Income Tax Appellate Tribunal - Delhi
New Delhi Television Ltd., New Delhi vs Department Of Income Tax on 30 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E
'E' : NEW DELHI
BEFORE SHRI G.D.AGRAWAL,
G.D.AGRAWAL, VICE PRESIDENT AND
SHRI A.D. JAIN,
JAIN, JUDICIAL MEMBER
ITA No.
No.852/Del/2012
Assessment Year : 2006-
2006-07
M/s New Delhi Television Vs. Additional Commissioner of
Limited, Income Tax,
207, Okhla Industrial Estate,
Estate, Range-
Range-13,
Phase-
Phase-III, New Delhi.
New Delhi - 110 020.
PAN : AAACN0865D.
(Appellant) (Respondent)
ITA No.942/Del/2012
No.942/Del/2012
Assessment Year : 2006-
2006-07
Assistant Commissioner of Vs. M/s New Delhi Television Limited,
Income Tax, 207, Okhla Industrial Estate,
Circle-
Circle-13(1), Phase-
Phase-III,
New Delhi. New Delhi - 110 020.
PAN : AAACN0865D.
(Appellant) (Respondent)
Assessee by : Shri Tarandeep Singh, CA.
Revenue by : Shri Gunjan Prasad, CIT-DR.
ORDER
PER G.D.AGRAWAL, G.D.AGRAWAL, VP :
ITA No.852/Del/2012 :-This appeal by the assessee is directed against the order of learned CIT(A)-XVI, New Delhi dated 30th September, 2011 for the AY 2006-07.
2 ITA-852 & 942/D/2012
2. The only ground raised by the assessee is against the disallowance of `12,52,71,933/- which was claimed by the assessee on account of Employee Stock Option Plan expenses.
3. We have heard both the sides and perused the material placed before us. We find that this issue is now covered by the decision of Special Bench of ITAT in the case of Biocon Limited Vs. DCIT(LTU), Bangalore - [2013] 35 taxmann.com 335 (Bangalore-Trib.)(SB). After considering the arguments of both the sides, we are of the opinion that it would meet the ends of justice if this issue is set aside and restored to the file of the Assessing Officer for readjudication in the light of the above decision of Special Bench of ITAT. We order accordingly and direct the Assessing Officer to allow adequate opportunity of being heard to the assessee while giving effect to this order.
ITA No.942/Del/2012 :-4. In this appeal, the Revenue has raised the following grounds :-
"1. On the facts and circumstances of the case, the ld.CIT(A) has erred in holding that Software expenses regarding accounting an upgradation software are revenue in nature and hence allowable as expenses. Reliance is placed on the judgement of the Hon'ble Supreme Court in the case of Tata Consultancy Services Vs. State of Andhra Pradesh (2004) 271 ITR 401.
2. On the facts and circumstances of the case, the ld.CIT(A) has erred in ignoring the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC), wherein it has been held that the AO has no power to entertain a claim made otherwise than by filing a revised return of income and directing the AO entertain the claim of the assessee for additional unabsorbed business loss which was not claimed in the return filed.
3 ITA-852 & 942/D/2012
3. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal."
5. The facts of the case are that during the year under consideration, the assessee claimed deduction of `30,08,440/- on account of software. The Assessing Officer treated the same as capital expenditure and, after allowing depreciation thereon at the rate of 60%, disallowed `12,03,376/-. On appeal, learned CIT(A) accepted the claim of the assessee and held the expenses to be revenue expenditure. The Revenue, aggrieved with the order of learned CIT(A), is in appeal before us.
6. At the time of hearing before us, learned CIT-DR relied upon the order of the Assessing Officer as well as the decision of Hon'ble Apex Court in the case of Tata Consultancy Services Vs. State of Andhra Pradesh - [2004] 271 ITR 401.
7. The learned counsel for the assessee, on the other hand, relied upon the following decisions of Hon'ble Jurisdictional High Court :-
(i) CIT Vs. K & Co. - [2003] 181 CTR (Del) 378.
(ii) CIT Vs. G.E. Capital Services Ltd. - ITA No.560/2007 order dated 10th July, 2007.
