TMI Blog2012 (12) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... pute that the claim of the assessee was denied by the A.O. without considering the same and without passing any speaking order on the issue. And that before the CIT(A) the assessee has filed detail submission along with supporting statements, however, the CIT(A) while observing that no relevant information is available on record in support of the claim, rejected the claim of the assessee. In the absence of any material to show that the assessee has filed any such supporting material before the A.O. or such material was examined by the A.O. during the course of assessment proceeding or the CIT(A) has called for the remand report from the A.O. on the impugned issue, in the interest of justice the matter should go back to the file of the A.O. to decide the same afresh providing a reasonable opportunity of being heard to the assessee. Computer software expenses - Capital v/s Revenue - Held that:- As decided in CIT vs. Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] the software expenditure incurred by the assessee are revenue in nature and hence the same are allowable as business expenditure and the CIT(A) was not justified in sustaining the disallowance made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ep by: Shri J.D. Mistry Respondent Rep by: Shri Privin Kumar ORDER Per: Dinesh Kumar Agarwal: This appeal preferred by the assessee is directed against the order dtd. 16-1-2009 passed by the ld. CIT(A) XI, Mumbai for the A.Y. 2003-04. 2. Briefly stated facts of the case are that the assessee company M/s Sony Music Entertainment (I) Pvt. Ltd. is engaged in manufacturing and trading of pre-recorded music and other entertainment software in cassette, compact disc and other formats. The return was filed declaring loss of Rs.24,72,90,346/-. However, the assessment was completed after making various disallowances at a loss of Rs. 9,33,58,500/-, vide order dtd. 31-3-2005 passed u/s 143(3) of the Income Tax Act, 1961 (the Act). On appeal, the ld. CIT(A) partly allowed the appeal. 3. Being aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us. 4. Ground No. 1 is against the sustenance of disallowance of internet/web site expenses. 5. Brief facts of the above issue are that the A.O. noted that the assessee has debited Rs. 10,88,657/- on account of internet/website cost. The A.O. observed that when website is developed, expenses were incurred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. Similar view has been expressed by Hon ble Delhi bench of the ITAT in the case of Polyplex Corporation Ltd. Vs. ITO. We are also of the view that such websites developed by the assessee has a very short life and immediately after release of the picture or music album and after laps of a few month these websites are hardly visited by anybody. Thus, we are of the view that it cannot be said that the assessee derives an enduring benefit. We therefore direct that the addition made by the Assessing Officer and confirmed by learned CIT(A) be deleted. 9. In the absence of any distinguishing feature brought on record by the ld. D.R., we respectfully following the decision of the Tribunal (supra) hold that internet/website expenses incurred by the assessee are revenue in nature and, hence, the same are allowable as business expenditure and accordingly we while reversing the order passed by the A.O. and the ld. CIT(A) on this account, allow the ground taken by the assessee. 10. Ground No. 2 is against the sustenance of disallowance of provision for stock obsolescence written back Rs. 3,73,80,638/-. 11. Brief facts of the above issue are that the A.O. observed that the assessee de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in support he refers the relevant extracts of financial statements for the assessment years 1999-2000, 2000-01, 2002-03 and 2003-04 and copy of the assessment orders for A.Y. 2001-02 and 2002-03 appearing at page 21 to 63 of the assessee s paper book. He, therefore, submits that the deduction claimed by the assessee be allowed. 13. On the other hand, the ld. D.R. while relying on the order of the A.O. and the ld. CIT(A) submits that since this issue has not been considered by the A.O. as per consistent practice followed by the assessee, therefore, in the interest of justice the issue may be restored back to the file of the A.O. to decide the same afresh. 14. We have carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the ld. D.R. that the issue has not been properly appreciated by the A.O. and the ld. CIT(A) in the light of the consistent method of accounting practice followed by the assessee and claim made by the assessee. 