenue supported the order of lower authorities. The ld DR further submits that the assessee has not explained the facts ld CIT(A) as recorded in para 7.1 of the impugned order.

ITA No. 1226 Mum 2019-M/s Scitech Centre.

and perused the record. As noted above the assessing officer disallowed

the Software expenses of Rs. 303,372/- by taking view that as per

invoice dated 10.03.2014 it was paid up to 31.12.2014, thus it was only

for one month. The ld. CIT (A) confirmed the action of assessing officer

by taking view that no submissions were made by the ld AR for the

assessee on this issue. We have noted that the assessee has placed on

record copy of submission with regard to the software expenses before

assessing officer and the copy of written submission filed before ld

CIT(A) on the issue of Software expenses. We have further noted that

the assessee also filed application dated 24.01.2018, for admitting

additional evidences on the impugned issue. On the admission of

additional evidence the ld CIT(A) sought the remand report of the

assessing officer, copy of such application is also on record. The copy of

remand report dated 23.08.2018, furnished by assessing officer for

objecting the admission of additional is also available on record. Despite

sufficient material on record, including the copy of tax invoice with

regard to annual maintenance of Software and written submission, the ld

CIT(A) affirmed the action of assessing officer without examining the

facts by holding that no submissions were made by AR of the assessee. 6. We have further noted that the assessing officer in para 6.1 of his

remand report dated 23.08.2018 accepted that the bills and vouchers 4

ITA No. 1226 Mum 2019-M/s Scitech Centre.

submitted by the assessee are in order. The relevant part of remand

report is extracted below.

“6.1 On perusal of the submissions of the assessee filed during the appellate proceedings, it is seen that the submission as submitted by the assessee are bills and vouchers are found to be in order.” 7. Considering the assessing officer in his remand report has already

accepted that the submissions of the assessee are in order, therefore, we

direct the assessing officer to allow the expenses. Even otherwise, we

have seen that on the tax invoice it is clearly mentioned that purchase

order was placed on 10.02.2014, invoice was generated on 10.03.2014 and maintenance contract was valid till 31st December 2014. In the

result the grounds of appeal raised by the assessee are allowed.

Order pronounced as per Rule 34(5) on 16/06/2020.

Sd/- Sd/- R.C.SHARMA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 16.06.2020 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4.The concerned CIT 5. DR “SMC” Bench, ITAT, Mumbai 6. Guard File BY ORDER, Dy./Asst. Registrar ITAT, Mumbai