(iii) CIT Vs. Asahi India Safety Glass Ltd. - [2011] 245 CTR 529 (Delhi).
(iv) CIT Vs. Amway India Enterprises - [2012] 346 ITR 341 (Delhi).
8. We have heard the arguments of both the sides and perused the material placed before us. The learned DR has relied upon the decision of Hon'ble Apex Court in the case of Tata Consultancy 4 ITA-852 & 942/D/2012 Services (supra). However, we find that the above decision was under
the Andhra Pradesh General Sales Tax Act, 1957 and the dispute was whether the software packages are goods within the meaning of Andhra Pradesh General Sales Tax Act. The issue whether the expenses on software packages are capital or revenue was not before the Hon'ble Apex Court. Therefore, in our opinion, the above decision of Hon'ble Apex Court would be of no help to the Revenue in the present case. On perusal of the decisions relied upon by the learned counsel, we find that Hon'ble Jurisdictional High Court in a series of decisions has held that the expenditure incurred by the assessee on purchase of software application is a revenue expenditure. In the case of Asahi India Safety Glass Ltd. (supra), Hon'ble Jurisdictional High Court discussed this issue at length and held as under:-
"Software is nothing but another word for computer programmes, i.e., instructions, that make the hardware work. Software is broadly of two types, i.e., the systems software, which is also known as the operating system which controls the working of the computer; while the other being applications such as word processing programs, spread sheets and database which perform the tasks for which people use computers. Besides these, there are two other categories of software, these being: network software and language software. The network software enables groups of computers to communicate with each other, while language software provides with tools required to write programmes. [Para 11] The aforesaid would show that what the assessee acquired through A was an application software which enabled it to execute tasks in the field of accounting, purchases and inventory maintenance. The fact that the application software would have to be updated from time to time based on the requirements of the assessee in the context of the advancement of its business and/or its diversification, if any; the changes brought about due to statutory amendments by law or by professional bodies like the Institute of Chartered Accountants of India, which
5 ITA-852 & 942/D/2012 are given the responsibility of conceiving and formulating the accounting standards from time to time, and perhaps also, by reason of the fact that expenses may have to be incurred on account of corruption of the software due to unintended or intended ingress into the system - ought not give a colour to the expenditure incurred as one expended on capital account. Given the fact that there are myriad factors which may call for expenses to be incurred in the field of software applications, it cannot be said that either the extent of the expense or the expense being incurred in close proximity, in the subsequent years, would be conclusively determinative of its nature. The Assessing Officer has erred precisely for these very reasons. [Para 12] The contention of the revenue that in the books of account, the assessee had not written off the expense in issue, while in the succeeding assessment year only a part of the expense had been written off and, therefore, the assessee's own understanding of the nature of the expense involved was that it was expended on capital account is be rejected. The reason being: that the treatment of a particular expense or a provision in the books of account can never be conclusively determinative of the nature of the expense. An assessee cannot be denied a claim for deduction which is otherwise tenable in law on the ground that the assessee had treated it differently in its books. [Para 13 & 13.1] Therefore, the aforesaid contention is of no avail to the revenue. [Para 13.2] Therefore, the Tribunal was correct in law in holding that the expenditure incurred by the assessee on account of software and professional expenses was a revenue expenditure."
9. Similar view is taken by their Lordships of Hon'ble Jurisdictional High Court in the case of CIT Vs. K & Co. (supra), G.E. Capital Services Ltd. (supra) and Amway India Enterprises (supra). Respectfully following the above decisions of Hon'ble 6 ITA-852 & 942/D/2012 Jurisdictional High Court, we uphold the order of learned CIT(A) and dismiss the Revenue's appeal.
10. In the result, the appeal of the assessee is deemed to be allowed for statistical purposes while the appeal of the Revenue is dismissed.
Decision pronounced in the open Court on 20th December, 2013.
Sd/- Sd/-
(A.D. JAIN)
JAIN) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 20.12.2013
VK.
Copy forwarded to: -
1. Assessee : M/s New
New Delhi Television Limited,
207, Okhla Industrial Estate,
Phase-
Phase-III, New Delhi - 110 020.
2. Revenue : Assistant Commissioner of Income Tax,
Circle-
Circle-13(1), New Delhi.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar