TMI Blog2021 (1) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. Though the learned assessing officer has challenged the existence of the software for the first time during the year, however, the assessee has been allowed depreciation at least at the rate of 25% on the software in earlier years also. Thus, the learned CIT A has correctly held that it is not a fictitious asset. Accordingly, we uphold the order of the learned CIT appeal while allowing depreciation on the software holding it to be an actual asset and allowing depreciation thereon at the rate of 60% following the order of the coordinate bench in assessee s own case for earlier years. Addition u/s 68 - cash credit in the books of accounts - HELD THAT:- For proving the identity of the party, the assessee submitted the permanent account number, and income tax jurisdiction of the investor company is, Bank statement of the investor company is and copies of the returns of those investors. With respect to the creditworthiness and genuineness of the investor, assessee submitted the audited financial statement of the investor company and bank statement showing the relevant entries of Davidson credits of the investor company is to show the sources of the funds. With respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (A) is legally justified in deleting disallowance of excess claim of depreciation of ₹ 2,46,81,028/- without considering the fact that the assessee had claimed higher rate of depreciation @60% on intangible assets developed by the assessee in the form of the software for its use in the business and it was not a claim of depreciation on the software purchased by the assessee? 4. Whether on facts and in circumstances of the case, the Ld. CIT (A) is legally justified in allowing relief to the assessee on the basis of its earlier order in the assessee s own case despite the fact that principle of res-judicata is not applicable to Income Tax proceedings as each assessment year is a separate year? 5. Whether on facts and in circumstances of the case, the Ld. CIT (A) is legally justified in deleting addition of ₹ 94,07,82,500/- u/s 68 of the Act, on account of cash credits in the books of accounts by ignoring the findings of the AO that during assessment proceedings the assessee failed to prove the here basic conditions i.e. identity, creditworthiness of creditors and genuineness of transactions in this regards? 6. Whether on facts and in circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited company and some of them have common directors and auditors. Therefore, assessee has failed to prove the creditworthiness and the genuineness of the transaction. Consequently the assessment order u/s 143(3) of the Act was passed on 28.03.2014 at taxable income of ₹ 10, 47, 99,362/-. 4. Aggrieved by the order the assessee filed appeal before the LD CIT (A). On the issue of disallowance of depreciation of software @60% as claimed by the assessee and allowed by the ld AO @25% as well as the disallowance of depreciation of ₹ 7, 20, 30,000/-on addition during the year from work in progress, following the decision of the coordinate bench in case of the assessee in earlier years, the learned CIT A allowed the claim of the assessee. With respect to the addition u/s 68 of the Act of ₹ 94,07,82,500/- the ld CIT(A) deleted the addition for the reason that this is the first call of warrants during the year, in subsequent year second call was made and in third year third call was made. The total issue of ₹ 220 crores was received in three different years. In the first year i.e. the impugned assessment year the learned assessing officer made the addition with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer about the existence of the software, the depreciation has rightly been disallowed of ₹ 72,030,000/ . 8. On the first issue of depreciation, LD AR submitted a detailed paper book showing the chart of asset-wise depreciation at page No. 170 of the paper book. It was further stated that identical disallowances of depreciation on software was made in the case of the assessee for Assessment Year 2009-10, 2010-11 and 2012-13 which travelled up to the level of coordinate bench and coordinate bench has deleted the above disallowances for Assessment Year 2009-10 in ITA No. 6092/Del/2013. He referred to the ground of that order wherein, this issue is considered. He further referred to page No. 5 of that decision wherein, it is stated that the above issue has been considered in its entirety. He further referred to that decision of the coordinate bench in assessee s own case for Assessment Year 2010-11 in ITA No. 4025/Del/2014 dated 08.01.2018 wherein identical issue has been dealt in para number 6. He further referred to the order of the coordinate bench in ITA No. 3778/Del/2017 for assessment year 2012-13 dated 28-01-2020 wherein, the above issue has been consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having exposures in the software industry, which is evident from the report of the Board of Directors. The company has also been instrumental in providing multiple services to government of Delhi Haryana, Punjab, and Andhra Pradesh. The company has also worked with Government of India in unique identification projects. In view of