9911796707
TMI Blog2022 (6) TMI 1487X X X X Extracts X X X X X X X X Extracts X X X X ..... ly following the decision of the jurisdictional High Court in assessee s own case for AY 2008-09 [ 2021 (4) TMI 1049 - KARNATAKA HIGH COURT] we hold that assessee is entitled for deduction u/s. 80JJA and delete the disallowance made in this regard wherein held software engineer in a software industry is a workman within the meaning of section 2(s) of the Industrial Disputes Act so long as the Software engineer does not discharge any supervisory role. The period of 300 days as mentioned under section 80JJAA of the Act could be taken into consideration both in the previous year and the succeeding year for the purpose of availing benefit under section 80JJAA. It is not required that the workman works for entire 300 days in the previous year. Thus software engineer being workman having satisfied the period of 300 days, the assessee is entitled to claim deduction under section 80JJAA. - Decided against revenue. Disallowance of expenses on discontinued capital project - Capital or revenue expenditure - HELD THAT:- We notice that this issue was held against the assessee in its own case for the AY 2008-09 [ 2020 (3) TMI 1195 - ITAT BANGALORE] as held that damages though was in connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT:-In the computation of total income of the assessee s that the assessee has added to the profit as per the P L A/c the finance charges on lease and reduced lease rentals paid. Therefore, whatever be the position with regard to the books of account in compliance with AS-19; as far as computation of the total income for the purpose of the Act is concerned, the assessee has made claim only for deduction on account of lease rentals paid. There is no basis for the Revenue authorities to come to a conclusion that the assessee has adopted a colourable device with a view to gain tax advantage. In this regard, we find that the AO as well as the CIT(A) have quoted various clauses of the lease agreement out of context, ignoring the main clause in the agreement which clearly lays down that the assessee is only a lessee and the lessor is the owner of the assets leased. In such a scenario, the conclusion of the Revenue authorities cannot be sustained. The assessee is entitled to claim deduction on account of lease rentals paid as it is a Revenue expenditure. Applicability of the provisions of section 40(a)(ia) - Hon ble High Court of Karnataka in assessee s own case on an identical issue for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital expenditure. Disallowance of employee stock option expenses - HELD THAT:- It is pertinent to mention that the accounts of the assessee had not been finalized as on 15.05.2009 and therefore this sum was claimed as a deduction. It is because of the wrong date given in the submission before the AO dated 18.12.2012 that the AO has taken the view that the invoices are not pertaining to previous year relevant to Assessment Year 2009-10. In the light of the evidence available on record, we are of the view that the disallowance made by the AO and sustained by the CIT(A) has to be deleted and a sum being a revenue expenditure pertaining to Assessment Year 2009-10 has to be allowed as a deduction. We hold and direct accordingly. - SHRI N. V. VASUDEVAN, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER For the Assessee : Shri. Percy Pardiwala, Sr. Counsel For the Revenue : Shri. Sanjay Kumar S. K, CIT(DR)(ITAT), Bengaluru. ORDER Per Bench These are cross appeals against the order of the CIT(Appeals), LTU, Bangalore dated 31.01.2017 for the assessment year 2009-10. 2. The brief facts of the case are that the assessee is a private limited company incorporated in 1985 under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessment order dated 22.4.2013 determining the total income of the assessee at Rs 2,843,922,040. 5. During the course of the appeal proceedings before the CIT(Appeals), the assessee withdrew the grounds relating to TP adjustment since the assessee accepted the final resolution in the MAP proceedings entered by its parent company with the US Competent Authority under Article 22 of India-US DTAA. On the corporate grounds, the CIT(Appeals) allowed the Data Automation Expenses of Rs.279,837,005 as well as the claim u/s. 40(a)(i) of Rs.57,761,289 subject to verification by AO; and upheld the rest of the disallowances made by the AO. Aggrieved, both the parties are in appeal before the Tribunal. While the revenue s appeal is only with regard to the deletion of disallowance of Data Automation Expenses, the assessee in its appeal has challenged the disallowances upheld by the CIT(Appeals). 