Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (7) TMI 1180 - AT - Income TaxDisallowance of depreciation on capitalization of software development - Held that:- As the assessee is a software development company and the cost of the development of the software is an intangible asset and the product license are IPR’s. In view of the provision of the Act and AS-26 and further the fact that the cost of development of the software is an intangible asset and the IPR’s is the product, license is not in dispute, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) to make the impugned addition. Addition made on account of sales of dollar being suppressed sales as per agreement with 3i Infotech - Held that:- Commissioner of Income Tax (Appeals) justifiably considered the agreement specially the terms and conditions as has been considered in para 4.2 of the impugned order and then reached to conclusion. The working mentioned in para 4.2 is exactly in terms of the agreement, wherein, no contradiction was pointed out by the department. Neither the ld. Commissioner of Income Tax (Appeals) found any suppression of sale nor anything was pointed before us. Even otherwise, nothing was brought on record by the Revenue evidencing that the project was completed during the year itself, thus, we affirm the stand of the ld. Commissioner of Income Tax (Appeals).This matter was kept for clarification by the Bench with respect to the front end commissions and as per the facts as emerging from the records, orders of the authorities below and statements and submissions as made by both the counsels, we are of considered view that the front end commission as are paid by the assessee company to M/s 3I Infotech, Dubai , the pith and substance of the agreement of the assessee with the foreign agent M/s 3I Infotech, Dubai is for arranging export order of software in favour of the assessee company and since it could not be brought on record by the Revenue that services were rendered from or in India by the said foreign agent i.e. 3I Infotech nor it could be brought on record that any technical services or technical knowhow or technical expertise, experience or expertise is provided by the 3I Infotech, Dubai and also the front commission pertains to the period prior to the new circular no. 7/2009 dated 22.10.2009, we hold that there was no liability on the part of the assessee to deduct tax at source on the said payment u/s 195 of the Act and the AO erred in invoking the provisions of Section 40(a) of the Act read with Section 195 of the Act. We confirm the orders of the CIT(A). Addition made on account of unaccounted sales - Held that:- Commissioner of Income Tax (Appeals) justifiably examined the documentary evidence filed by the assessee (Para 5.2 of the impugned order), terms of the agreements, and found that 50% of the payment were to be received on implementation. The contract was signed on 27/03/2008 and up to 31/03/2008, there was no implementation of work rather the work started on 01/04/2008 for which invoice for USD 70000 was raised which is 50% of USD 1,40,000. It is also noted that in case of product, License Company and accounting of the Revenue is based on percentage completion of work method. We find no suppression of sale as has been alleged by the Revenue. We have also perused and analyzed the agreement entered into between the parties and found that practically no work was commenced in the month of March, thus, no addition was warranted. Rejection of books of accounts - Held that:- The books of accounts were rejected by the ld. Assessing Officer on the plea that accounting standard were not complied with by the assessee. However, we note that the books of accounts were audited by M/s Delloitte Haskins, one of the big audit firms, who have not commented anything adverse/deviation in their audit report, thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals). Addition to the cost of software development cost by treating the proportionate value of incidental expenses - Held that:- Assessing Officer has not pointed out any infirmity in the explanation of the assessee. The totality of facts, clearly indicates merits in the contention of the assessee and as canvassed by the assessee, the ld. Assessing Officer made the addition to the cost of treating the proportionate value of incidental expenses ignoring the standard practices adopted by the assessee. In view of the explanation of the assessee, we allow this ground and more specifically when for earlier assessment year, the department had been accepting the claim of the assessee and in the impugned year, no contrary facts were brought on record.
|