ITO 2(3)(1), MUMBAI vs. QUOPRRO GLOBAL SERVICES P. LTD, MUMBAI

आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 28/09/2015 of the First Appellate Authority, Mumbai, deleting the addition made u/s 40(a)(ia) of the Income Tax Act, 1961 (hereinafter the Act) on payments made/credited for carrying out the work in pursuance to the contract without deducting TDS as applicable u/s 194C of the Act.

The assessee has also preferred cross objection.

2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee was incorporated on 16/05/2008 to act as specialist business process outsourcing agency to various diplomatic missions across the world. The assessee entered into an agreement with consular section of various diplomatic mission, whereby, these missions delegating the administrative task relating to visa and passport processing, to the assessee. The assessee was in the process of developing a customized software, which would contain the business logic for visa and passport processing to interface with other database and hardware. The direct and indirect expenses incurred by the respondent for development of the said software were debited to the CWIP account as actual business operation had not commenced till date. The opening and closing balances of CWIP account during the 4 C.O. No.141/Mum/2017 Quoprro Global Services Pvt. Ltd. year under consideration has been made available in the fact sheet, made available on record by the assessee. During assessment proceedings, the assessee claimed that the expenses of Rs.17,33,91,216/- were incurred for the development of the customized software and were debited to CWIP account as the actual operation had not commenced till date. It was also submitted that appropriate taxes were withheld on the expenses on which the provisions of tax deducted at source are applicable. The documentary evidence of such expenses on sample basis, were also furnished before the Assessing Officer. However, the ld. Assessing Officer made ad-hoc disallowance at the rate of 10% of the expenses amounting to Rs.1,73,92,122/-. On appeal before the Ld. Commissioner of Income Tax (Appeal), the factual matrix was considered and found that the assessee has not claimed any expenses in the profit & loss account and only offered interest income of Rs.1,28,997/- as other income. No other income from business/profession was shown by the assessee. it has also been mentioned in the impugned order that profit & loss account was examined, wherein, the assessee has not deducted/claimed

5 C.O. No.141/Mum/2017 Quoprro Global Services Pvt. Ltd. any expenses, including the payments considered by the Assessing Officer for making the disallowance u/s 40(a)(ia) of the Act. This factual matrix was not controverted by the Revenue. The Ld. Commissioner of Income Tax (Appeal) has also mentioned the case of the assessee for Assessment Year 2010-11 by holding that the claimed u/s 35D cannot be entertained since the business had not commenced. There is no change in the status of the business operation in the present year also as the assessee is in the midst of development of visa processing software, meaning thereby, business had not commenced, thus, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal).

6 C.O. No.141/Mum/2017 Quoprro Global Services Pvt. Ltd.

Finally, the appeal of the Revenue as well as the cross objection of the assessee are dismissed

This order was pronounced in the open court in the presence of ld. representative from both sides at the conclusion of hearing on 01/11/2017.