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2016 (6) TMI 1393 - AT - Income TaxUnearned income as per sec. 145(2) - any class of income to be disclosed and notified in the Central Government by Official Gazette - HELD THAT:- Revenue earned by the assessee from software and consultancy services was recognized on delivery of goods / services, that as per the existing scheme, M/s. Satyam Education Services Limited was assigned the responsibility to 'sign off’ on completion of the project in the case of all customers, that the assessee-company was following the AS 9 prescribed by the Institute which was in conformity with the provisions of section 145(2) of the Act. The assessee was regularly following the 'project completion method, which is a recognized method. The completion of each project is determined by 'sign off’. There is nothing on record to show that there was any inconsistency in this regard. The CIT(A) found that the deferred income amounting to ₹ 39,68,208 was carried forward and was duly taken into account in the next assessment year. In the circumstances, therefore, we see no reason to interfere with the conclusions reached by the CIT(A) There is no difference pointed out by the Revenue, we are of the opinion that the CIT(A) has rightly deleted the addition under the head "unearned income”. The mere submission on the part of Revenue that the same has not attained finality is no ground in itself for not placing reliance upon the same. Accordingly, the findings of the CIT(A) are upheld and the ground is decided against the Revenue. TDS u/s 195 - expenditure incurred on networking - remittance towards overseas services - assessee explained the networking and communication cost and the category of expenditure incurred outside India and the said provisions shall not apply - AO relied on the legal provisions of Sec. 40(a) (i) of the Act and double taxation u/s.90(2) of the Act considered the provisions of TDS are mandatory in respect of networking, communication were services are outside India - HELD THAT:- As decided in own case [2012 (11) TMI 1151 - ITAT CHENNAI] payments made for connectivity for transmission of data would not fall into the category 'royalty' or 'fees for technical - there is no iota of doubt that the payments in question made by the assessee cannot be subjected to the applicability of TDS provisions contained in the “Act”. Therefore, in view of the same and in order to maintain consistency, we rely on the above said order of the ITAT and decide the grounds against the Revenue. TDS u/s 195 - Overseas expenditure on recruitment - Departmental Representative explained that assessee has not proved the nature of expenditure incurred outside India and also no evidence was produced. AR explained that is expenditure in incurred for Branch Office at Australia which do not have permanent establishment in India and such payments are not in the nature of technical services or technical knowledge. We on perusal of the assessment order, found that the ld. Assessing Officer has not discussed on the permanent establishment or the type of expenditure incurred with complete details and the findings of assessment order that the assessee has failed to provide details of TDS and summary of expenditure incurred - matter has to be re-examined to verify to the expenditure and genuineness of permanent establishment and business connection of the assessee. Hence, we remit entire issue to the file of Assessing Officer to verify the claim and pass the order. This ground of the Revenue is allowed for statistical purpose. Allowability of Employee Stock Option Cost (ESOP) - revenue or capital expenditure - only contention of the Department that the expenditure is in the nature of capital in nature and the decision relied by the CIT (Appeals) has not attained finality - HELD THAT:- We perused the order of CIT (Appeals) and the submissions of both counsels and found that ESOP are in the nature of business expenditure and it takes the characteristic of staff welfare and the shares are issued to the employees to work in the best interest of the assessee. These shares are allotted through SEBI guidelines and expenditure is in the nature of Revenue expenditure and claimed deduction and ld. Authorised Representative supported his arguments with decision of Jurisdictional High Court in the case of CIT vs. PVP Ventures Ltd [2012 (7) TMI 696 - MADRAS HIGH COURT] wherein it held that staff welfare expenditure incurred by the assessee in respect of Employees Staff Option Plan as per SEBI guidelines is an ascertained liability and is allowable as expenditure in computation of income. Considering the jurisdictional High Court decision, we uphold the order of Commissioner of Income Tax (Appeals) and allow the expenditure. The ground of the Revenue is dismissed. Disallowance of depreciation on good will - assessee claimed depreciation on the goodwill @25% under the block of assets - HELD THAT:- The goodwill takes the characteristic of separate block and assessee has paid the money over and above the value of the assets to the seller and such excess amount is the goodwill classified and falls within the explanation of Sec. 32(1)(ii) of the Act. The Hon’ble Apex Court in the case of CIT vs. SMIFS Securities Ltd [2012 (8) TMI 713 - SUPREME COURT] has held that principle of ejusdem generis would strictly apply while interpreting said expression which finds place in Explanation 3(b). “Goodwill’’ is an asset under Explanation 3(b) to Sec. 32(1) of the Act and dismissed the appeal’’. We, respectfully following the Apex Court decision, upheld the order of Commissioner of Income Tax (Appeals) and dismiss the ground of the Revenue. Profit on IP/VPN Business sold to Sify Communications Ltd (SCL) - business income OR long term capital gains on slump sale - HELD THAT:- We on perusal of order of Commissioner of Income Tax (Appeals) found that the assessee has placed more reliance on the valuation report of Deloitte Haskins & Sells and sold the units to subsidiary company M/s. Sify Communications (SCL) and it was explained that sale consideration is based on future earning capacity and earning before interest and depreciation but not on individual value of assets. Under sec. 2(42C) of the Act, the slump sale is defined as ‘’sale for lumpsum consideration without assigning any value to he individual assets’’. At the time of hearing, the ld. Authorised Representative argued that even if some assets and liabilities are not transferred it will be a slump sale. Prime facie it is not clear whether sale is by a lock, stock and barrel or assigning the value of individual assets. Considering apparent facts, valuation report and decisions, we are of the opinion that the matter has to be reexamined. We remit the disputed issue to the file of the Assessing Officer to consider afresh the grounds of the Revenue and allow the ground for statistical purpose.
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