TMI Blog2019 (4) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 1812 - ITAT KOLKATA] was deleted by the Tribunal holding that the adhoc disallowance made by the Assessing Officer on the basis of presumption without bringing any material evidence on record to show the personal use of telephone was not sustainable. Disallowance of PWC Global Service Charges - similar issue has been decided by the Tribunal in favour of the assessee in the case of M/s. Price Water House Coopers Pvt [2018 (9) TMI 1812 - ITAT KOLKATA] uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for deduction on account of PWC Global Service Charges. Software licence fees - HELD THAT:- Allowing the deduction claimed by the assessee on account of software licence fees paid to M/s. Wipro Limited. Non-refundable grant - business receipt OR income from other sources - HELD THAT:- matter needs re examination by the Assessing Officer as the matter was decided by him with reference to the agreement dated 01.07.1998 and not with reference to the agreement dated 16.03.2011, which was referred to and relied upon by the ld. CIT(Appeals). As already observed by us, it is relevant to ascertain for deciding the exact nature of the non-refundable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional negligence was in relation to the business of the assessee and the fact remains that the said payment had a direct nexus with the business of the assessee and had to be recorded as expenses wholly and exclusively for the purpose of the business of the assessee. In Price Water House vide [2018 (9) TMI 1812 - ITAT KOLKATA] held that the premium paid towards Accountants Risk Policy cannot be considered as one falling within the ambit of Explanation 1 to section 37 of the Act - we uphold the impugned order of the CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of insurance paid by the assessee towards Accountant Risk Policy. - I.T.A. Nos. 1020 And 1021/KOL/2017 - - - Dated:- 8-3-2019 - Shri P.M. Jagtap, Vice-President (KZ) And Shri A.T. Varkey, Judicial Member For The Appellant : Shri Radhey Shyam, CIT (D.R.) For The Respondent : Shri Kanchan Kaushal , FCA, Shri K.M. Gupta, Advocate, Shri B.K. Jain, FCA and Shri Pulkit Chhajer, ACA ORDER Per Shri P.M. Jagtap, Vice-President (KZ):- These two appeals are preferred by the Revenue against two separate orders of ld. Commissioner of Income Tax (Appeals)-6, Kolkata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(Appeals) deleted the disallowance made by the Assessing Officer on this issue by observing that there was no evidence of any underlying assets having come into existence which might provide enduring benefits to the assessee. 6. During the year under consideration, the assessee had incurred a total expenditure of ₹ 10,98,467/- on account of payment made to M/s. Wipro Limited for renewal of software licence for personal computers. The Assessing Officer disallowed the said expenditure on the ground that payment made towards software licence fees was a capital expenditure as it resulted into enduring benefit to the assessee. On appeal, the ld. CIT(Appeals) deleted the disallowance made by the Assessing Officer on this issue holding that the expenditure incurred on payment of software licence fees was a revenue expenditure. 7. Aggrieved by the order of the ld. CIT(Appeals) giving relief to the assessee on these four issues, the revenue has preferred this appeal before the Tribunal raising a consolidated ground as Ground No. 1. 8. We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the ld. Representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by PWCDA services in terms of firming Services Agreement. The lower authorities seem to have disallowed the above payment mainly for the reason that the assessee could not establish the relevant business nexus / purpose and there was also a failure on its part in not deducting TDS thereupon. We have heard rival contentions reiterating both parties respective facts. There is no dispute in principle about the assessee s firm service agreement with the payee M/s PWCD s services as well as its role played as providing central services to the entire PWC group based on cost allocation method keeping in mind the nature of services rendered benefits derived as per pages 117 to 261 of the paper book. The assessee has also prepared a list of services availed via the payee concerned in respect of all member firms of the group involving sample cases of e-learning and education, mandatory foundation programmes, training programmes alloys specific / technical programmes etc. All this has gone unrebutted from the Revenue side whose case is that there is no business link forthcoming from the impugned expenditure. We find no substance in Revenue s instant stand. We make it clear that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es paid to M/s. Wipro Limited. 13. In the result, the appeal of the Revenue for A.Y. 2006-07 being ITA No. 1020/KOL/2017 is dismissed. 14. Now we take up the appeal of the Revenue for A.Y. 2010-2011 being ITA No. 1021/KOL/2017, which is directed against the order of the ld. CIT(Appeals)-6, Kolkata dated 14.02.2017. 15. In Ground No. 1, the Revenue has challenged the action of the ld. CIT(Appeals) in treating the receipt of ₹ 7,92,57,500/- as business receipt instead of income from other sources as held by the Assessing Officer. 16. During the year under consideration M/s. Price Water House Coopers Services BV, Netherlands (PWC BV) had provided a non refundable grant of ₹ 7,92,57,500/- at the request of the assessee. The said amount was claimed to be received by the assessee as per the Firm Services Agreement dated 16.03.2011. In the Profit Loss Account, the amount of grant received was credited by the assesee-company as sundry income and in the computation of total income, it was claimed to be a professional income. According to the Assessing Officer, the assessee during the course of assessment proceedings could not explain the circumstances in which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper network which provides audit services to Indian and multinational clients including work that is referred to it by other member firms of the network. As the clients increasingly conduct business on a cross-border basis, the appellant is stated to recognize the need to maintain level of human, technological and capital resources consistent with the level maintained by other member firms and competitors. The grant is provided by PWC BV with a specific undertaking by the appellant firm' to use the grant to enhance its resources by meeting the cost of acquiring / enhancing the required expertise and skill sets as specifically set out in the Grant Agreement. It is also agreed that no specific services are to be provided by the appellant and PWC BV to each other. Various ways in which the grant can be utilized are laid down in clause 2.3 under the general heading, 2.Grant Purpose which include inter-alia, development of and acquisition of resources for additional technical