this, it is apparent that company is listed company and carrying on the software development activities therefore there is no reason to doubt that the assets of the company are fictitious. The LD AO has also not brought on record anything to show that the assets appearing in the balance sheets are not real. Against this, the annual account shows that the assessee has several platforms for software services. Therefore we do not find any substance in the finding of the learned assessing officer that assessee has not shown that assets of software is in existence. The issue of depreciation of such software where it is allowable @25% or @ 60% has already been decided by the co-ordinate bench in assesses s own case since for assessment year 2008-09 that the assessee is entitled to depreciation @ 60% of such software. The LD CIT (A) has also followed the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the orders of the ld CIT(Appeal) and has dismissed the departmental appeal vide the appellate order dated 11.04.207 in ITA No. 6091/Del/2013 for Assessment Year 2008-09 and ITA No. 6092/Del/2013 for AY 2009-10. It is submitted by the assessee that the department has not apparently appealed against the order of the tribunal in the High Court. 4.4 The AO had denied the depreciation @60% during the AY 2010-11 but the same has been allowed by the ld CIT(Appeals)-19, Delhi vide the appellate order dated 26.03.2014 in appeal No. 10-2013-14. Similarly, the AO had denied the deprecation @60% claimed in the AY 2012-13 but the same has been allowed by the ld CIT(Appeals)-15, Delhi vide appellate order dated 27/02/2017 in Appeal No. 217/2016-17. 4.5 The assessee has opening work in progress of computer softwares of ₹ 60.18 crores as on 01.04.2010 and the assessee had added work in progress of ₹ 35.14 crores during the current AY but the same was not complete and the assessee had claimed the actual capitalized work in progress of ₹ 13.36 crores on which te assessee had claimed the deprecation on computer @60% of ₹ 7,20,30,000/- but the same had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble asset and the assessee is very eligible for depreciation @60% u/s 32(1) of the Act which has been allowed by the ld CIT(A) and the Hon ble Tribunal in the earlier years as discussed above. The assessee should not be denied the rightful deprecation @60% merely because the assessee had made a mistake to claim the same in one earlier AY 2003-04 although the assessee has rectified and modified its claim and has made the right of depreciation @60% in the subsequent years. The ld AO is also not justified without any valid reasons to deny the very existence of computer software as an intangible asset in one had and denying the depreciation as a whole while on the other hand the same AO is allowing the depreciation but restricting the same @25% in place of 60% and as such it is clear misunderstanding and mis- appreciation of the facts of the case. 4.9 After considering all the facts and circumstances of the case I am of the view that so far the issue of the claim of allowing depreciation @60 % in ground No. 1 and 2 is concerned the same have been allowed by ld Colleagues in the earlier AYs and the same has been upheld by the Hon ble Tribunal and the department has also apparently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the order of the coordinate bench in assessee s own case for earlier years. Accordingly, Ground Nos. 1 to 4 and 7th of the appeal of the ld AO are dismissed. 12. Ground number 5 and 7 are on the issue of addition of ₹ 940,782,500/ u/s 68 of the act on account of cash credit in the books of accounts. The fact shows that assessee has received during the year sum for issue of convertible warrant amounting to ₹94,07,82,564.76 crores during assessment year 2012 13 and ₹ 61.15 crore during assessment year 2013 14. Thus, the assessee has received the money for issue of convertible warrants amounting to ₹ 220 crores to which the shares were allotted subsequently on 28th of April 2012. The learned assessing officer has made an addition u/s 68 of the income tax act to the extent of sum received during the year for convertible warrants amounting to ₹ 940,782,500. 13. The learned departmental representative extensively referred para number 3.3 of the order of the learned assessing officer and stated that when the assessee has failed to prove the creditworthiness and the genuineness of the transaction, mere filing of the proof of the identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld CIT(A) on this account stating that the same applicants has deposited the money that the assessee for Assessment Year 2011-12, 2012-13 and 2013-14. The LD AO has accepted the identity capacity and genuineness of the shareholders for assessment year 2012-13 and 13-14; however, for Assessment Year 2011-12 the addition is made. He referred to detailed list of shareholders at page number 196 to 199 of the paper book. He submitted that all the shareholders who are investor for Assessment Year 2011-12 are also investors in assessment year 2012-13 and 13-14 wherein on the identical evidence submitted no addition have been made. He submitted that there is no contravention of any of the provision of SEBI and companies Act. He further stated that all these companies are the group companies and even the source of the funds are also established as stated in the order of the LD AO itself. Merely because some common entities are advancing money to the debenture holders, which is in turn investor in the assessee company does not make an amount of investment in the warrant as unexplained investment. He therefore, submitted that the LD CIT (A) has rightly deleted the addition. 15. We have car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As the names of these companies suggest, they should be in various types of business but they are actually not doing such business and only investing in shares of private limited companies and showing very less income i.e. below ₹ 50,000/- not from investment but showing as other income. Therefore, the balance sheet and P L account of the debenture holder companies are indicative of typical entry operator entities. (iv) On perusal of the bank statements of debenture holder companies, it is seen that the money is rotating among the 27 debenture holder companies and going to the assessee company. For instance, M/s Meritorius Realty Pvt. Ltd. is a debenture holder company giving money to another debenture holder company, M/s Allied Computer International (Asia) Ltd. as under as is evident from the bank statement of Meritorius Realty Pvt. Ltd. 21.07.2010 ₹ 93.72 lacs 21.07.2010 ₹ 91.28 lacs 22.07.2010 ₹ 49.75 lacs 22.07.2010 ₹ 65.25 lacs Similarly, M/s Acacio Tradelink Pvt. Ltd. is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convertible warrant of ₹ 94,07,82,500/- during the current assessment year 2011-12 and ₹ 64.76 crores during the assessment year 2012-13 and ₹ 61.15 crores during the assessment year 2013-14 and as such the assessee had received the money for convertible warrant of ₹ 220 cross for which the shares were allotted subsequently on 28.4.2012. The AO has restricted the application money off on control convertible warrants of ₹ 94,07,82,500/-in the current year as unexplained credit u/s 68 on the ground that the same are not genuine but the order of the AO. 6.2 The assessee in appeal against the order of the AO and it is submitted that the application money has been received from the various parties for convertible warrant and subsequently the shares have been allotted to the parties and as such there is no case for disbelieving the genuineness of the shareholders. It is submitted that the same applicants had given the money in three different years of current assessment year 2011-12, 2012-13 and 2013-14 and it is only in the current year that the AO has treated the application money as unexplained where is the same for the same assessee has accepted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity creditworthiness and genuineness of the transaction against the assessee. 6.4 I have considered the order of the learnt and the submissions of the assessee and find considerable merit in the submissions of the assessee that the is not justified to make any additional under the strict provision of cash credit under section 68 without proof proving that there are any false transaction in the subsequent assessment years. after considering all the facts and circumstances of the case I am of the view that there is no material evidence or any address finding of the against the associate to treat the application money as unexplained in the current year when the same money from the same parties in the subsequent year has been treated as genuine and accordingly there is no proper justification for the able to make such edition in a very casual manner without any finding and the same is not justified and additions made by the air is not sustainable and accordingly the same is deleted. 18. Brief facts of the case shows that in terms of resolution passed u/s 81 (1A ) of the companies act, 1956 at the extraordinary general meeting of the company held on 3/9/2010 and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stors. With respect to the creditworthiness and genuineness of the investor, assessee submitted the audited financial statement of the investor company and bank statement showing the relevant entries of Davidson credits of the investor company is to show the sources of the funds. With respect to the genuineness of the transaction, assessee once again submitted the confirmations of the above parties were issued the convertible warrants. It is further submitted that these companies were the investor for all the three years and subsequently were allotted the equity shares. Therefore, materially, the learned assessing officer has accepted the identity, creditworthiness of the investor as well as the genuineness of the transaction for assessment year 2012 13 and 2013 14 on the same material whereas for the assessment year 2011 12 the learned assessing officer has made the addition u/s 68 of the income tax act. The subsequent assessment order is placed before us clearly shows that there is no addition made on account of issue of convertible warrants of ₹ 220 crores part of which the sum is received in these years. Such assessment order is not at all disturbed. Even otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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