2013 (9) TMI 1190 - AT - Income Tax

Summary

Issues involved: Three appeals related to assessment years 2001-02 and 2002-03 were filed against the order of the CIT(A) regarding the disallowance of brokerage paid by the assessee to ICICI Capital Services Ltd. and Hughes Telecom Ltd.

ITA No.3423/Mum/10 & ITA No. 4868/Mum/10 (relevant to assessment year 2001-02): The assessee challenged the retention of 10% disallowance by the CIT(A) on brokerage paid to ICICI Capital Services Ltd. and Hughes Telecom Ltd. The Tribunal had previously remanded the matter to the AO for further examination of evidence. The CIT(A) disallowed 10% of the commission payments despite finding that services were rendered by ICICI Capital Services Ltd. The Tribunal held that the token disallowance was unjustified and set aside the 10% disallowance.

ITA No.6948/Mum/05 (relevant to assessment year 2002-03): Similar to the previous appeal, the CIT(A) deleted the disallowance of commission paid to ICICI Capital Services Ltd. The Tribunal upheld the CIT(A)'s decision, stating that the services were genuine and no token disallowance was warranted.

The second issue in this appeal concerned the treatment of software expenses as revenue or capital in nature. The CIT(A) held the expenditure to be revenue in nature, citing case laws. The Tribunal upheld the CIT(A)'s decision based on the principle that such expenses were for system upgrade and efficiency, not creating new assets or sources of income.

In conclusion, the Tribunal allowed the appeal of the assessee related to assessment year 2001-02 and dismissed the appeals of the Revenue related to assessment years 2001-02 and 2002-03.