6. We first take up the revenue s appeal with regard to deletion of Data Automation Expenses by the CIT(A). The brief facts on this issue are that the assessee debited a sum of Rs.151,27,43,459 as data automation expenses treating it as revenue in nature. Before the AO, it was submitted that the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital asset and therefore the expenditure ought to have been treated as a capital expenditure. It was submitted that the expenditure was part of the profit making operative and therefore ought to be considered as capital expenditure. Learned Counsel for the assessee pointed out that identical expenditure was allowed in assessee s own case by the Tribunal in Assessment Year 2008-09 in IT(TP)A No.149/Bang/2014, order dated 06.03.2020. The Tribunal in the aforesaid order held as follows: 28. Gr.No.3 raised by the revenue is with regard to the grievance of the revenue in treating amount paid towards automation software as revenue expenditure. The facts with regard to this ground of appeal are that the Assessee claimed deduction of a sum of Rs.135,52,51,594/- while computing income from business under the head Data Automation software Expenses . The AO called upon the Assessee to explain the nature of the aforesaid expenditure. The Assessee vide its letter dated 28.7.2011 explained to the AO that the software in question were Electronic Design Automation (EDA) which are used by the Assessee s designers for product design and verification. The Assessee pointed out that EDA software licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be an asset of endurable nature. If the programme is used in one mining to another mining operation, why it should not be treated as capital asset and expenditure on that, capital expenditure. Considering these facts and decision of their Lordships and later decision of the Bombay High Court, in our view, the acquisition of technical know-how is a capital expenditure, therefore, the assessing officer has rightly treated the expenditure on acquiring the computer software as expenditure of capital nature and rightly allowed depreciation as per rules. 5.5 Reliance is also placed on the decision in the case of Amway India Enterprises Vs. DCIT (ITAT, Del-Special Bench) [111 ITD 112]. In this case the Hon'ble ITAT held that computer software was tangible asset eligible for depreciation @ 60%. In the result, the Automation software expenses of Rs. 135,52,51,594/- are held to be capital in nature. The amount as claimed in P 86 L a/c is disallowed and added back. Instead, the assessee is allowed depreciation on the amount @ 60%. [Addition Rs. 54,21,00,637/-] 29. On appeal by the Assessee, the CIT(A) deleted the addition made by the AO holding that the Assessee acquired on purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into existence. The Tribunal held that the expenditure was revenue in nature. We are of the view that in the light of the similarity of facts with regard to these expenses, the decision by the Tribunal for Assessment Year 2008-09 will equally apply to Assessment Year 2010-11 also. Following the aforesaid decision of the Tribunal, we uphold the order of the CIT(A) and dismiss ground No.2 raised by the Revenue. 11. Considering the fact that the revenue has not gone in further appeal on this issue for the AY 2008-09 and the binding effect of the above order of the Tribunal, we uphold the order of the CIT(Appeals) in treating the data automation expenses as revenue expenditure. Therefore, the appeal of the revenue is dismissed. Assessee s appeal 12. Ground No.2 by the assessee is regarding deduction u/s. 80JJA of the Act. The grounds raised are as follows:- 2.1 The learned CIT(A) and the AO have erred in law and on facts in denying the deduction under section 80JJAA of the Act amounting to Rs 7,78,51,741 without appreciating the fact that the Appellant has complied with all the conditions to be entitled for the deduction under section 80JJAA of the Act. 2.2 The learned CIT(A) and the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the Official Gazette till 30-3-2013. 4. Without prejudice to the above said findings it was also noticed that many of the alleged new workmen were not recruited afresh and rather they had joined from various other software companies and the assessee company themselves have admitted this fact that those employees were not new as contemplated by legislature. The very purpose of such legislation was defeated by the assessee company. 5. In few cases though it was claimed that the mode of recruitment was campus recruitment no evidence was submitted. 6. It is also learnt that the alleged new workman had not worked for more than 300 days in the year of recruitment. 