DCIT, NEW DELHI vs. M/S TIMES INTERNET LTD., NEW DELHI

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ITA 2986/DEL/2011Status: DisposedITAT Delhi21 October 2016AY 2006-0732 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the rent disallowance was incorrect as the lessor admitted leasing and handing over possession from the effective date. Regarding Section 14A, the Tribunal found the AO's satisfaction recorded for disallowance to be valid and upheld the disallowance.

What were the facts?

The assessee took premises on lease from its holding company. The Assessing Officer (AO) disallowed rent for four months, considering the possession date later than the lease effective date. The assessee also earned exempt dividend income, and the AO made a disallowance under Section 14A.

What were the issues?

Whether rent for premises leased from a holding company can be disallowed based on the lease deed execution date versus the effective date. Whether the disallowance under Section 14A was validly made by the AO.

Which sections of the Income-tax Act were involved?

Section 14A

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Income Tax Appellate Tribunal, DELHI BENCHES : D : NEW DELHI

Before: SHRI R.S. SYAL & MS SUCHITRA KAMBLE

For Appellant: Shri Salil Agarwal, Advocate &, Shri Shailesh Gupta, CA
For Respondent: Shri I.P.S. Bindra, CIT- DR
Hearing: 19.10.2016Pronounced: 21.10.2016

per law.

32.

The last ground of the revenue’s appeal is against the deletion of disallowance of Rs.1,55,59,504/- shown by the assessee as receipt of advances. The assessee declared ‘Unearned income’ at a sum of Rs.1,55,59,504/-, which was shown as a liability in the balance sheet. On being called upon to explain as to why this amount was taken to balance sheet instead of showing it as income for the year, the assessee contended that the assessee billed the parties for a larger sum and the amount of income pertaining to the period after 31st March, 2006 was taken as deferred revenue and, hence, unearned income. Not convinced, the AO made addition of a sum of Rs.1,55,59,504/-, which came to be deleted in the first appeal.

33.

After considering the rival submissions and perusing the relevant material on record, we find that the assessee was following matching principle in recording income as well as expenses under the mercantile system of accounting. Page 572 of the paper book indicates that not only the income pertaining to the succeeding year, but, received in the year under consideration was taken as deferred revenue income, but, the expenditure incurred during the year not pertaining to the year under consideration, was also similarly accounted for. This unearned income of Rs.1.55 crore was taken as income for the succeeding year and accepted by the Revenue as such in the assessment u/s 143(3) of the Act.

1.

In view of the fact that this income did not pertain to the year under consideration, we hold that the ld. CIT(A) was justified in deleting this disallowance.

34.

In the result, the appeal of the assessee is partly allowed and that of the Revenue is partly allowed for statistical purposes.

Assessment Year 2007-08

35.

This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 6.6.2011. The appeal of the Revenue for the A.Y. 2006-07 was extensively argued by both the sides and it was fairly admitted that the facts and circumstances of the instant appeal are, mutatis mutandis, similar to those for the A.Y. 2006-07. In fact, no separate arguments were advanced in respect of the grounds taken for the year in question and the arguments so made for the A.Y. 2006-07 were adopted by the respective sides. We have passed our order for the A.Y. 2006-07 in earlier paras. Following the view taken for the immediately preceding year, the grounds of the Revenue are disposed of as under :-

36.

Ground no. 1 against the deletion of disallowance of Rs.21,59,50,568/- pertaining to expenditure relating to Medianet and Content selling is similar to ground no. 1 of the appeal for the A.Y. 2006-07. Following the view taken hereinabove, we dismiss this ground of appeal.

37. Ground no. 2 is against the decision taken by the ld. CIT(A) in setting aside the addition of Rs.28,95,387/- made by the AO u/s 14A and remitting the matter to the AO for a fresh adjudication. While dealing with similar ground for the A.Y. 2006-07, we have sustained the disallowance at Rs.2 lac, being the amount disallowed by the AO himself in the consequential proceedings. Consequential order passed by the AO for this year has not been brought on record. Following the view taken for the A.Y. 2006-07, we sustain the disallowance u/s 14A at Rs.2 lac for this year as well.

38.

Ground no. 3 is against the deletion of disallowance of Rs.5,01,200/-, being the legal and professional charges capitalized by the AO. This ground is similar to ground no. 3 of the Revenue’s appeal for the A.Y. 2006-07. Following the view taken hereinabove, we dismiss this ground of appeal.

39. Ground no. 4 is against the deletion of disallowance of Rs.29,36,247/- by holding that the depreciation on licence to use software should have been allowed at 25% and not at 60%. This ground is similar to ground no. 4 of the Revenue’s appeal for the A.Y. 2006-07.

Following the view, we dismiss this ground of appeal.

40.

Ground no. 5 is against the deletion of disallowance of Rs.12,64,688/-, being expenses on software treated by the AO as capital in nature. This ground is similar to ground no. 5 of the Revenue’s appeal for the A.Y. 2006-07. Following our view for the preceding year, we dismiss this ground of appeal.

41. Ground no. 6 is against the deletion of disallowance of Rs.2,22,146/- comprising of expenditure on repairs and maintenance of computers, furniture and fixtures. This ground is similar to ground no. 9 of the Revenue’s appeal for the A.Y. 2006-07. Following the view taken hereinabove for the preceding year, the disallowance pertaining to AMC of computers is held to have been rightly allowed as deduction. In so far as the expenditure relating to Repairs of furniture and fixtures is concerned, the same is restored to the file of AO to be decided in accordance with the view taken by us for the A.Y. 2006-07

42. Ground no. 7 is against the deletion of disallowance of Rs.80,140/.

This ground is similar to ground nos. 6, 7 and 8 of the Revenue’s appeal for the A.Y. 2006-07. Following our view on these grounds in the earlier year, we dismiss this ground of appeal.

43.

In the result, the appeal is partly allowed for statistical purposes.

Assessment Year 2008-09

44.

This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 13.6.2011. The appeal of the Revenue for the A.Y. 2006-07 was thoroughly argued by both the sides and it was fairly admitted that the facts and circumstances of the instant appeal are, mutatis mutandis, similar to those for the A.Y. 2006-07. In fact, no separate arguments were advanced in respect of the grounds taken for the year in question and the arguments so made for the A.Y. 2006-07 29 were adopted by the respective sides. We have passed our order for the A.Y. 2006-07 in earlier paras. Following the view taken for the immediately preceding year, the grounds of the Revenue for the extant year are disposed of as under :-

45.

Ground no. 1 against the deletion of disallowance of Rs.28,41,30,727/- pertaining to expenditure relating to Medianet and Content selling is similar to ground no. 1 of the appeal for the A.Y. 2006-07. Following the view taken above, we dismiss this ground of appeal.

46.

Ground no. 2 is against the deletion of disallowance of Rs.34,60,688/-, being the legal and professional charges capitalized by the AO. This ground is similar to ground no. 3 of the Revenue’s appeal for the A.Y. 2006-07. Following our view for the earlier year, we dismiss this ground of appeal.

47. Ground no. 3 is against the deletion of disallowance of Rs.1,16,16,134/- by holding that the depreciation on licence to use software should have been allowed at 25% and not at 60%. This ground is similar to ground no. 4 of the Revenue’s appeal for the A.Y. 2006-07.

Following the view taken hereinabove, we dismiss this ground of appeal.

48.

Ground no. 4 is against the deletion of disallowance of Rs.33,64,530/-, being expenses on software treated by the AO as capital in nature. This ground is similar to ground no. 5 of the Revenue’s appeal for the A.Y. 2006-07. Following our view for such earlier year, we dismiss this ground of appeal.

49. Ground no. 5 is against the deletion of disallowance of Rs.16,38,636/-, being disallowance out of Content procurement and maintenance expenses by treating it as capital expenditure. This ground is similar to ground no. 8 of the Revenue’s appeal for the A.Y. 2006-07.

Following our view taken hereinabove, we dismiss this ground of appeal.

50.

Ground no. 6 is against the deletion of disallowance of Rs.1,28,700/- comprising capital expenditure on Repair & Maintenance charges of computer. This ground is similar to ground no. 9 of the Revenue’s appeal for the A.Y. 2006-07. Following our view, we dismiss this ground of appeal.

51.

In the result, the appeal is dismissed.

The order pronounced in the open court on 21.10.2016.

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