2022 (4) TMI 1590 - AT - Income Tax

Nature of expenditure - software expenses - AO treated it as capital expenditure - HELD THAT - Upon hearing the parties we find that this is a recurring issue since assessment year 2004-05 to 2011-12. In all these years the Tribunal took a view in favour of the assessee as has been agreed by the DR. It is also brought to our notice that notice further appeal has been preferred by the Revenue against the decision of the Tribunal. This being the factual matrix consistent with the earlier decisions of the Tribunal we uphold the order of the Ld.CIT(A) and reject the ground raised by the Revenue. This ground of appeal of the Revenue fails. Addition of notional interest income in respect of toll road from Madhya Pradesh State Industrial Development Corporation - HELD THAT - As counsels representing the parties submitted that this issue has been restored to the file of the Assessing Officer for the assessment years 2004-05 to 2011-12. Therefore consistent with the earlier decisions of the Tribunal for the above assessment years the issue in ground 2 raised by the Revenue is restored to the file of the Assessing Officer for de novo consideration in line with the directions issued for the assessment years 2004-05 to 2011-12. This ground is treated as allowed for statistical purpose. Disallowance of payments made to clubs - HELD THAT - Upon hearing the parties we find that this issue is covered in favour of the assessee by the earlier orders of the Tribunal for the assessment years 2005- 06 to 2011-12. Therefore consistent with the earlier decisions of the Tribunal for the assessment years 2005-06 to 2011-12 we uphold the order of the CIT(A) on this issue. Depreciation on residential properties - AO held that depreciation claimed in respect of house properties income from which were chargeable as Income from house property was not allowable - HELD THAT - Upon hearing the parties we note that this issue has been decided by the Tribunal in favour of the assessee for earlier years i.e. A.Ys. 2004-05 to 2011-12. There is no change in the facts and circumstances of the issue. Therefore being consistent with earlier orders of the co-ordinates benches we allow this ground raised by the assessee. Ground 1 of the appeal is allowed. Depreciation on toll road - HELD THAT - The issue stands squarely covered by the decision of the Tribunal for the assessment years 2010-11 and 2011-12 2019 (12) TMI 1499 - ITAT MUMBAI wherein the C Bench of this Tribunal by following the decisions of the Tribunal for assessment years 2008-09 and 2009-10 2019 (11) TMI 1368 - ITAT MUMBAI has restored the issue to the file of the Assessing Officer with direction to the Assessing Officer to decide the issue keeping in view the directions of the Tribunal for the A.Ys. 2004-05 to 2007-08. This ground is allowed for statistical purpose. Disallowance u/s 14A read with rule 8D - HELD THAT - We restore this issue to the file of the Assessing Officer to follow the directions of the Tribunal for the A. Y. 2004-05 to 2007-08 2019 (4) TMI 1809 - ITAT MUMBAI and recompute the disallowance in accordance with the directions therein. We also direct the Assessing Officer to recompute the disallowance keeping in view the decision of the special bench of Delhi in the case of ACIT vs Vireet Investments Private Limited 2017 (6) TMI 1124 - ITAT DELHI . This ground is allowed for statistical purpose

Summary

Issues Involved:
1. Disallowance of software expenses.
2. Addition of notional interest income from toll road.
3. Disallowance of payments made to clubs.
4. Disallowance of depreciation on residential properties.
5. Disallowance of depreciation on toll road.
6. Disallowance under section 14A read with rule 8D of I.T. Rules, 1962.

Detailed Analysis:

1. Disallowance of Software Expenses:
The Revenue contested the deletion of disallowance of Rs. 1,63,15,111/- for software expenses, treated as capital expenditure by the Assessing Officer. The CIT(A) had followed precedents from earlier assessment years (2004-05 to 2011-12) in favor of the assessee. The Tribunal upheld the CIT(A)’s decision, noting that the issue had been consistently decided in favor of the assessee in previous years. Consequently, this ground of appeal by the Revenue was dismissed.

2. Addition of Notional Interest Income from Toll Road:
The Revenue challenged the deletion of the addition of Rs. 1,50,00,000/- as notional interest income from toll road. Both parties agreed that this issue had been remanded to the Assessing Officer in earlier years (2004-05 to 2011-12). The Tribunal restored this issue to the Assessing Officer for fresh consideration, consistent with earlier directions. This ground was allowed for statistical purposes.

3. Disallowance of Payments Made to Clubs:
The Revenue appealed against the deletion of disallowance of Rs. 47,19,084/- for payments made to clubs. The Tribunal found that this issue had been settled in favor of the assessee in earlier years (2005-06 to 2011-12) and upheld the CIT(A)’s order. This ground of appeal by the Revenue was dismissed.

4. Disallowance of Depreciation on Residential Properties:
The assessee contested the disallowance of depreciation of Rs. 6,56,258/- on residential properties. The Assessing Officer had disallowed the claim based on precedents from earlier years (2006-07 to 2011-12). The Tribunal noted that this issue had been decided in favor of the assessee in previous years (2004-05 to 2011-12) and allowed the assessee’s ground of appeal.

5. Disallowance of Depreciation on Toll Road:
The assessee challenged the disallowance of depreciation of Rs. 1,65,322/- on toll road. The Assessing Officer had disallowed the claim, stating that the ownership of the toll road vested with the government. The CIT(A) upheld the disallowance based on judgments from the jurisdictional High Court. The Tribunal, however, noted that this issue had been remanded to the Assessing Officer in earlier years (2004-05 to 2011-12) and restored the issue for fresh consideration. This ground was allowed for statistical purposes.

6. Disallowance under Section 14A Read with Rule 8D of I.T. Rules, 1962:
The assessee contested multiple disallowances under section 14A read with rule 8D, including interest and administrative expenses. The Tribunal noted that these issues had been remanded to the Assessing Officer in earlier years (2004-05 to 2011-12) for fresh consideration. Consistent with earlier decisions, the Tribunal restored these issues to the Assessing Officer for re-computation following the directions from previous years. Grounds 4 to 7 were allowed for statistical purposes.

Conclusion:
Both the assessee’s and Revenue’s appeals were partly allowed for statistical purposes, with several issues being remanded to the Assessing Officer for fresh consideration in line with earlier Tribunal decisions. The Tribunal upheld the CIT(A)’s decisions on software expenses and club payments, while remanding issues related to notional interest income, depreciation on residential properties and toll road, and disallowances under section 14A for re-evaluation.