7. Not ever a single workman was paid wage as prescribed in Industrial Dispute Act and the salary has exceeded the prescribed limit in all cases and many of them were recruited in managerial capacity contrary to Industrial Disputes Act, 1947. 15. On appeal, the CIT(Appeals) confirmed the disallowance stating that the ITAT in assessee s own case for AYs 2001-02 to 2002-03 decided the issue against the assessee and also that the assessee does not satisfy the eligibility conditions u/s. 80JJA of the Act during the FY 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.80JJAA of the Act amounting to Rs. 7,57,22,069/-. The provisions of Sec.80JJAA of the Act, as applicable for AY 2008-09 reads as follows: 80JJAA. Deduction in respect of employment of new workmen. (1) Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture or production of article or thing, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-section (1) shall be allowed (a) if the industrial undertaking is formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking; (b) unless the assessee furnishes along with the return of income the report of the accountant, as defined in the Explanation below sub-section (2) of section 288 giving such particulars in the report as may be prescribed. Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. The Tribunal held that Software Industry has also been notified as Industry for the purpose of Industrial Disputes Act, 1947 by the State of Karnataka and that the employees employed in software development industry render technical services and not services in the nature of supervisory or management character. In view of the aforesaid decision of the Tribunal, we are of the view that the above reason given by the AO for denying the benefit of deduction u/s.80JJAA of the Act cannot be sustained. In fact the CIT(A) in the impugned order has also not sustained the disallowance of deduction u/s.80JJAA of the Act on this ground and has followed the earlier order of the Tribunal in Assessee's own case. 5. Before we deal with the other surviving reasons assigned by the AO for denying the benefit of deduction u/s.80JJAA of the Act, it is appropriate to recapitulate the conditions that need to be fulfilled for claiming deduction. The conditions that need to be fulfilled by an Assessee to claim benefit of deduction u/s.80JJAA of the Act, are: (1) The Assessee should be an Indian Company and the gross total income of the Assessee should include profits and gains derived from any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re new employees who joined during the FY 2006-07, on or after 12-6-2006 and therefore could not have put in service of 300 days or more during the FY 2006-07 relevant to Ay 2007-08. It is undisputed that they worked for 300 days during the previous year relevant to AY 2008-09. 8. The second reason given by the AO for denying the benefit of deduction u/s.80JJAA of the Act, which is the reason that survives for consideration by the Tribunal is according to the AO since the additional wages paid to these 287 employees were not eligible to deduction u/s.80-JJAA of the Act because these employees did not work for more than 300 days in FY 2006-07 relevant to AY 2007-08, the wages paid to these employees in AY 2008-09 will also not qualify for deduction u/s.80JJAA of the Act. In other words according to the AO if the condition for grant of deduction u/s.80JJAA of the Act is not satisfied with reference to additional wages paid to new employees in the first year of their employment, then the additional wages paid to such new employees will not allowed in the second and third Assessment Years also. There is a reference in the AO's order that only 236 out of the 287 employees were new e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a casual workmen or workmen employed through contract labour. Therefore, if some workmen were employed for a period of less than 300 days in the previous year then no deduction is allowable in respect of payment of wages to such work men in the present year even if such workmen was employed in the preceding year for more than 300 days but in the present year, such workmen was not employed for 300 days or more. It was submitted that by the very same reasoning the fact that in the first year of employment the additional wages paid is not allowed deduction for the reason that the workmen did not work for 300 days or more but if the next two Assessment years, if he works for more than 300 days each, then the deduction u/s.80JJAA of the Act has to be allowed. He also drew our attention to the insertion of a second proviso to Explanation (ii) to Sec.80JJAA of the Act (which defines additional employee) by the Finance Act, 2018, w.e.f. 1-4-2019, which reads as follows : Provided Further that where an employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year relevant to AY 2007-08, the Assessee is entitled to deduction u/s.80JJAA of the Act. In the decision rendered in the case of Bosch Ltd. (supra) the Bangalore ITAT at paragraph 23 of the aforesaid order the Tribunal observed that the deduction u/s.80JJAA of the Act is allowed for three years including the year in which the employment is provided. Hence, in each year it has to be seen that the workmen was employed for at least 300 days during that previous year and that such workmen was not a casual workmen or workmen employed through contract labour. Therefore, if some workmen were employed for a period of less than 300 days in the previous year then no deduction is allowable in respect of payment of wages to such work men in the present year even if such workmen was employed in the preceding year for more than 300 days but in the present year, such workmen was not employed for 300 days or more. By the very same reasoning the fact that in the first year of employment the additional wages paid is not allowed deduction for the reason that the workmen did not work for 300 days or more but if the next two Assessment years, if he works for more than 300 days each, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of workman under section 2(2) of the Industrial Disputes Act, 1947 (for short 'ID Act') and that since the employee has not completed 300 days of employment in the previous year, no deduction could be claimed by the Assessee. 16.2 As regards the first contention of the Revenue, the same does not require much examination by this Court inasmuch as at the first instance; the Assessing Officer had held that the Assessee's employees would not come within the purview of workman under section 2(s) of the I.D. Act and disallowed the claim, on an appeal filed by the Assessee, the Commissioner, Income-tax (Appeals) CIT(A) accepted the Assessee's contention and held that the Assessee's employee would come within the purview of Section 2(s) of the ID Act. This aspect was not challenged by the Revenue, although the Revenue had filed an appeal against the order of the CIT(A). Having accepted the said finding of the CIT(A) and not having filed any appeal, the Revenue cannot now seek to challenge the said finding in the present appeal. 16.3 Section 2(s) of the ID Act is reproduced hereunder for easy reference: workman means any person (including an apprentice) employed in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical or clerical work, such a person would satisfy the requirement and would fall within the definition of the 'workman'. In the present case, a software engineer is a skilled person, a technical person who is engaged by the employer for hire or reward. Therefore, all the said persons would satisfy the requirement of being a workman in terms of section 2(s) of the I.D.Act. 16.6 In our considered view, the concept of the workman has undergone a drastic change and is no longer restricted to a blue collared person but even extends to white-collared person. A couple of decades ago, an industry would have meant only a factory, but today industry includes software and hardware industry, popularly known as the Information technology industry. Thus the undertaking of the Assessee being an industrial undertaking, the persons employed by the Assessee on this count also would satisfy the requirement of a workman under section 2(s) of the ID Act. 16.7 Sri. Aravind, learned Senior Panel counsel of the Revenue, has strenuously argued that the period of 300 days in a year would mean 300 days in the financial year alone, not in the calendar year or otherwise. He has submitted that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyed for 300 days, even if the said period is split into two blocks, i.e. the assessment year or financial year, the Assessee would be entitled to the benefit of Section 80JJ-AA in the next assessment year and so on so forthwith for a period of three years. The Income-tax Appellate Tribunal, having held to that effect, in our considered opinion, it would not be open for the Revenue to now contend otherwise, more so since the said order has attained finality on account of the Revenue not having filed an appeal. 16.12 It is sought to be contended by Sri. K.V. Aravind, learned Senior Panel counsel that the fact that such an interpretation could not be given is established by the curative amendment carried out in the year 2018 wherein it is clarified that an assesses whose employee completes 300 days in a second year would also be entitled to a deduction for three years therefrom. Thus he submits that the amendment having been brought into force in the year 2018 the present matter relating to the year 2007-2008, the said curative or clarificatory amendment would not come to the rescue of the Assessee and as such, the finding of the Tribunal in this regard is required to be set aside. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e industry is a workman within the meaning of section 2(s) of the Industrial Disputes Act so long as the Software engineer does not discharge any supervisory role. 16.17 The period of 300 days as mentioned under section 80JJAA of the Act could be taken into consideration both in the previous year and the succeeding year for the purpose of availing benefit under section 80JJAA. It is not required that the workman works for entire 300 days in the previous year. 16.18 Hence, in the facts and circumstances of the case, the software engineer being workman having satisfied the period of 300 days, the assessee is entitled to claim deduction under section 80JJAA. 21. Respectfully following the decision of the jurisdictional High Court in assessee s own case for AY 2008-09, we hold that assessee is entitled for deduction u/s. 80JJA and delete the disallowance made in this regard. 22. The next issue for consideration is disallowance of expenses on discontinued capital project of Rs 7,419,000. Ground Nos. 3.1 to 3.4 in this regard by the assessee are as follows:- 3.1 The learned CIT(A) and the AO have erred in law and on facts in denying a deduction a 7,419,000 claimed by the Appellant in rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that since identical claim has been considered capital expenditure by the tribunal in AY 2007- 08, we find no reason to take a contrary view. The nature of the capital work in progress written off being identical, respectfully following the decision of the Tribunal, we uphold the orders of the revenue authorities. We also find all the case laws cited by the learned counsel for the Assessee before us were dealt with and distinguished by the AO. We are also of the view that the damages of Rs. 3,81,10,000/- though was in connection with a claim for not engaging the services of the contractor in future for other contracts cannot be regarded as having no nexus with the capital work in progress written off in the books of accounts of the Assessee and therefore to that extent the claim for deduction and cannot be allowed as deduction and were rightly held to be capital expenditure by the revenue authorities. We however find that in Gr.No.3.2.9 the Assessee has submitted that a sum of Rs. 61,04,942/- was disallowed u/s.40(a)(i)/(ia) of the Act and that sum is also part of the sum of Rs. 4,42,14,942 which was disallowed by the AO as capital expenditure and therefore to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire amount claimed. He, however, allowed depreciation @ 5% and arrived at a net disallowance of Rs.12,46,021. The CIT(Appeals) confirmed the disallowance after verification of two sample invoices. Aggrieved, the assessee is in appeal before the Tribunal. 29. Before us, the ld. AR submitted that the amount incurred towards planning, designing and architecture fees satisfied all the conditions specified in section 37 of the Act viz., (i) the expenditure is not in the nature of expenditure described in sections 30 to 36; (ii) it is not a personal expenditure, (iii) it is incurred wholly exclusively for the purpose of business; and (iv) it is not a capital expenditure. Reliance was placed on the Supreme Court decision in the case of Empire Jute Co. Ltd. v. CIT, 124 ITR 1 (SC). The ld. AR also submitted that since the project of expansion of Cafeteria and breakout area was closed, the expenditure incurred did not bring any new asset into existence and there is no advantage or enduring benefit accrued to the assessee and therefore the same should be allowed as a deduction u/s. 37 of the Act. 30. The ld. DR supported the orders of the lower authorities. He also contended that had the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re written off towards discontinued project of Cafeteria and breakout area expansion does not bring any benefit of enduring nature to the assessee and hence it is allowable as a revenue expenditure u/s. 37 of the Act. This ground of the assessee is allowed. 34. With regard to disallowance of repairs maintenance expenditure, grounds are as follows:- 5.1 The learned CIT(A) and the AO have erred in law and on facts in disallowing an amount of Rs 9,233,401 in the following manner: - Rs 4,187,113 - disallowed by the AO for non-submission of 100 percent invoices, and by the CIT(A) for non-satisfaction of the conditions as laid out in Rule 46A of the Income-tax Rules, 1962 ( the Rules ); - Rs 5,438,094 - held to be capital expenditure which is disallowed net of depreciation by the AO and CIT(A); - Rs 1,580,977 - held to be prior period expenses by the AO but disallowed by the CIT(A) as capital expenditure. 