3DI SYSTEMS INDIA PVT. LTD., MUMBAI v. ITO 10(3)(4), MUMBAI

MA 158/MUM/2016 | 2009-2010
Pronouncement Date: 17-10-2016

Appeal Details

RSA Number 15819924 RSA 2016
Assessee PAN AAACZ1972H
Bench Mumbai
Appeal Number MA 158/MUM/2016
Duration Of Justice 3 month(s) 9 day(s)
Appellant 3DI SYSTEMS INDIA PVT. LTD., MUMBAI
Respondent ITO 10(3)(4), MUMBAI
Appeal Type Miscellaneous Application
Pronouncement Date 17-10-2016
Appeal Filed By Assessee
Bench Allotted E
Tribunal Order Date 17-10-2016
Assessment Year 2009-2010
Appeal Filed On 08-07-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE: SHRI R.C.SHARMA AM & SHRI RAMLAL NEGI JM M.A.NO. 158 /MUM/2016 I.T.A.NO. 1746 /MUM/201 2 ( ASSESSMENT YEAR : 200 9 - 20 10 ) 3DI SYSTEMS INDIA PVT.LTD. 409 BLDG. NO.2 SECTOR - 1 MILLENIUM BUSINESS PARK MAHAPE NAVI MUMBAI - 400 710 VS. ITO 10 (3) (4) MUMBAI PAN/GIR NO. : AAACZ1972H ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY : SHRI RAJEEV KHANDELWAL WITH NEELKANTH KHANDELWAL ASSESSEE BY : SHRI G . NANTHAKUMAR DATE OF HEARING : 09 /0 9 /2016 DATE OF PRONOUNCEMENT : 17/10/2016 O R D E R PER R.C.SHARMA (A.M) : TH IS M.A AROSE OUT OF ORDER OF TRIBUNAL DATED 24 / 01 /201 4 IN ITA NO. 1746 / MUM/ 2012 . 2. THROUGH THIS MA IT WAS CONTENDED BY LEARNED AR THA T DURING THE YEAR UNDER REFERENCE THERE IS A REDUCTION IN GROSS BLOCK OF FIXED ASSETS TO THE TUNE OF RS.1 48 43 395 THAT IS FROM RS.6 79 87 074 TO RS.5 58 74 774 UNDER THE HEAD PRODUCT DEVELOPMENT CHARGES. THE ASSESSEES IN EARLIER YEARS INCURRED EXPENSE S ON SOFTWARE LICENCES OPERATING SYSTEMS SQL SERVICES AND THE LIKE WHICH HAVE BEEN DEBITED UNDER THE HEAD PRODUCT DEVELOPMENT CHARGES IN 2 M.A.NO. 158 - 201 6 ITA NO. 1746 - 2012 3DI SYSTEMS INDIA PVT. LTD. VS ITO - 10(3)(4) THE FIXED ASSETS SCHEDULE. LATER THE PROJECT FOR WHICH THE AFORESAID EXPENSES INCURRED GOT ABANDONED AND THE ASS ESSEES DECIDED TO WRITE - OFF THE EXPENSES INCURRED NET OF THE UNPAID EXPENSES TO THE TUNE OF RS.1 48 43 395 OVER A PERIOD OF TEN YEARS. THUS THE LIABILITY WHICH IS UNPAID IS WRITTEN BACK TO THE ACCOUNT OF FIXED ASSETS THEREBY REDUCING THE GROSS BLOCK O F ASSETS BY AN EVEN AMOUNT. 4. ACCORDINGLY IT WAS ARGUED THAT THE SUM OF RS.1 48 43 395 HAS NOT BEEN ALLOWED AS A DEDUCTION TO THE ASSESSEES IN ANY OF THE EARLIER YEARS. THE HONOURABLE TRIBUNAL WITHOUT CONSIDERING JUDICIAL PRONOUNCEMENT AS LAID DOWN BY BO MBAY HIGH COURT IN THE CASE OF MAHINDRA & MAHINDRA LTD. 261 ITR 501 CONFIRMED THE ACTION OF AO MAKING ADDITION U/S 41(1) IN AS MUCH AS SECTION 41(1) OF THE ACT DEALS WITH A CASE WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN ANY YEAR IN RESPECT OF LOSS EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPEC T OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. AS SUCH THE PROVISIONS OF SECTION 41(1) DO NOT GET TRIGGERED WHEN THE LIABILITY WHICH HAS NOT BEEN ALLOWED AS A DEDUCTION IS WRITTEN BACK. 5. IT WAS FURTHER CONTENDED BY LEARNED AR THA T WHILE DECIDING THE ISSUE TRIBUNAL HAVE NOT CONSIDERED THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE 3 M.A.NO. 158 - 201 6 ITA NO. 1746 - 2012 3DI SYSTEMS INDIA PVT. LTD. VS ITO - 10(3)(4) OF MAHINDRA AND MAHINDRA LTD. (261 ITR 501) WHEREIN IT WAS HELD THAT WAIVER OF LOAN AMOUNT IS NOT TAXABLE UNDER SECTION 28 (IV ) NOR IT AMOUNTS TO CE SSATION OF LIABILITY UNDER SECTION 41(1). AS PER LEARNED AR NON - CONSIDERATION OF DECISION OF JURISDICTIONAL HIGH COURT AMOUNTS TO MISTAKE APPARENT FROM RECORD WHICH COULD BE RECTIFIED UNDER SECTION 254 (2). FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF SAURASHTRA KUTCH STOCK EXCHANGE LTD. 305 ITR 227 DATED 15 TH SEPTEMBER 2005. 