TMI Blog2021 (1) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure under Section 35D - Decided in favour of assessee. Deduction u/s 10A - assessee is engaged in the business of mobile added value services, which involve content development in its STP unit - HELD THAT:- Tribunal held that assessee has a dedicated studio in this STP unit where music related content is developed. The assessee procures music and other contents on the third parties. The assessee also uses its studios for content development - assessee is engaged in the activity of developing content and conversion of procured content into mobile readable format and the same would qualify to be classified as content development or data processing and the same would be covered under the notification dated 26.09.2000 issued by the Central Board of Direct Taxes. The High Court of Delhi in ML OUTSOURCING P. LTD [ 2014 (9) TMI 396 - DELHI HIGH COURT] and MCKINSEY [ 2015 (3) TMI 1226 - DELHI HIGH COURT] has interpreted the notification and has held that intention of the legislature is not to constrain or restrict but to enable the Board to include several services of products of similar nature in the ambit of Section 10A - notification covers within its ambit even the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under Section 80JJAA of the Act requires reconsideration by the Tribunal. Accordingly, the second substantial question of law is answered. - I.T.A. NO. 340 OF 2014 - - - Dated:- 18-1-2021 - THE HON'BLE MR. JUSTICE ALOK ARADHE And THE HON'BLE MR. JUSTICE NATARAJ RANGASWAMY FOR THE APPELLANTS : BY MR. E.I. SANMATHI, ADVOCATE FOR THE RESPONDENT : BY MR. K.R. VASUDEVAN, ADVOCATE JUDGMENT This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act', for short) has been filed by the revenue. The subject matter of the appeal pertains to the Assessment Year 2008-09. The appeal was admitted by a Bench of this Court vide order dated 20.04.2015 on the following substantial questions of law: 1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the expenditure incurred in connection with the issue of IPO inter alia stamp duty is an allowable expenditure under section 35D of the I.T. Act despite the ruling of Apex Court in the case of General Insurance Corporation V/s. CIT (reported in 286 ITR page 232)? 2. Whether on the facts and in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act as well as Section 10A of the Act. 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), by an order dated 27.06.2012, inter alia allowed the claim of the assessee in respect of disallowance of stamp duty expenditure as well as under Section 80JJAA and under Section 10A of the Act and rejected the claim of the assessee in respect of disallowance of legal and professional charges. Thus, the appeal preferred by the assessee was partly allowed. Being aggrieved, the assessee as well as the revenue filed appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). The Tribunal, by an order dated 21.02.2014, allowed the appeal preferred by the assessee whereas the appeal preferred by the revenue was dismissed. In the aforesaid factual background, the revenue has approached this Court. 4. Learned counsel for the revenue submitted that the Assessing Officer had disallowed the portion of stamp duty relating to issue of fresh share capital through IPO amounting to ₹ 6,87,770/- as the same was capital in nature and was not a revenue expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein are not fulfilled. It is also submitted that reliance placed by the assessee on the notification dated 26.09.2000 issued by the Central Board of Direct Taxes is misconceived and the case of the assessee does not fall within the expression content development or animation used in the aforesaid notification. It is also submitted that the Tribunal has not examined the contents of the agreement which discloses the nature of activities and the notification which was relied upon by the assessee dated 26.09.2000 only pertains to information technology enabled products or services. Sofar as the claim of the assessee with regard to disallowance of professional charges, it is submitted that the Assessing Officer has rightly held that the payments were made in regard to acquisition of a foreign company and therefore, some are in the nature of capital expenditure. It is also pointed out that the Assessing Officer has rightly held that the expenses incurred for patent registration is also capital in nature since patent is capital asset of the company. However, the Tribunal has failed to appreciate the aforesaid aspect of the matter. It is also pointed out that the Assessing Officer has rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnology enabled services i.e. computer software and the assessee has claimed deduction only on those payments which were made to workmen who were not employed in supervisory capacity. Therefore, the finding on this issue has been recorded on merits. Therefore, in the fact situation of the case, there is no need to remand the matter. Sofar as the claim of the assessee with regard to deduction under Section 10A of the Act is concerned, learned counsel for the assessee has submitted that the aforesaid issue has been dealt with in paragraph 7.4.4 by the Tribunal, where the Tribunal has examined the activities of the assessee in detail and has held that the nature of the activity of the assessee would amount to development content and conversion of procured content into mobile readable format. Therefore, the assessee is entitled to the benefit of notification dated 26.09.2000. In support of aforesaid submission, reliance has been placed on the decision of the Delhi High Court in 'CIT-II, NEW DELHI Vs. MLOUTSOURCING SERVICES (P) LTD.' (2015) 228 TAXMAN 54, (DELHI) AND 'CIT-II Vs. McKINSEY KNOWLEDGE CETNRE INDIA PVT. LTD.' DATED 27.03.2015 IN ITA NO.217/2014 and our attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was relied upon by High Court of Bombay in MAHINDRA UGINE AND STEEL CO. LTD, supra, and it was held that the aforesaid expression would improve stamp duty payable by the assessee on the debenture issue. In view of aforesaid enunciation of law, the expenses incurred by the assessee towards stamp duty in connection with issue for public subscription of shares in or debentures of the company is an allowable expenditure under Section 35D of the Act. Therefore, the first substantial question of law is answered against the revenue and in favour of the assessee. 11. Sofar as claim for deduction of the assessee under Section 10A of the Act is concerned, before proceeding further, it is apposite to take note of relevant extract of Section 10A(1) of the Act which reads as under: 10A (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the Assessment Year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany in France and legal and professional charges to file patent application for a sum of ₹ 24,08,000/-. The Assessing Officer has held the same to be in the nature of capital expenditure. The Tribunal, by following the decision of its co-ordinate Benches, has held that expenditure incurred by the assessee for conducting due diligence in report of a company which was to be acquired by the assessee is revenue in nature and has treated the same to be deductible expenditure under Section 37(1) of the Act. The aforesaid finding of the Tribunal is based on meticulous appreciation of material on record and does not call for any interference. In the result, the fourth substantial question of law is also answered against the revenue and in favour of the assessee. 13. Now we may deal with the claim of the assessee with regard to depreciation on block of assets and has claimed depreciation thereon at the rate of 60%. The Assessing Officer has held that the media resource board is plant and machinery but is not a computer by holding it to be a telecom equipment and allowed depreciation at 15% as applicable to plant and machinery. The expression 'computer system' has been defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent executive and cannot be treated as workman. Therefore, the claim for deduction under Section 80JJAA of the Act was disallowed. However, the Tribunal by placing reliance on the decision of the Tribunal in the case of TEXAS INSTRUMENTS (INDIA) P. LTD., supra allowed the claim of the assessee. It is pertinent to note that the decision of TEXAS INSTRUMENTS (INDIA) P. LTD. supra was challenged before this Court in ITA No.535/2007 and ITA No.537/2007 and the matter was remitted by an order dated 17.02.2014 to decide the matter afresh. However, we find that the Tribunal in paragraph 6.5.4 has rather recorded the conclusions and has failed to assign any reasons. Therefore, the matter insofar as it pertains to claim of the assessee for deduction under Section 80JJAA of the Act requires reconsideration by the Tribunal. Accordingly, the second substantial question of law is answered. The impugned order dated 21.02.2014 insofar as it dismisses the appeal of the revenue to the extent of challenge of the claim of the assessee under Section 80JJAA of the Act is hereby quashed. In the result, the matter is remitted to the Tribunal to decide the claim of the assessee for deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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