5.2. The learned CIT(A) has erred in law and on facts in disallowing the amount of Rs 4,187,113 by not considering the reason of paucity of time as a relevant criteria to justify the submission of additional evidence. The learned AO has erred in disallowing the same merely because 100 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the break-up of expenditure is examined to conclude it as capital in nature. 38. We have considered the rival submissions and perused the material on record. The ld. AR submitted a letter dated 20.6.2022 with break-up of expenditure which was before the lower authorities consisting of details of invoice and whether the expenditure was incurred in own premises or leased premises . We notice that these details of invoices have not been looked into by the lower authorities, and in our view, this aspect needs to be examined by the revenue authorities for the purpose of deciding its allowability. We are also the view that the additional evidence filed by the assessee before the CIT(Appeals) goes to the root of the matter for deciding the issue and therefore we admit the additional evidence filed before the CIT(Appeals). Hence, we remit this issue back to the AO to examine the evidence submitted by the assessee vide letter dated 20.6.2022 as well as the documents in the form of additional evidence and decide the allowability of the same in accordance with law, after giving reasonable opportunity of being heard to the assessee. 39. Ground No.6 is regarding disallowance of lease rentals pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of equipment and a sum of Rs.7,75,20,,788 towards lease of motor cars. 41. In view of Accounting Standards AS-19 issued under the Companies (Accounting Standards) Rules, 2006, the assessee in its books of accounts treated itself as the owner of the asset and capitalized the value of the equipment as well as the vehicles in its books of accounts. Depreciation was computed and debited in the P L A/c. The following accounting treatment was adopted by the assessee as per AS 19, in the case of finance lease, the lessee (to whom significant risks and rewards have been transferred) would for all practical purposes be treated as the owner of the asset and expenditure on the same shall be capitalised in his books, while the lessor would not be considered as the owner, but the lease rentals received by the lessor shall be recorded as revenue in its books of accounts. In summary, the accounting treatment prescribed for finance leases for a lessee is as follows:- - The assets taken on finance lease are capitalised in the books of accounts of the lessee and depreciation is computed in the books of accounts. However, the value at which the purchase is recorded does not contain margin on sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. 43. In light of the above, the Assessee submitted that the Assessee has made the following adjustments (on account of the leased assets) to its net profits to arrive at its taxable profits:- The depreciation on assets acquired under finance lease is added back to net profits; The finance charges of Rs 15,250,304 have been added back to the net profits; The profit of Rs 5,570,701 on account of the foreclosure of the lease has been excluded from the net profits; and The aggregate amounts of monthly instalments amounting to Rs 77,520,788 towards vehicles and Rs 23,059,332 towards equipment have been claimed as a deduction. 44. The AO however, disallowed the claim of the assessee for deduction on account of lease rentals for the following reasons:- The Assessee is the owner of the assets acquired under finance lease. Therefore, Assessee is only eligible to claim depreciation on the assets acquired under finance lease and not the lease rental paid towards acquisition of these assets; If the Assessee claims the lease rentals as revenue expenditure, the Assessee ought to have debited the same to profit and loss account. An expenditure not debited to profit and loss account cannot be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. 