TMI Blog2018 (12) TMI 1805X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. The ground of the Revenue is dismissed. Unearned income - AR contention that unearned income as per sec. 145(2) in respect of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the consolidated orders passed by the Commissioner of Income Tax (Appeals)-17, Chennai in ITA Nos. 69/11-12, 3/13-14 18/1516/CIT(A)-17 dated 28.03.2016 for assessment years 2009-10, 2010-11 2011-12, respectively, and the order of the Commissioner of Income Tax (Appeals)-17 in ITA No. 52/15-16/CIT(A)-17 dated 31.03.2017 for assessment year 2010-11 on the order passed u/s. 143(3) r.w.s. 147. 2. M/s. Sify Technologies Ltd., the assessee, is in the business of networking services and development of software. While making the assessments for assessment years 2009-10, 2010-11 2011-12 u/s. 143(3), the Assessing Officer disallowed expenditure on ESOP, addition of unearned income and made disallowances u/s. 40(a)(ia), on networking cost, content development cost, direct cost and legal and professional charges. Aggrieved, the assessee filed appeals and the CIT(A) allowed the assessee s appeals. 3. Aggrieved against those orders, the Revenue filed these appeals with the common grounds of appeal. One of the common grounds is extracted as under: 1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case. 2 The learned CIT(A) ought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fen Robertson and Kirsten Consulting Engineers Scientists [1998] 230 ITR 206 wherein it has been held that even if the payment to non residents have been made for services rendered abroad, if the benefits thereof are derived in India, then 40(a)(i) would be applicable. 5.1 The learned CIT(A) has therefore erred in holding that Section 40(a)(i) is not attracted in the case of expenses of the nature of content development charges, direct cost and legal and professional charges. 6 For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored. 4. The Ld. DR presented the case on the lines of the grounds of appeal. Per contra, the Ld. AR submitted that this Hon ble Tribunal decided all the above issues in its favour in the orders in DCIT vs Sify Technologies Ltd in ITA No. 1076/Mds/2011 dated 04.10.2013 for assessment year 2008-09 and in ITA Nos. 435,439 859/Mds/2010 dated 08.06.2016 for assessment years 2001-02, 2006-07 2007-08, respectively. So, he pleaded that on the same reasons these appeals may be allowed. 5. We heard the rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The DR vehemently submitted that the CIT(A) has wrongly deleted the addition which was deservingly made by the Assessing Officer. Accordingly, he prayed for restoring the same. 6. Opposing the submissions of the DR, the AR representing the assessee has submitted that the issue in hand has already been adjudicated by the Coordinate Bench of Chennai ITAT in assessee s own case i.e. I.T.A. No. 1954/Mds/2007 decided on 26.05.2009 for the assessment year 2003- 04 and also produced copy of the order. In rebuttal, the DR could not point out any distinguishing feature and only pleaded that the said order is yet to become final. 7. We have heard both parties and also perused the relevant findings as well as case law cited. The only bone of contention between the parties is that the assessee has treated the amount in question as unearned income, whereas; per Revenue, section 145(2) of the Act is applicable and he amount in question has to be treated as income of the current year. We find that the same very issue had arisen in assessment year 2003-04 in I.T.A. No. 1954/Mds/2007 (supra), wherein the Coordinate Bench had decided it in favour of the assessee as under: Ground No. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to customer under certain circumstances does not hold ground. In case a customer returns the products sold by the assessee and the assessee is required to refund the payments received from the customer, the assessee can book the same as sales returns. Hence, the system adopted by the assessee cannot be accepted and so the unrecognized income of ₹ 39,68,208 is now treated as income. 33. The CIT(A) deleted the addition and his order has been challenged by the department in the present appeal. 34. We have considered the rival submissions in the light of material on record. It was explained by the learned AR that the software development was the major source of income. In the written submission filed by the AR before the CIT(A) the breakup of receipts was shown as under. Sl.No Particulars Amount (₹ In lacs) c The major service income are as under:- Income from software development (IDC) LMNK 1175 Income from software development non LMNK 162 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as dealt in ITA No. 1084/Mds/2012, for the assessment year 2002-2003, dated 20.11.2012, where the Tribunal observed in para No.13 as under:- 13. We have heard the rival contentions and gone through the relevant findings as well as case law above said. The only issue between the parties is that per Revenue, the payment in question made by the assessee is liable to TDS provisions as comprised in Chapter XVII B of the Act which the assessee is disputing. We notice that the Coordinate Bench in I.T.A. No. 1277 and 1283/Mds/2008 (supra) decided on 02.02.2012 [in which one of us N.S. Saini, A.M. Member of the Bench) has held as under:4. We have heard the rival submissions and perused the orders of the lower authorities as well as the cited decisions. We find that the Ld. CIT(A) has decided this issue by observing as under: 6. I have carefully considered the facts of the case and the rival submissions and also examined the issues carefully with reference to applicability of sec. 195, which has been denied by the appellant. The appellant company is engaged in the business of providing networking and e-commerce services by way of internet. In order to carry out its business of provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has not properly appreciated the facts of the case and submitted that the bandwidth charges are provided either by way of undersea cables or by satellite earth stations and the appellant does not have any control over the equipments as it has only leased a part of the transponder capacity and not leased the transponder. Therefore, the right of' use of the equipment is not exclusively with the appellant. Further, the right to use equipment mainly arises if there is physical equipment and since the equipments used by the appellant are not under its control. Therefore, the payments made do not have the character of royalty. 6.3 On the above facts and in the circumstances of the case, only one question arises for decision whether the remittances made by the appellant company to the foreign parties would fall within the purview of sec. 195(1) which requires deduction of tax at source. Bandwidth is bought and sold to consumers and it acts as a conduit only. In the appellant's case there are no equipments installed in its premises and the contract entered with the foreign parties is only for the services. Mere use of equipment in providing bandwidth services would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out above, it is held that the transactions in respect of which the impugned payments were made was purely on account of services and there is no transfer of right to use the goods. In the result, it is held that the Assessing Officer was not justified in treating the payment as royalty and invoking the provisions of sec. 195 for both the assessment years. Consequently, the impugned order u/s, 195 r.w.s. 201(1) and 201(1A) dated 21-03-2006 for A.Ys. 2002-03 and - 2003-04 is cancelled. 6. On a query from the Bench from the ld. D.R. as to whether there is any contrary decision of any other High Court, the ld. D.R. replied that the Hon ble Delhi High Court decision is a lone decision on the issue. 7. On the above facts, when there is only one decision of the High Court, then the same requires to be followed by us. Our view finds support from the decision of the Hon ble Bombay High Court in CIT Vs. Godavari Devi Saraf [Smt] [1978] 113 ITR 589 [Bom] We, therefore, confirm the order of the ld. CIT(A) and dismiss the grounds of appeals of the Revenue. 8. In the result, both the appeals of the Revenue are dismissed. After going through the operative portion above said, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court in the case of United Breweries Ltd v DCIT (241 Taxmann 299). 2.3 The learned CIT(A) erred in relying on the decision of ITAT Chennai in the case of EIH associated holes v DCIT which has not become final. 3. The learned CIT(A) ought to have appreciated the fact that in the assessee s case the set off period of eight years had expired and thus the assessee is not eligible for set off of such unabsorbed depreciation pertaining to AY 2001-02 as per the amended provisions of Section 32(2) of the Act. 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer be restored. 8. The Ld. DR presented the case on the lines of grounds of appeals. Per contra, the Ld. AR submitted that since the assessee was not having any exempt income, as per jurisdictional High Court decisions in the cases of Redington (India) Ltd vs ACIT (392 ITR 633) (Mad) and CIT vs Chettinad Logistics Pvt. Ltd., (248 Taxman 55) (Mad), no disallowance could be made 14A r.w.r. 8D. 8.1 With regard to set off of brought forward unabsorbed depreciation, the AR relied on the Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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