2015 (6) TMI 1262 - AT - Income Tax

Amount written off as irrecoverable - failure of the assessee in producing the relevant particulars relating to the discounts and also for the reason that the debtors are undertakings of the State Government the CIT(A) has confirmed the addition made by the AO - HELD THAT - It is a limited request of assessee that he be given one more opportunity for filing the relevant details if any before the AO for demonstrating that debts in question pertain to discounts given by the assessee to the said corporations. He also mentioned that in remand proceedings the AO can also adjudicate the issue relating to allowing the said debts as business loss. We order accordingly and direct the AO to adjudicate the issue afresh after considering the material placed before him even it means furnishing of additional evidences for the first time before him. Accordingly ground No.2 is allowed for statistical purposes. Export promotion expenses - Disallowance of claim of the assessee primarily for want of details - Claim of the assessee that the said amount constitutes reimbursement of expenses - HELD THAT - We find it relevant to remand this issue also to the file of the Assessing Officer for want of relevant facts. AO shall adjudicate this issue afresh considering the details if any filed before him after giving an opportunity of being heard to the assessee. He shall also consider the orders of the ITAT in the assessee s own case for other assessment years. This ground is also allowed for statistical purposes. Nature of expenditure - computer software expenses - HELD THAT - We find that there is no relevant facts on the record to adjudicate if the said expenditure falls in revenue or capital field. So all the parameters relating to the nature of capital asset should be brought on record by the AO. It is not clear as to how the crash recovery software gives enduring benefits and is capable of yielding income on stand alone basis. As decided in CIT vs Amway India Enterprises 2011 (11) TMI 4 - DELHI HIGH COURT has provided certain guidelines to decide on capital or revenue nature of the expenses in software. In the remand proceedings the Assessing Officer is directed to decide the issue afresh after considering the above cited judgments relating to the issue under consideration and granting the assessee a reasonable opportunity of being heard. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of bad debts
2. Disallowance of export promotion expenses
3. Addition of computer software expenses

Issue 1: Disallowance of Bad Debts
The appellant contested the disallowance of bad debts amounting to Rs. 41,37,600 by the Assessing Officer, arguing that the debts were discounts negotiated with Government undertakings and should be allowed. However, the appellant failed to produce relevant details like copies of invoices to support this claim. The Commissioner of Income-tax(Appeals) upheld the disallowance, stating that discounts should have been debited in the relevant year and do not qualify as bad debts. The tribunal allowed the appellant one more chance to provide necessary details to the Assessing Officer for re-examination, citing the need to establish the nature of the debts and conditions specified in the relevant provisions of the Act.

Issue 2: Disallowance of Export Promotion Expenses
The appellant challenged the disallowance of Rs. 21 lakhs as export promotion expenses, claiming it was reimbursement of expenses. The Assessing Officer and CIT(A) disallowed the claim due to lack of details. The tribunal remanded this issue to the Assessing Officer for fresh examination, instructing a reevaluation based on the details provided and consideration of previous ITAT orders in the assessee's case for other assessment years.

Issue 3: Addition of Computer Software Expenses
The appellant disputed the addition of Rs. 80,000 for computer software expenses treated as capital expenditure by the Assessing Officer. The CIT(A) upheld this decision without providing a detailed explanation. The tribunal found a lack of relevant facts to determine if the expenditure should be classified as revenue or capital. It directed the Assessing Officer to reevaluate the issue, considering guidelines from relevant judgments and granting the appellant a reasonable opportunity to present their case.

In conclusion, the tribunal allowed the appellant's appeal for statistical purposes on all three issues, emphasizing the importance of providing necessary details and ensuring a fair opportunity for the appellant to be heard during re-examination by the Assessing Officer.