6. RELIANCE WAS ALSO PLACED ON THE DECISION OF BOMBAY HIGH COURT IN CASE OF XYLON HOLDINGS PVT. LTD. 90 DTR 205 WHEREIN IT WAS HELD THAT CESSATION OF LIABILITY TO REPAY A LOAN TAKEN TO PURCHASE A CAPITAL ASSET DOES NOT RESULT IN A REVENUE RECEIPT AND CONCERN AMOUNT WAS NOT TAXABLE U/S 41(1) AS SAME WAS NOT AN EXPENDITURE INCURRED IN EARLIER YEARS. ACCORDINGLY IT WAS HELD THAT CESSATI ON OF LOAN LIABILITY IS CAPITAL RECEIPT NOT TAXABLE AS INCOME. 7. IN VIEW OF THE ABOVE IT WAS SUBMITTED THAT MISTAKE APPARENT FROM RECORD SHOULD BE RECTIFIED IN SO FAR AS TRIBUNAL HAS CONFIRMED THE ORDER OF AO BRINGING TO TAX NET U/S 41(1) OR DISALLOW U/ S 37(1) IN RESPECT OF R E MISSION OF LIABILITY OF RS.1 48 43 395/ - . 8. ON THE OTHER HAND CONTENTION OF LEARNED DR WAS THAT THERE IS NO MISTAKE MUCH LESS AN APPARENT MISTAKE ON THE ORDER OF THE TRIBUNAL. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS CITED AT BAR BY LEARNED AR AND DR IN THE CONTEXT OF FACTUAL 4 M.A.NO. 158 - 201 6 ITA NO. 1746 - 2012 3DI SYSTEMS INDIA PVT. LTD. VS ITO - 10(3)(4) MATRIX OF INSTANT CASE. WE HAVE ALSO CAREFULLY GONE THROUGH THE MISCELLANEOUS APPLICATION AS WELL AS ORDER OF THE TRIBUNAL DATED 24/01/2014 WHERE IN THE TRIBUNAL HA D CONFIRMED THE ACTION OF AO APPLYING PROVISIONS OF SECTION 41(1) ON ACCOUNT OF REMISSION OF LIABILITY. HOWEVE R WHILE DECIDING THE ISSUE THE TRIBU NAL HAS NOT CONSIDERED THE JUDICIA L PRONOUNCEMENTS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHINDRA AND MAHINDRA (SUPRA) WHEREIN IT WAS HELD THAT WAIVER OF LOAN LIABILITY DOES NOT AMOUNT TO REMISSION THEREFORE CANNOT BE ADDED UNDER SECTION 41(1) OR SECTION 28 (IV). SIMILA R VIEW HAS BEEN TAKEN BY BOMBAY HIGH COURT IN CASE OF XYLON HOLDINGS PVT. LTD. (SUPRA). HONBLE SUPREME COURT IN CASE OF SAURASHTRA KUTCH STOCK EXCHANGE LTD. (SUPRA) HAS HELD THAT NON - CONSIDERATION OF DECISION OF JURISDICTIONAL HIGH COURT AMOUNTS TO MISTAKE APPARENT FROM RECORD WHICH CAN BE RECTIFIED U/S. 254(2) OF I.T.ACT . HO WEVER IN THE ORDER PASSED BY TRIBUNAL THE RATIO LAID DOWN BY JURISDICTIONAL HIGH COURT HAVE NOT BEEN CONSIDERED WHICH AMOUNTS TO MISTAKE APPARENT FROM RECORD U/S. 254(2). ACCORDINGLY WE RECTIFY THE SAME AND DIRECT THAT REMISSI ON OF LIABILITY O N CAPITAL ACCOUN T SHOULD NOT BE TREATED AS INCOME UNDER SECTION 41(1) IN SO FAR AS IT IS NOT ON REVENUE ACCOUNT. ACCORDINGLY WE HOLD THAT AO WAS NOT JUSTIFIED IN BRINGING TO TAX NET RS.1 48 43 395 AS REMISSION OF LIABILITY UNDER SECTION 41(1) OF THE IT ACT. AO IS DI RECTED TO DELETE THE ADDITION OF RS.1 48 43 395/ - . 9. IN THE RESULT MA FILED BY THE ASSESSEE IS ALLOWED. 5 M.A.NO. 158 - 201 6 ITA NO. 1746 - 2012 3DI SYSTEMS INDIA PVT. LTD. VS ITO - 10(3)(4) ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17/10/2016 . SD/ - ( RAMLAL NEGI ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 17/10/2016 KARUNA SR. 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//