PROGRESS SOFTWARE SOLUTIONS (I) P.LTD, MUMBAI v. ASST CIT 5(3), MUMBAI

ITA 3151/MUM/2013 | 2009-2010
Pronouncement Date: 29-09-2016 | Result: Allowed

Appeal Details

RSA Number 315119914 RSA 2013
Assessee PAN AAACT7450Q
Bench Mumbai
Appeal Number ITA 3151/MUM/2013
Duration Of Justice 3 year(s) 5 month(s) 4 day(s)
Appellant PROGRESS SOFTWARE SOLUTIONS (I) P.LTD, MUMBAI
Respondent ASST CIT 5(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 29-09-2016
Date Of Final Hearing 17-08-2015
Next Hearing Date 17-08-2015
Assessment Year 2009-2010
Appeal Filed On 25-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C MU MBAI BEFORE SHRI R. C. SHARMA ACCOUNTANT MEMBER AN D SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 3151/MUM/2013 FOR AY 2009-10 PROGRESS SOFTWARE SOLUTIONS (INDIA) PVT. LTD. (FORMERLY KNOWN AS SAVVION (INDIA) PVT. LTD. 8 TH FLOOR R-TECH PARK NIRLON COMPLEX OFF. WESTERN EXPRESS HIGHWAY GOREGAON (E) MUMBAI-400063 PAN: AAACT7450Q VS. THE ACIT-5(3) AAYAKAR BHAVAN M. K. ROAD MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHAVEER C. JA IN (AR) REVENUE BY : MS. BHARTI SINGH (D R) DATE OF HEARING : 02.08.2016 DATE OF PRONOUNCEMENT : 28.09.2016 O R D E R PER PAWAN SINGH JM: 1. THE PRESENT APPEAL U/S 253 OF THE INCOME TAX ACT ( ACT) IS DIRECTED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-9 MUMBAI DATED 10.01.2013 FOR AY 2009-10. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY ENGAGED IN COMPUTER SOFTWARE DEVELOPMENT SALE OF PRODUCT LICE NSE ON COMMISSION BASIS AND TRADING OF PRODUCT SOFTWARE LICENSE FILE D RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR (AY) ON 28.09.2009. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE AO WHILE FRAMING ASS ESSMENT ORDER DISALLOWED A SUM OF RS. 23 50 446/- U/S 40(A) (IA) DUE TO NON-DEDUCTION OF TDS ON THE EXPENSES IN RELATION TO IMPORT OF C OMPUTER SOFTWARE FROM CALIFORNIA. THE AO ALSO DISALLOWED RS. 48 54 215/- ON ACCOUNT OF DIFFERENCE OF LOSS ON NON-EXPORT ORIENTED UNIT IN THE ASSESSMENT ORDER 2 ITA NO. 3151/M/2013 PROGRESS SOFTWARE SOLUTIONS (I NDIA) PVT. LTD. DATED 26.12.2011. THE AO ALSO INITIATED PENALTY. AG GRIEVED BY THE ORDER OF AO THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THUS THE PRESENT APPEAL IS FILED BEFORE U S RAISING THE FOUR GROUNDS OF APPEAL THE ASSESSEE HAS FURTHER RAISED VARIOUS SUB GROUNDS UNDER THE MAIN GROUNDS OF APPEAL. FOR DISPOSAL OF T HE APPEAL WE HAVE SUMMARIZED THE GROUNDS OF APPEAL IN THE FOLLOWING M ANNER :- (1) VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. (2) DISALLOWANCE U/S 40(A) (IA) ON ACCOUNT OF NON-DEDUC TION OF TDS OF RS. 23 50 446/- ON PURCHASE PRICE OF COMPUTE R SOFTWARE. (3) DISALLOWANCE OF DIFFERENCE OF LOSS ON NON EXPORT OR IENTED UNIT OF RS. 48 54 215/-. (4) INITIATION OF PENALTY PROCEEDING. 