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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI R.C. SHARMA & SHRI PAWAN SINGH
These are cross-appeals filed by the assessee and revenue against order of CIT(A) for A.Ys 2007-08 and 2008-09, in the matter of order passed u/s. 143(3) of the Income Tax Act, 1961.
Rival contentions have been heard and record perused. Facts in brief are that assessee is engaged in business of shipping agent/container freight station owner and operator. During the course of scrutiny assessment for both the years under consideration the AO declined assessee’s claim of software expenses by treating same as capital in nature. By the impugned order, CIT(A) allowed assessee’s claim against which revenue is in further appeal before us in both the years under consideration.
It was submitted by the ld. AR that the issue is covered by the order of the Tribunal in assessee’s own case for A.Y 2006-07 vide order dt. 19.12.2014. We also find that the issue is also covered in favour of the assessee by the decision of the Hon'ble Bombay High Court in the case of Raychem RPG Ltd. (346 ITR 138), wherein it was held that software facilitate assessee’s trading operations or enable the management to conduct assessee’s business more efficiently or more profitably but it is not in the nature of profit-making apparatus. Therefore, expenditure on software was to be allowed. In the instant case also, assessee was in the business of shipping agent, software was 3 M/s. Maersk India Pvt. Ltd. & APM Terminals India Pvt. Ltd. 3072, 3283 & 3284/Mum/2013 used to facilitate assessee’s business of shipping, therefore, there is no reason to treat the expenditure on software as capital.
In the result, both the appeals of the revenue are dismissed.
The AO has also made an addition of closing balance of CENVAT credit on account of unutilized service tax credit u/s 145A of the Act. By the impugned order CIT(A) confirmed the addition against which assessee is in further appeal before us.
We have considered the rival contentions and found that issue with regard to applicability of Sec. 145A on unutilized service tax credit was considered by the Tribunal in assessee’s own case in vide order dt. 19.12.2014, wherein the Tribunal held as under :-
“10. We have heard the rival submissions and also perused the relevant finding of the AO as well as Ld.CIT(A). The amount of unutilized CENVAT credit of Rs.57,39,710/- pertains to service tax, which was payable on account of services rendered by the assessee. As per the service tax law, the service tax is payable as and when the payment/fees for under lying services provided by the assessee are realized. The CENVAT credit is available only on account of laws laid down under Central Excise Act. Here there is no valuation of stock of goods. Section 145A is a non obstante clause to section 145 and provides that the valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head profit and gains has to be adjusted so as to include the amount of any tax, duty, cess, or fee paid or incurred by the assessee to bring the goods as on the date of valuation. This section only applies to purchase and sale of goods and inventory for the purpose of valuation of stock on the date of valuation. In the normal
4 M/s. Maersk India Pvt. Ltd. & APM Terminals India Pvt. Ltd. 3072, 3283 & 3284/Mum/2013 circumstances it is at the time of valuation of closing stock and not for the valuation of service contracts. If the provision of section 145A is not applicable on services, then the action of the AO in invoking the provisions of section 145A to make the addition is legally not correct. Accordingly on this reason, the order of the Ld. CIT(A) is set aside and the addition made by the AO is deleted. In the result ground no. 3 is treated as allowed.”
As the facts and circumstances during both years under consideration are same, respectfully following the order of the Tribunal this ground of assessee’s appeal is allowed, in both the years.
In A.Y 2007-08 assessee has also taken a ground that CIT(A) had not adjudicated ground no. 7 taken before CIT(A). It was argued by the ld. AR that revised returned income was not considered by the AO for the purpose of computation of assessed income. We found that the CIT(A) has not adjudicated this ground. In all fairness, we restore this matter back to the file of the CIT(A) for deciding afresh considering income as per revised return, and after giving due opportunity to the assessee.
In A.Y 2008-09 assessee has taken a ground with regard to disallowance u/s 14A amounting to Rs.6,18,410/-. It was argued by the ld. AR that there was no exempt income during the year under consideration, therefore, no disallowance should be made. The issue with regard to disallowance u/s 14A when there is no exempt income has been considered by the Hon'ble Delhi High Court in the case of Cheminvest Ltd., 378 ITR 33 wherein it was held that no disallowance u/s 14A should be made when there is no exempt income during the 5 M/s. Maersk India Pvt. Ltd. & APM Terminals India Pvt. Ltd. 3072, 3283 & 3284/Mum/2013 year. Respectfully following the order of the Hon'ble Delhi High Court, we delete the disallowance made u/s 14A of the Income Tax Act, 1961.
In the result, appeals of the revenue are dismissed, whereas appeals of the assessee are allowed in part in terms indicated hereinabove.
Order pronounced in the open court on 30th March, 2016.