47. In so far as the applicability of the provisions of section 40(a)(ia) of the Act is concerned, the Hon ble High Court of Karnataka in assessee s own case on an identical issue for Assessment Year 2008-09 in the decision reported in [2021] 127 taxmann.com 59 (Karnataka) held that neither provisions of 194I nor 194C of the Act are attracted to lease financing of motor vehicles and therefore there could be no disallowance under section 40(a)(ia) of the Act. In so far as the applicability of provisions of section 40(a)(ia) of the Act in respect of lease rentals paid for lease of equipment is concerned, it is seen from the submission made by the Assessee before the CIT(A) at page 672 of the Assessee s PB that the Assessee has duly deducted tax at source on payment of lease rentals. On a perusal of the order of the Revenue authorities, we do not find any specific discussion on this issue. In these circumstances, we deem it fit and proper to remand the question whether the lease rentals were subjected to TDS by the Assessee. The AO will afford due opportunity of being heard being to the Assessee. Thus, ground No.6 is partly allowed. 48. Ground No.7 raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be accepted. Without prejudice to the above, it was submitted that in case the Assessee s claim for deduction with respect to lease rentals on finance leased assets is not accepted, the amount reduced with respect to profit on foreclosures of leased assets should separately not be disallowed in the tax computation. 50. The AO, however, held that the reply was very vague and there was no proper explanation as to why the profit should not be treated as income of the assessee. Accordingly, the AO added a sum of Rs.55,70,701/- to the total income of the assessee. On appeal by the assessee, the CIT(A) confirmed the order of the AO. The line of reasoning adopted by the AO and CIT(A) is that in respect of lease rentals, it has been treated as capital in nature and therefore the gain on foreclosure of lease should be taxed as income. 51. We have heard the rival contentions and we are of the view that the profit on foreclosure of leased assets is purely a notional entry in compliance with the requirements of AS-19 and no income can be said to have accrued to the assessee by reason of such accounting treatment. It was made clear by the Assessee that as per tax treatment for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gave further details of TDS in respect of 4 parties totaling Rs.8,51,41,793/-. The details of which were as follows:- (1) Aricent Technologies Rs.2,37,95,808 (2) Intra Systems Rs.2,98,11,670 (3) Lossen and toubro Rs.1,93,42,367 (4) Poseidon Design Rs.1,21,91,857 Rs.8,51,41,793 55. There was a difference of Rs.7,30,95,490 (Rs.159,55,40,621 Rs.152,24,45,131) for which the name of the parties to whom payment of Software development charges were paid was not given by the Assessee. 56. The Assessee gave further details of TDS certificates of 16 parties totaling Rs.19,46,79,429 as per the following details:- Sl.No. Name of the party Ledger total (in Rs.) 1. Australian Semiconductor Technology 49,66,000 2. Couth Infotech Ltd. 10,02,645 3. Cranes Software International Ltd. 17,23,959 4. Dr.Sushil Kumar Sinha 29,98,937 5. E4e Business Solutions India 93,78,398 6. Embwise Technologies Ltd. 11,71,711 7. Mindtree Consulting Ltd. 8,27,43,181 8. Mistral Solutions 13,58,750 9. Processor Systems 45,12,056 10. Qai India Ltd. 89,44,627 11. Aualcore Logic Ltd. 38,12,588 12. Soliton Technologies 71,91,556 13. Symphony Services India Ltd. 3,12,67,883 14. Tes Pvt.Electronic Pvt.Ltd. 1,08,02,661 15. Wip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 509 was added by the AO as follows: (i) Rs.4,80,75,547 u/s.40(a)(ia); (ii) Rs.4,51,66,023 u/s.69C of the Act; and (iii) Rs.12,15,83,939 also u/s.69C of the Act. 61. The aforesaid additions were confirmed by the CIT(A). The CIT(A) however gave relief accepting the explanation of the Assessee with regard to discrepancy in the account of 3i Infotech Ltd., and Processor s Systems (India) Pvt.Ltd. 62. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. We have considered the rival submissions. The first aspect which we have noticed in the order of the CIT(A) is that despite submissions made with regard to unexplained expenditure under section 69C of the Act of Rs.4,51,66,023/- and another sum of Rs.12,15,83,939/-, the CIT(A) has not rendered any findings on the above submissions. These submissions are at pages 844 to 851 of the Assessee s PB. In so far as the reconciliation with regard to the gross amount as per TDS Certification and as per the ledger of the assessee is concerned, the CIT(A) has held that the assessee was unable to file reconciliation except in respect of 2 parties viz., Processors Systems India Pvt. Ltd., and 3i Infotech Ltd. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act have be looked into afresh. The AO will afford opportunity of being heard to the assessee in the set aside proceedings. 