3. WE HAVE HEARD THE LD. AUTHORISED REPRESENTATIVE (AR ) OF ASSESSEE AND THE LD DEPARTMENTAL REPRESENTATIVE (DR) FOR THE R EVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO.1 IS WI TH REGARD THE VIOLATION OF PRINCIPLE OF NATURE JUSTICE AND LACK OF REASONIN G. THE LD. AR OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THE GROU ND NO.1. KEEPING IN VIEW THE SUBMISSION OF THE LD. AR OF THE ASSESSEE THE GROUND NO.1 OF THE APPEAL IS DISMISSED AS NOT PRESSED. 4. GROUND NO.2 IS WITH REGARD TO DISALLOWANCE U/S 40( A) (IA) ON ACCOUNT OF NON-DEDUCTION OF TDS ON THE EXPENSES OF RS. 23 50 446/- ( PURCHASE PRICE) OF COMPUTER SOFTWARE. THE LD. AR OF THE AS SESSEE ARGUED THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF THE ASSESS EE BY A NUMBER OF DECISIONS OF HIGH COURTS AND THE DECISIONS OF THIS TRIBUNAL. LD. DR FOR REVENUE RELIED ON THE ORDER OF AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND PERUSED THE ORDERS OF AUTHORITIES BELOW. THE AO WHILE FRAMING A SSESSMENT ISSUE SHOW CAUSE REGARDING THE DISALLOWANCE OF EXPENSES I N RELATION TO IMPORT OF SOFTWARE FOR NON DEDUCTION OF TDS. THE ASSESSEE FURNISHED ITS REPLY (NOT DISCUSSING BY AO IN ITS ORDER). THE REPLY OF A SSESSEE WAS NOT ACCEPTED BY THE AO. THE AO CONCLUDED THAT RIGHT TO MAKE A COPY OF THE SOFTWARE AND USE IT FOR INTERNAL BUSINESS BY MAKING COPY OF THE SAME AND STORING IT ON THE HARD DICK AMOUNT TO USE OF THE CO PYRIGHT. THUS THE 3 ITA NO. 3151/M/2013 PROGRESS SOFTWARE SOLUTIONS (I NDIA) PVT. LTD. CONTENTION OF THE ASSESSEE THAT THERE WAS NO TRANSF ER OF ANY PART OF COPY RIGHT WAS NOT ACCEPTED. HENCE THE AO DISALLOWED T HE AMOUNT OF RS. 23 50 446/- (COST OF SOFTWARE). DURING THE FIRST AP PELLATE STAGE THE ASSESSEE FURNISHED WRITTEN SUBMISSION AND RELIED UP ON A NUMBER OF DECISIONS ON VARIOUS HIGH COURTS AND TRIBUNALS. LD. CIT(A) WHILE DECIDING THE APPEAL OF THE ASSESSEE HOLD THAT ASSES SEE IS ENGAGED IN THE BUSINESS OF IMPORTING AND RESELLING OF CERTAIN COMP UTER SOFTWARE. THE AMOUNT PAID BY THE ASSESSEE TO THE SUPPLIER FOR SUP PLY OF THE COMPUTER SOFTWARE WAS NEITHER THE PRICE OF CD/DVD ALONE OR T HE COMPUTER SOFTWARE ALONE NOR THE PRICE OF LICENSE. IT WAS A C OMBINATION OF ALL UNLESS THE LICENSE WAS PERMITTING THE END USER TO COPY AND DOWNLOAD THE SOFTWARE CD/DVD CANNOT BE USED BY THE INDIVIDUAL AND FURTHER RELIED UPON THE EXPLANATION 5 INSERTED VIDE FINANCE ACT 2012 IN SECTION 9(1)(VI) OF THE ACT. THE LD CIT(A) FURTHER HOLD TH AT THE PAYMENT FOR THE LICENSE TO USE THE COMPUTER SOFTWARE PROGRAMME CONS TITUTE ROYALTY FOR THE PURPOSE OF THE ACT. WE HAVE NOTICED THAT THE LD AR FOR ASSESSEE NOT SUBSTANTIATED AS TO HOW THE FACTS OF HIS CASE ARE S IMILAR TO THE FACTS OF CASES ON WHICH HE RELIED. THE AO NOT DISCUSSED IN ITS ORDER THE CONTENTION RAISED BY ASSESSEE DURING THE ASSESSMENT . SIMILARLY THE LD CIT(A) HAS ALSO NOT DISCUSSED IN ITS ORDER THE CON TENTS OF VARIOUS CLAUSE CONTAINED IN THE BUYERS AGREEMENTS OF VARIOUS DATES RELIED BY ASSESSEE. THUS WE RESTORE THIS GROUND OF APPEAL TO THE FILE OF AO TO CONSIDER ALL THE DOCUMENTS AND VARIOUS DECISIONS OF THE HIGH COURTS AND TRIBUNAL AND PASS SPEAKING ORDER IN ACCORDANCE WITH LAW. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 6. GROUND NO.3 IS WITH REGARDS TO THE DIFFERENCE OF LO SS ON NON-EXPORT ORIENTED UNIT. THE LD. AR OF THE ASSESSEE NOT ARGUE D AGAINST THIS GROUNDS OF APPEAL. THE LD DR HAS NO OCCASION TO COU NTER THE SUBMISSION OF THE ASSESSEE. 7. WE HAVE CONSIDERED THE ORDER OF AUTHORITIES BELOW. DURING ASSESSMENT THE AO OBSERVED THAT ASSESSEE HAS INCURRED E XPENDITURE OF RS. 4 ITA NO. 3151/M/2013 PROGRESS SOFTWARE SOLUTIONS (I NDIA) PVT. LTD. 6 56 96 521/- ON ACCOUNT OF SALARIES BONUS ALLOWA NCE CONTRIBUTION TO PROVIDED FUND AND OTHER FUNDS FOR WELFARE OF THE EM PLOYEES. THESE EXPENSES ARE COMMON EXPENSES FOR BOTH NON-EXPORT OR IENTED UNIT AND EXPORT ORIENTED UNIT AS NO ALLOCATION IS FOR BOTH T HE UNITS PROVIDED BY THE ASSESSEE. THE AO CONCLUDED THAT HE LEFT WITH NO OPT ION TO APPRECIATE THE EXPENDITURE IN THE PROPORTIONATE OF TURNOVER. HENCE THE APPORTIONMENT HAS BEEN DONE ON THE BASIS OF TURNOVER. THE TURNOVE R OF EOU IS RS. 8 38 77 285/- (86.51%) AGAINST THE TURNOVER OF RS. 1 30 75 950/- (13.49%) OF NON-EOU THUS THE EXPENSES APPORTIONED ON THE BASIS OF TURNOVER OF RS. 5 68 34 060/- FOR EOU AND THUS REDU CED THE PROFIT ON EOU TO RS. 3 04 907/- RS. 88 62 481/- WILL REPRESE NT EXPENSES FOR NON- EOU AND BY REDUCING THE LOSS OF NON-EOU AS PER P&L A/C RS. 48 54 215/- WAS DISALLOWED. LD. CIT(A) WHILE CONSID ERING THIS GROUND HAS NOT GIVEN ANY REASON EXCEPT SUSTAINING THE FIND ING OF AO. WE HAVE SEEN THAT THE ASSESSEE HAS FURNISHED THE COPY OF CI RCULAR FOR SECTION 10B DEDUCTION IN FORM NO. 56G ALONG WITH HIS SUBMISSION DATED 11.01.2011 AND FURTHER THE DETAILS SUBMISSION DATED 13.12.2011 . NEITHER THE AO NOR THE CIT(A) DISCUSSED ALL THE CONTENTION RAISED IN B OTH THE LETTERS AS WELL AS ON THE CERTIFICATION U/S 10(B). MOREOVER ONE OF THE UNITS OF THE ASSESSEE IS EOU AND THE ASSESSEE IS ENTITLED FOR DE DUCTION U/S 10B. THE ASSESSEE IS ENTITLED FOR 100% DEDUCTION IN RESPECT OF BUSINESS DERIVED BY HIM FROM 100% EXPORT ORIENTED UNDERTAKINGS THUS TH E APPORTIONMENT OF NON-EOU IS NOT IN ACCORDANCE WITH LAW THUS WE REST ORE THIS GROUND OF APPEAL TO THE FILE OF AO TO GIVE THE FRESH FINDING AFTER CONSIDERING THE WRITTEN SUBMISSION OF ASSESSEE DATED 11.11.2011 & 1 3.12.2011FILED BEFORE THE LD CIT(A) AND PASS APPROPRIATE ORDER IN ACCORDANCE WITH LAW. 8. GROUND NO. 4 IS WITH REGARD TO INITIATION OF PENAL TY. THE ASSESSEE HAS NOT MADE ANY SUBMISSION IN RESPECT OF THIS GROUND. EVEN OTHERWISE MERE INITIATION OF PENALTY IS NOT CHALLENGEABLE IN APPEA L UNLESS THE SUBSTANTIVE ORDER IS PASSED. THUS THIS GROUND OF APPEAL IS DIS MISSED AS PREMATURE. 5 ITA NO. 3151/M/2013 PROGRESS SOFTWARE SOLUTIONS (I NDIA) PVT. LTD. 9. IN THE RESULT APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016. SD/- SD/- ( R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 28/09/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER (ASSTT.REGISTRAR) ITAT MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) MUMBAI. 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. //TRUE COPY/