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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri P K Bansal & Shri Pawan Singh
O R D E R Per P K Bansal, Vice-President:
This appeal has been filed by the assessee against the order of the CIT(A)-17, Mumbai, dated 22.03.2013, for A.Y.2009-10.
None appeared on behalf of the assessee though notice was duly sent through registered post. Earlier also the appeal had been fixed from time to time i.e. from 13.04.2015 till date. But nobody appeared except on 20.10.2016, on which date the assessee’s counsel requested for adjournment. We, therefore, proceed to dispose of the appeal on merit and after hearing the learned DR.
The assessee has raised the following grounds of appeal:
The Ld. Commissioner of Income Tax (A)-17,Mumbai erred in confirming of the additions made by the Id. A.O to the returned loss of Rs.48,25,240/-
2. The Ld. Commissioner of Income Tax (A)-17,Mumbai erred in confirming the addition made by the Id AO of a sum of Rs. 40,73,791/- being the goodwill purchased by the company on account of partial purchase of business. The appellant respectfully submits that the additions made may kindly be deleted
3. The Ld. Commissioner of Income Tax (A)-17, Mumbai erred in confirming the disallowances made by the Id. A.O of the claim of Rs. 44,79,718/- being depreciation on intellectual property. The appellant respectfully submits that the disallowance may kindly be deleted.
4. The Ld. Commissioner of Income Tax (A)-17, Mumbai erred in confirming the disallowances made by the Id. AO towards operating expenses and administrative expenses amounting to Rs. 94,907/- and Rs. 2;73,385/- respectively. The appellant respectfully submits that the disallowance may kindly be deleted.
Ground no.1 is general in nature and requires no adjudication.
Ground no.2 relates to the addition made to fixed assets to the tune of ` 40,73,791/- being goodwill the net difference of value of transfer considered as good on account of partial sale of business. After hearing the learned DR and going through the facts of the case, we noted that the assessee has debited a sum of ` 40,73,791/- in the goodwill account. The Assessing Officer in the absence of proper explanation treated the said sum as non-explained expenditure and made addition u/s. 69C of the I.T.Act.
When the matter went before the CIT(A), the assessee submitted that it had sold part of its business to Nexgen Technology Services and this amount is nothing but represent the difference in the value of transfer and, therefore, it has been debited to goodwill account. The CIT(A) was not satisfied with the explanation and hence, confirmed the order of the Assessing Officer. We are of the view that this is a case where the assessee has not made any investment so that the amount can be added u/s. 69C of the Act. This is a clear case where the assessee has passed a normal accounting entry debiting goodwill account for the excess consideration received on sale of its partial business. Since no extra consideration has been received by the assessee outside the books of account, there is no question of applicability of section 69C. We, therefore, set aside the order of the CIT(A) on this issue and delete the addition.
Ground no.3 relates to the sustenance of the disallowance made by the Assessing Officer or ` 44,79,718/- being depreciation on intellectual property.
Facts relating to this ground are that the Assessing Officer noted that the assessee claimed depreciation of ` 44,79,718/- on Intellectual Property Rights IX Platform. On the basis of the submissions made by the assessee, it was noted that during the A.Y. 2007-08 the holding company of the assessee M/s.
Nexgenix Inc of USA had become bankrupt and had filed an application for bankruptcy in the USA under Chapter 11 of the US Bankruptcy Code. Due to this the business of the assessee company was severely affected. The Intellectual Property Right IX Platform which was earlier shown under the capital work-in-progress, and represented expenditure incurred to develop a particular platform for its holding company, could not be materialized as the holding company became bankrupt. Even then the assessee capitalized the expenditure and claimed depreciation firstly in A.Y. 2007-08, which was disallowed. The learned CIT(A) also disallowed the claim of depreciation.
After hearing the learned DR we have noted that the assessee has taken a plea before the CIT(A) that it had incurred expenditure on development of software product. The cost so incurred was capitalized and the depreciation was claimed. The CIT(A) upheld the disallowance of depreciation as it had been disallowed in the earlier years also and the assessee has not filed any appeal even though it had taken a plea before the CIT(A) that it was in the process of filing an appeal before the Tribunal by making an application for condonation of delay. Neither the DR nor anybody from the assessee’s side could inform us whether any appeal has been filed in the earlier year against the said disallowance before the Tribunal and, if at all filed, whether the Tribunal has decided the appeal in favour or against the assessee. Under these circumstances, we set aside the order of the CIT(A) and restore the issue to the file of the Assessing Officer with a direction to re- decide this issue after ascertaining the facts for A.Ys 2007-08 and also whether the assessee has filed any appeal before the Tribunal for the said year. In case the Assessing Officer finds that such an appeal has been filed and decided in favour of the assessee, the said claim may be allowed for the impugned assessment year also or if it has disallowed the claim for A.Y. 2007-08, the claim for disallowed for this year also. Thus, this ground is allowed for statistical purposes.
Ground no.4 relates to sustenance of disallowance made by the Assessing Officer towards operation and administrative expenses of ` 94,907/- and ` 2,73,385/- respectively. After hearing the learned DR and going through the orders of the tax authorities below, we noted that the Assessing Officer disallowed the said expenditure as the assessee failed to submit the details of thereof. Before the CIT(A), the assessee submitted that the amount of `. 94,907/- was incurred towards general expenses like electricity, travelling etc. and `.2,52,672/- was towards part payment of rent of SEEPZ and all these expenses were incurred wholly for the purpose of business. In support of this contention, the assessee also filed the details and copies of bills of these expenses. Failure on the part of the to file the details before the Assessing Officer and in the absence of any application for filing of addition evidence before the CIT(A) as required under Rule 46A, the CIT(A) confirmed the disallowance made by the Assessing Officer.
We, therefore, in the interest of justice and fair play to both the parties, set aside the order of the CIT(A) and restore the issue to the file of the Assessing Officer with a direction that the assessee shall file all the details as well as copies of the bills as has been filed before the CIT(A) and the Assessing Officer shall re-decide the issue afresh in accordance with law after verifying the details and the copies of bills so filed. Thus, this ground is allowed for statistical purpose.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open court on 12th day of September, 2017.