65. Ground No.9 raised by the assessee reads as follows: 9. Disallowance of information technology support services 9.1 The learned CIT(A) and the AO have erred in law and on facts in disallowing the amount of Rs 8,517,018 (net of 60 percent depreciation) in relation to a portion of the Information Technology Support Services ( ITSS ) expenses. 9.2 The learned CIT(A) and the AO have erred in law and on facts in concluding that the expenditure incurred was in relation to purchase of software and not in relation to rendering of service. The learned CIT(A) and the AO have erred in not considering the Appellant's contentions that there was neither any enduring benefit nor new capital asset which was acquired by TI India pursuant to incurring of such expense. 9.3 The CIT(A) has erred in law and on facts in not admitting the evidence (in the form of a confirmation letter from the holding company to which payment was made) submitted by the Appellant as the said evidence was produced on the specific direction of the CIT(A) (As per Rule 46A(4) of the Rules). 9.4 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Our attention was also drawn to the order of the ITAT in assessee s own case for AY 2010-11 dated 17.05.2022 in ITA No.1967/Bang/2019 wherein this Tribunal on an identical issue held as follows:- 12. As far as ground No.3 raised by the Revenue is concerned, the facts are almost identical to the EDA expenses. As far as the ground No.3 is concerned, it relates to expenses incurred by the assessee towards information technology support services. The agreement by which the assessee received information technology support services is dated 01.01.2006 and the information technology services were provided by Texas Instruments, USA. The agreement clearly mentions that the assessee desires to avail information technology services from the parent company to better carry on its operations of the business. The nature of services for the following services to be performed by the parent company 1.0 Services to Be Performed By TI 1.1 Purchaser employs TI to provide it with services as to certain phases of its information technology needs, including but not limited to: Maintenance and on-going support services for various information systems including but not limited to SAP. Oracle, Peoplesoft, U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parent and there is no separate and exclusive purchase of any software from the parent company. The ownership rights in respect of these software vests with the parent company, i.e, TI Inc. Considering the above, and also considering the other supporting facts brought on record by the Appellant, I am of the view that the ITSS cost is to be treated as revenue expense. Accordingly, the addition made by the AO in this regard by treating the said expenditure as capital, is deleted. In the result, these grounds of appeal are allowed. 16. At the time of hearing, learned Counsel for the assessee brought to our notice that in Assessment Year 2011-12, on identical expenditure in assessee s own case, the Tribunal in ITA Nos.275, 525/Bang/2019, order dated 11.03.2022, upheld similar order of the CIT(A) deleting the addition made by the AO. The relevant observations of the Tribunal in this regard are contained in paragraph 6.3. It is not disputed before us that the facts and circumstances of the case are identical. In these circumstances, following order of the Tribunal in Assessment Year 2011-12, we uphold the order of the CIT(A) and dismiss ground No.3 raised by the Revenue. 68. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounts. An expenditure booked /debited into the P L account without having the corresponding invoice shall be treated as bogus expenditure. In this connection, a detailed discussion made in the paragraph-7 on account of one such expenditure is once against highlighted. The expenditure debited into the P L did not tally with the gross amount in TDS certificate and a separate addition was made on account of software development charges. Accordingly the sum of Rs.14,19,397/- is disallowed and added back. 72. On appeal by the assessee, the CIT(A) confirmed the order of the AO. Aggrieved by the order of the CIT(A) the Assessee has raised Grd.No.10 before the Tribunal. We have heard the rival submissions. The two invoices in question based on which the impugned disallowance was made by the Revenue authorities is at pages 418, 419 of the assessee s PB. These invoices are dated 15.05.2009. In a submission filed by the assessee before the AO dated 18.12.2012, the assessee has mentioned the dates of the invoice as 05.10.2012. It is pertinent to mention that the accounts of the assessee had not been finalized as on 15.05.2009 and therefore this sum was claimed as a deduction. It is becau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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