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PER CHANDRA MOHAN GARG, JUDICIAL MEMBER These cross appeals have been filed against the order of Commissioner of Income Tax (Appeals) – VI Mumbai dated 16.1.2002 passed in appeal No. CIT(A)-VI/SR-3/IT III/00-01 for asstt. year 1998- 99.
Grounds raised by the revenue in read as under :-
“On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding the sale and lease back transaction entered into by the assessee with M/s. Asian Electronics Ltd. as genuine and in further allowing the depreciation of Rs. 1,74,11,000/- claimed by the assessee, relying on the decision of the CIT(Ä) in the assessee’s own case for A.Y. 1997-98 which has not been accepted by the department and appeal to ITAT has been filed vide Authorisation Memo No.J- 24/J-III/IT-112/2001-02 dated 22.5.2001.
2. On the facts and in the circumstances of the case and in law the CIT(A) erred in deleting the addition of Rs. 24,71,034/- out of Rs. 30,59,684/- made by the AO in respect of expenses on purchase of computer software, without appreciating that the said expenses have been held as capital expenditure as the same have resulted in enduring benefit to the assessee.”
The assessee has raised as many as four grounds in this appeal but at the very outset the Ld. Counsel for the assessee submitted that assessee does not want to press ground No. 1 and 1a thus same are dismissed as not pressed. Remaining effective grounds of the assessee read as under :-
2. “ On the facts and in the circumstances of the case, the Learned Commissioner of Income-tax (Appeals) has legally erred in not accepting the purchase bills and other relevant documents filed before him, thereby disregarding the provisions of Rule 46A of the Income-tax Rules 1962, and consequently, confirming the disallowance of depreciation of Rs. 32,27,474/- on vehicles owned by the appellant company and leased out during the year.
3. On the facts and in the circumstances of the case, the Learned Commissioner of Income-tax (Appeals) has legally erred in confirming the addition of Rs. 57,38,100/- on account of interest on sticky loans and advances without considering the fact that no real income had accrued to the appellant. 4. On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) has legally erred in confirming the estimated disallowance of 50% of foreign travel expenditure incurred by the appellant company, thereby causing a grievance of Rs. 12,07,827/- to the appellant company. 5. The Appellant Company craves leave to add, alter, amend and / or withdraw all or any of the grounds of appeal herein and to submit such statements documents and papers as may be considered necessary either at or before the appeal hearing.”
4. Ground No. 1 of the revenue the Ld. CIT (DR) pointed out that this issue is covered in favour of the revenue by the order of the ITAT Delhi C Bench dated 21.6.2013 passed in and 3192/D/2007 wherein similar issue raised by the assessee as ground No. 2 has been restored to the file of AO to decide the same denovo in view of the decision of Hon’ble Supreme Court in the case of ICDS Ltd. vs. CIT 350 ITR 257 (SC). The Ld. CIT(DR) further pointed out that the appeal of the assesee against the order of the Tribunal dated 21.6.2013 on this issue has been dismissed by Hon’ble High Court of Delhi by order dated 24.2.2014 passed in ITA No. 46/2014 and 47/2014.
5. Replying to the above the Ld. Counsel for the assessee took us through relevant operative para 17 at page 8 of the first appellate order and submitted that the CIT(A) granted relief to the assessee by following the order of his predecessor for astt. Year 1997-98. However, he could not controvert this contention of the Ld. CIT(DR) that similar issue has been restored to the file of AO for fresh adjudication by the Tribunal and order the Tribunal for asstt. year 2001-02 dated 21.6.2013 (Supra) on this issue has been upheld by the Hon’ble High Court. From operative part of the Hon’ble Delhi High Court it is amply clear that the Hon’ble High Court has left upon the question to be raised by the assessee before the AO during remand proceedings as to whether the decision in ICDS Ltd. (supra) is distinguishable or not. In view of above similar controversy involved in the present case for asstt. year 1998-99 is also restored to the file of AO for fresh adjudication after allowing due opportunity of hearing to the assesee. Accordingly ground No. 1 of the revenue is allowed for statistical purposes.
6. Ground No. 2 of the revenue apropos ground No. 2 is Ld. CIT(DR) contended that the CIT(A) has erred in deleting the addition of Rs. 24,71,034/- out of Rs. 30,59,684/- made by the AO in respect of the expenses on purchase of computer software without appreciating that the said expenses have been held as capital expenditure as the same have resulted in enduring benefit to the assesee.
7. Ld. AR strongly supported the first appellate order and drawn our attention towards relevant operative para of 29 and 30 of the first appellate order and contended that the assessee filed the details of expenses incurred on various items of these software of the value of Rs. 30,59,684/- including Rs. 9,05,672/- which was a deferred revenue expenditure written off in the books of accounts and it has been claimed as revenue expenditure in asstt. year 1998-99. Ld. Counsel further submitted that the CIT(A) considered facts and circumstances of the present case and ratio of the decision of ITAT Ahmedabad Bench A in the case of Lubi Electricals Pvt. Ltd. vs. DCIT in and ITA No. 163/Ahd/1992 for asstt. year 1988-89 where the Tribunal following the judgment given by Hon’ble Gujrat High Court in the case of Alembic Chemicals Works Ltd. 177 ITR 377 allowed the claim of the assessee and purchase of software programme was allowed as revenue expenditure.
8. On careful consideration of our submissions from operative para 29 and 30 of the first appellate order we note that the CIT(A) granted relief to the assesee after considering all relevant facts and circumstances and by following ratio of the decision of ITAT Ahmedabad in the case of Lubi Electricals Pvt. Ltd. vs. DCIT (supra). The CIT(A) also noted that out of Rs. 9,05,672/- an amount of Rs. 5,88,650/- has already been allowed to the assesee as revenue expenditure in 1997-98. Therefore balance has been claimed as deferred revenue expenditure. Therefore total claim of the assessee for the period under consideration i.e. asstt. year 1988-89 is of Rs. 24,71,034/- which is allowable as revenue expenditure as the expenditure in purchase of software programme has to be allowed as revenue expenditure. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the impugned order and therefore we uphold the same. Accordingly ground No. 2 being devoid of merits is also dismissed.
Assessee’s appeal ITA No. 1942/M/2002
Ground No. 2 of the assesee the Ld. AR contended that the Ld. CIT(A) has legally erred in not accepting the purchase details and other relevant documents filed before him under Rule 46A of IT Rules 1962 and consequently confirming the disallowance of depreciation of Rs. 32,27,474/- on the vehicles owned by the assessee company and leased out during the year. The Ld. Counsel pointed out that the additional evidence filed by the assessee before CIT(A) should have been admitted and considered which properly explains the stand of the assessee in regard to claim of the depreciation of vehicles owned by the assessee company and leased out during the period.
The Ld. CIT(DR) strongly supported the assessment order as well as first appellate order on this issue. However she could not controvert this fact that additional evidence submitted by the assessee during first appellate proceedings was to be admitted and considered for proper adjudication of this ground. In all fairness she agreed to the submission of the Ld. AR that the issue contained in ground No. 2 of the assessee should be restored to the file of the AO with a direction to admit and consider the additional evidence filed by the assesee under Rule 46A of the Rules as the assessee was prevented by sufficient cause from filing the same before the AO during the proceedings. In view of above submissions of both the sides issue of allowability of depreciation on vehicles owned by the assesee company and leased out during the year is restored to the file of the AO with a direction that the additional evidence of the assessee should be admitted and considered as per relevant rule 46A of the Rules and the issue should be decided afresh after affording due opportunity of being heard to the assessee and without being prejudice from the earlier assessment and first appellate order. Accordingly ground No. 2 of the assessee is allowed for statistical purposes.
Apropos Ground No. 3 the Ld. Counsel for the assessee submitted that this issue is covered by the order of the Tribunal dated 15.9.2011 passed in and 4145/D/2011 for asstt. year 2003-04 and 2004-05 respectively wherein the appeals of the revenue have been dismissed on the issue of interest on sticky loans and advances. The Ld. Counsel further pointed out on the very similar issue the appeal of the revenue against the order of the Tribunal in ITA No. 3198/Del/04 for asstt. year 1999-2000 has been dismissed by holding that the Tribunal has rightly followed the decision of Hon’ble High Court in the case of CIT vs. Vasisth Chay Vyapar Ltd. (2011) 330 ITR 440 (Del). Replying to the above the Ld. CIT(DR) submitted that this issue is not covered by the order the Tribunal and Hon’ble High Court because in the order of the Tribunal dated 21.6.2013 for asstt. year 2001-02 page 10 the Tribunal has confirmed the order of CIT(A) on this issue by following the decision of Hon’ble Supreme Court in the case of UCO Bank vs. CIT 237 ITR 889 which has been upheld by Hon’ble High Court by order dated 24.2.2014.
Replying to the above Ld. Counsel for the assessee pointed out that in the order dated 24.2.2014 (supra) Hon’ble High Court has not recorded any findings on the issue involved in ground No. 3 of the assessee pertaining to interest on sticky loans and advances and the same was decided in favour of the assessee by the Tribunal for asstt. year 1999-2000 which was confirmed by Hon’ble High Court of Delhi by order dated 29.1.2016 (supra).
On careful consideration of above rival submissions we are of the considered opinion that the issue on interest on sticky loans has been decided in favour of the assessee by the order of the Tribunal in asstt. year 1999-2000 and order of the Tribunal has been upheld by the Hon’ble High Court order dated 29.1.2016 (supra) wherein appeal of the revenue has been dismissed on both the counts i.e. delay of 365 days in filing the appeal as well as on merits. The Ld. CIT(DR) could not show us any contrary decision of Hon’ble High Court on this issue therefore respectfully following the order of Hon’ble High Court dated 29.1.2016 for asstt. year 1999-2000 we hold that ground No. 3 of the assesee is covered on all four corners by this order we decide the same in favour of the assessee respectfully following the order of the Hon’ble High Court.
Ground No. 4 apropos ground No. 4 the Ld. Counsel for the assessee submitted that the AO well as the CIT(A) has legally erred in confirming the estimated disallowance of 50% of foreign travel expenses expenditure incurred by the assessee thereby causing a grievance of Rs. 12,05,827/- to the assessee. The Ld. Counsel pointed out that the AO as well as the CIT(A) could not controvert this fact that the expenditure on foreign travel was not incurred for the purpose of business of the assessee and without establishing any allegation estimated disallowance has been made which is not sustainable. The Ld. Counsel also pointed out that entire foreign travel expenses was incurred for the purpose of business of the assessee. Therefore the same should be allowed in toto.
The Ld. CIT(DR) drawn our attention towards relevant operative para 8 of the assessment order and paras 35 to 37.1 of the first appellate order and contended that in the tax audit report only a list of persons undertaking foreign travelling has been given without mentioning dates, place of visits and amounts in respect of each such visit along with the explaining the business purpose for such visits. The Ld. CIT(DR) vehemently pointed out that the AO specifically asked the assessee to furnish complete details but the assessee inspite of repeated opportunities given during the assessment proceedings over a period of six months failed to submit the same. Ld. CIT(DR) further pointed out that in this situation the AO was quite correct in holding that it is not estimated as to whether all such visits were wholly and exclusively for the business purposes of the assessee and he may remitted disallowance of 50% of claimed expenditure. Ld. CIT(DR) further pointed out that the CIT(A) also provided repeated opportunities to the assessee and the assessee filed incomplete details vide submissions and the assessee could not prove that the whole expenditure on foreign travel was expended for the purpose of business of the assessee.
On carefully consideration of rival submission we note that the assessee filed written submissions and summary of the foreign travel expenses before the CIT(A) which is placed at page 141 to 144 of the assessee’s paper book wherein particulars of foreign traveling, amount expended, purpose of visit, name of the person travelled their designation has been given and grand total of foreign travel expense has been shown as Rs. 24,15,655/-. However we may point out that these details of foreign travel expenses filed before the CIT(A) has not been confronted to the AO. Therefore this issue is restored to the file of AO with a direction that he shall decide the issue afresh after affording due opportunity of hearing to the assessee and shall properly examine and verify the details submitted by the assessee regarding claim of foreign travel expenses. Needless to say that the AO shall adjudicate the issue after affording due opportunity of hearing to the assessee and without prejudice from the earlier assessment and first appellate order of the CIT(A). Accordingly ground No. 4 of the assessee is allowed for statistical purposes.
In the result appeal of the revenue as well as of the assessee are partly allowed for statistical purposes. Order pronounced in the open court on 17th June, 2016.