15. In Sony Music Entertainment India Private Limited vs. Addl. CIT in ITA No. 6569/Mum/2010 for A.Y. 2005-06 order dtd. 18-7-2012 the issue before the Tribunal was as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of the observations of the Tribunal in the case cited (supra) and according to law after providing reasonable opportunity of being heard to the assessee. The ground taken by the assessee is, therefore, partly allowed for statistical purpose. 16. Ground No. 3 is against the sustenance of disallowance of computer software expenses. 17. Brief facts of the above issue are that the A.O. observed that the assessee has debited an amount of Rs. 5,69,340/- as J.D. Advert Software Expenses. It was explained by the assessee that the amount involved fees paid to Sony Music International Inc. towards fees for use of J.D. Advert Software. The fees was paid on the basis of usage annually. It was in the nature of revenue payment without any enduring benefits. It was further explained that the said package was Enterprise Resource Planning software and used by the company for accounting purposes. No initial payment was made by the company. However, the A.O. did not accept the assessee s submission and held that the same is not allowable in view of the decision of the ITAT in the case of Maruti Udyog Ltd. (2005) 92 ITD 119 (Del). However, the A.O. has allowed depreciation @ 60% thereon. On app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . that the reply filed by the assessee was evasive about the use of borrowings and copies of relevant agreements were not filed. Further the foreign exchange rate difference can be allowed as revenue expenditure only without related borrowings on revenue account. In response it was submitted by the assessee that ECB loan was taken for the purpose of carrying on business of the company and to meet working capital needs. Part of the loan was utilized for purchase of capital asset. The company had filed the relevant details with the Reserve Bank of India. The loan was also utilized for import of raw materials and payment of royalty and the nominal part of the loan was utilized for purchase of capital asset. It was further submitted that in the computation of income Rs. 27,37,890/- pertaining to purchase of capital assets out of ECB A/c was disallowed by the assessee. However, the A.O. observed that the total foreign exchange loss amounted to Rs. 1,29,77,521/- out of which the assessee took 21% of the total ECB loan for creditors of capital goods and accordingly disallowed Rs. 27,37,890/-. The balance amount of Rs. 1,02,39,631/- was taken as revenue deduction because the assessee s ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with law after providing reasonable opportunity of being heard to the assessee. The ground taken by the assessee is, therefore, partly allowed for statistical purpose. 29. Ground No. 5 is against the sustenance of disallowance of advance written off amounting to Rs. 47,08,980/-. 30. Brief facts of the above issue are that from the P L account the A.O. observed that the assessee has claimed advance written off amounting to Rs. 47,08,980/-. It was submitted that the assessee company had claimed refund from Excise Deptt. Amounting to Rs. 95,75,110/- and out of it the Excise Deptt. granted refund of Rs. 46,66,130/-. The company wrote off the balance amount of Rs. 47,08,980/-. However, the A.O. in the absence of any documentary evidence, disallowed the claim of the assessee. On appeal, the ld. CIT(A) in the absence of any evidence confirmed the disallowance made by the A.O. 31. At the time of hearing the ld. counsel for the assessee while reiterating the same submissions as submitted before the A.O. and the ld. CIT(A) further submits that the assessee has produced the books of accounts, therefore, the claim made by the assessee be allowed. 32. On the other hand, the ld. D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure was certainly capital in nature upheld the disallowance made by the A.O. 36. At the time of hearing the ld. counsel for the assessee submits that the Tribunal in assessee s own case in ITA No. 195/Mum/2007 for A.Y. 2002-03 dtd. 22-10-2010 following the earlier order of the Tribunal for A.Y. 2001-02 has allowed the claim of the assessee, therefore, following the same, the disallowance made by the A.O. and sustained by the ld. CIT(A) be deleted. 37. On the other hand, the ld. D.R. while relying on the order of the A.O. and ld. CIT(A) also relied on the decision in CIT v. M. Subramaniam (2005) 272 ITR 525 (Mad.). 38. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute. 39. In M. Subramaniam (supra) relied on by the ld. D.R., it has been held as under (Headnote) : Held, that the agreement clearly provided for assignment of the rights of the producer of the music of the movie to the assessee. The copyright so assigned was in the nature of a capital asset. The ascertained sum of Rs. 501 paid by the assessee to the producer at the time of entering into that agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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