Income Tax Appellate Tribunal - Mumbai
Dcit 2(2)(2), Mumbai vs Priya Ltd, Mumbai on 9 April, 2019
1 ITA No.7432/Mum/2017 M/s. Priya Limited Assessment Year :2014-15 आयकर अपीलीय अिधकरण "सी" ायपीठ मुंबई म । IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI माननीय ी महावीर िसं ह, ाियक सद एवं माननीय ी मनोज कुमार अ वाल ,ले खा सद के सम । BEFORE HON'BLE SHRI MAHAVIR SINGH, JM AND HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ I.T.A. No.7432/Mum/2017 (िनधा रण वष / Assessment Year:2014-15 DCIT-2(2)(2) M/s. Pri ya Ltd.
Room No.545, 5 t h Floor, 4 t h Floor Kimatrai Building
बनाम/
Aaykar Bhavan, MK Road 77/79 M.K.Road
Mumbai-400 020. Vs. Marine Lines (East)
Mumbai-400 002.
थायीले खासं ./जीआइआरसं ./PAN/GIR No. AAACP-2210-Q (अ पीलाथ!/Appellant) : ("#थ! / Respondent) Appellant by : Abhi Rama Kartikeyan - Ld.DR Respondent by : J.P. Bairagra -Ld.AR सुनवाई की तारीख/ : 18/03/2019 Date of Hearing घोषणा की तारीख / : 09/04/3029 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. Aforesaid appeal by revenue for Assessment Year [in short referred to as 'AY'] 2014-15 contest the order of Ld. Commissioner of Income- Tax (Appeals)-5, Mumbai, [in short referred to as 'CIT(A)'], Appeal No.IT- 406/16-17 dated 03/10/2017 on following grounds of appeal: -
"1."Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was right in deleting the addition of Rs. 86,49,923/- made u/s 40A(2)(b) of the IT Act on account of purchase expenditure without 2 ITA No.7432/Mum/2017 M/s. Priya Limited Assessment Year :2014-15 appreciating the fact that purchased software is freely available on internet for downloading for which assessee paid huge amount of Rs. 86,49,923/- to the related party?"
2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that unsold software of Rs. 84,04,746/- is lying in closing stock and hence there is no effect on profit without appreciating that as per financial statements of assessee. There is no closing stock of impugned purchases since entire software of Rs.9,66,79,695/- has been sold for of Rs. 10,40,12,930/- in year under consideration?"
2.1 Facts leading to the dispute are that the assessee being resident corporate entity engaged in the business of export / import of chemicals etc. and trading in computer parts was assessed for impugned AY u/s 143(3) on 28/12/2016 by Ld. Assistant Commissioner of Income Tax- Circle 2(2)(2), Mumbai [AO] wherein the income of the assessee was determined at Rs.312.99 Lacs after certain additions as against returned income of Rs.297 Lacs filed by the assessee on 30/09/2014. As evident from grounds of appeal, the sole subject matter of present appeal before us is disallowance of Rs.86.49 Lacs on account of certain purchases made by the assessee. This addition, although discussed in the quantum assessment order dated 28/12/2016, was omitted to be made while computing the income of the assessee and accordingly, the quantum assessment order has been rectified u/s 154 on 13/01/2017 to account for the same.
2.2 During assessment proceedings, it transpired that the assessee purchased certain software from a related entity within the meaning of Section 40A(2)(b) namely Verixo Technologies Pvt. Ltd. The assessee, while furnishing purchases invoices, submitted that it had purchased software from the said entity for resale in the normal course of business. These software was in the nature of Linux Version-1, VMS Ent./Std.3 ITA No.7432/Mum/2017
M/s. Priya Limited Assessment Year :2014-15 Addition, Re purposing software etc. which was stated to be purchased at rates ranging from Rs.1000/- to Rs.1600/-. However, finding the rates to be excessive and unreasonable and observing that Linux was free and open-source software, Ld. AO disallowed the same.
3. The assessee agitated the same with detailed submissions before Ld. first appellate authority vide impugned order dated 03/10/2017 wherein it was observed that the assessee had not claimed the expenditure since there was debit of Rs.86.49 Lacs by way of purchase of software and corresponding credit of by way of sale of software for Rs.1.16 Lacs and closing stock for Rs.84.04 Lacs and therefore, the stated disallowance was not justified. Aggrieved, the revenue is in further appeal before us.
4. The Ld. Departmental Representative [DR], supported the stand taken by Ld. AO whereas Ld. Authorized Representative for Assessee, Shri J.P.Bairagra, on the strength of documents placed in the paper- book, submitted that software formed part of closing stock which has been sold in subsequent years as evident from stock records.
5. We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper- book. Upon perusal, the undisputed position that emerges is the fact that the assessee has purchased the stated software under 6 bills for resale. The part of these software has been sold by the assessee during impugned AY and the balance software have been reflected as Closing Stock under the head electronics which is evident from closing stock details as placed on page no. 100 of the paper-book. The perusal of quantitative details reveals that the assessee is having closing stock of 4 ITA No.7432/Mum/2017 M/s. Priya Limited Assessment Year :2014-15 these items for Rs.84.02 Lacs. Further, the assessee has sold the software in subsequent years which is evident from sales invoices placed on record. So far as the observations that the Linux was free open source software, is concerned, it has been submitted that the said software has been tailor made by the assessee as per the user's requirement and the said fact remain uncontroverted. Another noteworthy point is that fact that nothing has been placed on record by Ld. AO to support the finding that the price paid by the assessee was excessive or unreasonable, in any manner, having regards to the market price of these goods. Under these circumstances, no infirmity could be found in the impugned order.
6. Resultantly, the appeal stands dismissed.
Order pronounced in the open court on 09th April, 2019.
Sd/- Sd/-
(Mahavir Singh) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member मुंबई Mumbai; िदनां क Dated : 09/04/2019 Sr.PS, Jaisy Varghese आदे शकी"ितिलिपअ$ेिषत/Copy of the Order forwarded to :
1. अपीलाथ!/ The Appellant
2. "#थ!/ The Respondent
3. आयकरआयु*(अपील) / The CIT(A)
4. आयकरआयु*/ CIT- concerned
5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाड/ फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai.