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TMI Blog2014 (11) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of the learned Commissioner of Income-tax (Appeals) that there was no purpose of making such additions and in our opinion, such additions have been rightly deleted - Decided against revenue. - ITA No. 1123/Chd/2013 - - - Dated:- 18-11-2014 - SHRI BHAVNESH SAINI AND SHRI T.R. SOOD, JJ. For the Appellant : Shri Rajeev Kumar For the Respondent : Shri Sudhir Sehgal ORDER T. R. Sood (Accountant Member).- This appeal is directed against the order of the learned Commissioner of Income-tax (Appeals), Chandigarh dated September 18, 2013. 2. In this appeal, the Revenue has raised the following grounds : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in allowing appeal of the assessee without appreciating the facts of the case. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in deleting the additions without appreciating the fact that assessment which resulted in substantial additions on various grounds was made under section 144 of the Act after affording several opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax return. 8. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in deleting the addition of ₹ 3,06,364 and ₹ 2,02,620 after rectification under section 154 made on account of disallowance of expenses claimed by the assessee in the profit and loss account under the heads 'Travelling and local conveyance' and 'Singapore living expenses', respectively on the plea that the additions would not have any effect on the total taxable income, since the appellant has been allowed benefit of exemption under section 10B of the Act when section 80(5) provides that the assessee is not entitled for exemptions not claimed in the Income-tax return. 9. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in deleting the addition of ₹ 6,96,000 made by the Assessing Officer while framing order under section 144 of the Income-tax Act on account of failure of the assessee to substantiate the genuineness of the salaries paid to persons specified under section 40A(2)(b). 10. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in deleting the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport of its claim of exemption under section 10B of the Act were forwarded to the Assessing Officer (ITO-Ward-4(4), Chandigarh) vide this officer letter No. 605 dated July 2, 2013 for his comments in view of rule 46A(3) of the Income-tax Rules, 1962 (here inafter referred to as 'the rules') and Income-tax Officer, Ward-4(4), Chandigarh forwarded my letter along with annexures to Asst. CIT, Circle-4(1), Chandigarh vide his letter No. 2552 dated July 15, 2013. No report has been received till the date of passing of this order. 4.3 From the documents submitted by the appellant, it is evident that the appellant is a 100 per cent. export-oriented unit duly registered with STPI and had exported computer software during the year. As per the explanation given by learned counsel for the assessee/ appellant, as discussed in para 2.1 above, the appellant was prevented by sufficient cause from producing these documents before the Assessing Officer and so the same are admitted under rule 46A(1) of the Rules. The entire amount of software export transaction is duly reported to the Reserve Bank of India by the appellant. The appellant had duly filed Form 56G along with det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal No. 2, the addition made on this account is also deleted. Ground of appeal No. 4 is allowed. 7.1 The appellant had debited certain amounts on account of travelling and local conveyance and Singapore living expenses. The Assessing Officer has disallowed one-tenth of the travelling and local conveyance expenses and Singapore living expenses. In the computation of income in the assessment order, the correct amounts were not added, which have been subsequently rectified by the Assessing Officer vide order under section 154 dated January 16, 2013. Learned counsel for the appellant has submitted that the additions will have no effect on the taxable income of the appellant if the claim of the appellant regarding exemption under section 10B is accepted. The contentions of the appellant is correct. The additions would not have any effect on the total taxable income, since the appellant has been allowed benefit of exemption under section 10B of the Act. Ground of appeal No. 5 is allowed. 8.3.2 I have considered the submissions of learned counsel. The Assessing Officer has reduced the claim of the salaries paid to relatives of the company's d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year in which it has accrued. The explanation of learned counsel that accrued interest on fixed deposit receipts must have been accounted for in the next accounting year does not hold water. Learned counsel is himself not sure as to whether the said difference of interest of ₹ 33,867 was actually declared in the next financial year. The addition made of ₹ 33,867 on this account is accordingly upheld. 8.2 Regarding the difference of ₹ 8,676 on account of receipt from M/s. Anglo Eastern Ship Management India (P) Ltd., learned counsel for the assessee has submitted that the amount of ₹ 8,676 is tax deducted by payers which should have been taken into account. As learned counsel for the assessee has accepted the mistake, the addition made of ₹ 8,676 is confirmed. The above clearly show that the learned Commissioner of Income-tax (Appeals) has mainly deleted the addition by observing that if these expenses are disallowed, the profits of the assessee would increase which would mean that the assessee would become entitled to enhanced deduction under section 10B of the Income-tax Act. 6. Before us, the learned Departmental repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of Tata Consultancy Services v. State of Andhra Pradesh [2004] 271 ITR 401 (SC), wherein the question arose whether sale of intellectual property in case of software through a licence would amount to sale of goods or not. In this connection, the hon'ble Supreme Court observed as under (headnote) : 'The term goods , for the purposes of sales tax, cannot be given a narrow meaning. Properties which are capable of being abstracted, consumed and used and/or transmitted, transferred, delivered, stored or possessed, etc., are goods for the purpose of sales tax. The test to ascertain whether a property is goods for the purposes of sales tax is not whether the property is tangible or intangible or incorporeal. The test is whether the concerned item is capable of abstraction, consumption and use and whether it can be transmitted, transferred, delivered, stored, possessed, etc. In the case of software, both canned and uncanned, all of these are possible. Intellectual property when it is put on a media becomes goods. A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is squarely covered in favour of the assessee by the above decision. 9. Now the question is if some additions are made on account of disallowances of expenses, etc. whether such income would also constitute income eligible for exemption. This issue came up for consideration of the hon'ble Himachal Pradesh High Court in the case of CIT v. Allied Industries [2010] 229 CTR (HP) 462. In that case it was held as under : Deduction under section 80-IB-Profits and gains derived from industrial undertaking-Income surrendered by assessee-Assessee firm offered a sum of ₹ 2,50,000 for taxation to cover up certain dis crepancies-It is not the case of the Revenue that this was income derived from undisclosed sources-Also there is no finding of any unexplained expenditure-Addition of ₹ 2,50,000 was made to the income of the business itself -Therefore said addition would result in enhancement of income of the business and is entitled for deduction under section 80-IB- Kedar Nath Modi v. CIT [1993] 109 CTR (Delhi) 112; [1993] 200 ITR 685 (Delhi) distinguished. Similarly the hon'ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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