excellence and knowledge in the fields of professional practice development, maintenance and enhancement of quality standards, dissemination of reference and research material. to professionals, continuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ], wherein it was held that the head income from other sources is only a residuary head of income that can be availed only if income does not fall under any of the other four heads of income and the subsidies which go to reimbursement of cost in the production of goods of a particular business would have to be included under the head profits and gains of business or profession and not under the head income from other sources . He invited our attention to the copy of Grant Agreement entered into by the assessee with PWC BV on March 16, 2011 (copy placed at page no.165 of the paper book) to point out that the grant in question was provided to the assessee in order to enable it to improve the quality of its human, technological and capital systems and maintain their quality such that it is consistent with the standards of PWC network. He also pointed out that the said grant was available for utilization for the specific purpose connected with the business of the assessee. He contended that this purpose for which the grant in question was specifically given to the assessee is relevant to decide its nature and since the said purpose was directly connected with the business of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elying on the terms and conditions of the said agreement. He, however, ignored the fact that the issue was decided by the Assessing Officer by reference to the agreement dated 01.07.1998 between PWC BV and assessee and apparently the agreement dated 16.03.2011 filed by the assessee before him and relied upon by the ld. CIT(Appeals) to decide the issue in favour of the assessee was not filed before the Assessing Office as there was no mention whatsoever to the said agreement in the assessment order. Even at the time of hearing before the Tribunal, the ld. Counsel for the assessee has supported the impugned order passed by the ld. CIT(Appeals) in favour of the assessee by relying on the said agreement dated 16.03.2011, a copy of which is placed at page no. 165 of the paper book and has not referred to any agreement dated 01.07.1998, which was filed before the Assessing Officer and the issue was decided by the Assessing Officer by relying on the terms and conditions of the said agreement. In the written submission dated 27.03.2013 stated to be filed with the Assessing Officer on 28.08.2013, there is a mention made by the assessee to the agreement dated 16.03.2011, but it appears that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(Appeals) of the disallowance of ₹ 4,75,32,761/- made by the Assessing Officer on account of partner s remuneration under section 40(b)(v). 23. In the computation of total income for the year under consideration, a deduction of ₹ 13,17,28,800/- was claimed by the assessee on account of partner s remuneration as per section 40(b)(v) on the basis of book profit. In the assessment completed under section 143(3), the Assessing Officer recomputed the book profit of the assessee company for the year under consideration after reducing sundry income in the form of grant amounting to ₹ 7,92,57,500/- and interest income of ₹ 16,520/- and accordingly restricted the claim of the assessee for deduction under section 40(b)(v) on account of partner s remuneration to ₹ 8,41,78,039/- resulting in a disallowance of ₹ 4,75,32,761/-. On appeal, the ld. CIT(Appeals) allowed relief to the assessee on this consequential issue on the basis of the decision rendered by him allowing the claim of the assessee that the non-refundable grant of ₹ 7,92,57,500/- received by the assessee during the year under consideration constituted its business income. 24. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as capital expenditure. 27. During the year under consideration, an amount of ₹ 1,38.67.293/- was paid by the assessee to M/s. Price Water House Cooper Global Licensing Services Corporation, Canada and the said payment was claimed to be made for maintenance and technical support fees for Microsoft, WinZip Pro, Verity, IBM-Lotus. From the relevant details furnished by the assessee in this regard, the Assessing Officer noticed that the relevant software were purchased by the assessee and charges were made per computer basis. According to the Assessing Officer, the assessee-company thus had acquired right in the software license entered into by its Canadian entity and the amount in question paid for acquiring the said right was capital expenditure. He accordingly disallowed the deduction claimed by the assessee on account of expenditure incurred towards software licence fees. 28. The disallowance made by the Assessing Officer on account of software licence fees was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 13.04.2016 in ITA No. 1347/Kol/2013 for AY. 2008-09 in the case of DCIT Circle, Kolkata v M/ s. Exide Industries Ltd. of Hon'ble ITAT C Bench, Kolkata in which the Revenue's ground of appeal against deletion of disallowance on account of software expenses of ₹ 1,36,32,019/- by the Ld. CIT(A) was rejected. In the present case the AO has not discussed as to what enduring benefits are expected from the software license fees. The appellant's case is that the software license fee pertains to a particular period of time and no enduring benefits are derived. Moreover, in earlier years, the AO has himself allowed similar software licence fees holding that the same did not result in any enduring benefits. The facts for the instant assessment year are similar. It has been held in the case of Radhasoami Satsang Vs CIT 193 ITR 321 by the Hon'ble Supreme Court that res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia, relied on the decision of the Hon ble Delhi High Court in the case of CIT vs.- Asahi India Safety Glass Limited [346 ITR 329]. He further contended that the amount in question having been paid by the assessee for the right to use the software for a limited/particular period of time, it did not result in any enduring benefit to the assessee and there was no question of treating the same as capital in nature. 31. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the assessee is engaged in the profession of Chartered Accountancy and for the said profession, it requires to have basic software to carry out its day to day functioning smoothly. As per the practice consistently followed by the group to which the assessee belongs, the licence to use such software is acquired by its Canadian entity PWC Global Licensing Services Corporation and the assessee being a member of the network for which the licence is acquired gets right in the software licensing. As stated on behalf of the assessee before the authorities below as well as before us, the various basic software like Microsoft, WinZip Pro, Verity, IBM-Lotu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
