TaxTMI 
TaxTMI 
2017 (3) TMI 1948
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....ided in favour of the assessee and against the revenue. The ld Departmental representative relies upon the order passed by the assessing officer. 5. We have noticed that this issue of depreciation of server/networking equipment is covered by the decision of the Madras High Court in the case of Dinamalar Vs. CIT (2016) 74 taxman.com 14 and also the decision of Hyderabad Tribunal in the case of ACIT Vs. Ushodaya Enterprises Ltd., (2013) 33 taxmann.com 381. 6. The decision of Madras High Court in the case of Dinamalar (Supra) held as under : 11. Before the Tribunal, as regards claim of depreciation @ 80%, on "control panel board and transformer", the appellant-assessee has contended that the same can be classified under the head, "B. Instrumentation and monetary systems for monitoring energy flows", as mentioned in New Appendix-I-III-(8)(ix)B and therefore, they are entitled to depreciation @ 80%, as provided under the Act. Considering the arguments of the appellant-assessee and the findings of the authorities, the Income Tax Appellate Tribunal, vide order, dated 14.01.2016, in I.T.A. No. 2829/Mds/2013, held as follows:- 'We find merit in the contention of the Ld. A.R. Cont....
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....der the definition, "computer, including computer software". Fact that the machineries do not fall under the abovesaid category, cannot be termed as perverse and therefore, the order impugned, does not call for interference. 15. We have given our careful consideration, as to how both the appellate authority and the tribunal have considered the facts of the case and rendered findings, on the rival submissions of the parties. Going through the material on record, we are of the considered view that the concurrent findings of fact, rendered by the CIT (Appeals) and the Income Tax Appellate Tribunal, do not call for any interference, as no substantial question of law, is involved. 7. Respectfully following the decision of Madras High Court in the case of Dinamalar (Supra), we dismiss this ground of Revenue. 8. The second ground is with respect to the depreciation on goodwill. 9. This ground was discussed by AO in paragraph 9.2 of the Asst. order, wherein it has been held as under: 10. The learned authorised representative on the behalf of the assessee had submitted that this issue is also covered by the judgment of Hon'ble Supreme court and Madras High Court and therefore this i....
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....hat entity's identifiable assets and liabilities. Positive goodwill arises when the acquisition cost exceeds the aggregate fair values of the identifiable assets and liabilities. Negative goodwill arises when the aggregate fair values of the identifiable assets and liabilities of the entity exceed the acquisition cost." 17. At this stage, it is also relevant to refer to Accounting Standard 10 as issued by the Institute of Chartered Accountants of India. The relevant extract of which reads as under:- "16.1 Goodwill, in general, is recorded in the books only when some consideration in money or money's worth has been paid for it. Whenever a business id acquired for a price (payable either in cash or in shares or otherwise) which is in excess of the value of the net assets of the business taken over, the excess id termed as 'goodwill'. Goodwill arises from business connections, trade name or reputation of an enterprise or from other intangible benefits enjoyed by an enterprise." 18. It is also relevant to note that Smifs Securities Ltd. (supra) was a case where assets of company - YSN shares and Securities (P.) Ltd. were transferred to Smifs Securities Ltd. und....
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....entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court. The Supreme Court held as under :- "5. In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a). The court held as under: (ITR p. 229) "If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The....
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....onal ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose." [Emphasis supplied] 13. The underlined observations in the above passage do not curtail the ambit of the jurisdiction of the appellate....
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....eduction had been held to be valid in view of an earlier judgment of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363. This was, therefore, a case of error in perception/judgment. Despite the same, the Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowing the deduction. The words "could not have been raised" must, therefore, be construed liberally and not strictly. 15. It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court there may be several factors justifying the raising of a new plea in appeal and each case must be considered on its own facts. However, such cases include those, where the ground though available when the return was filed or the assessment order was made, was not taken or raised for reasons which the appellate authorities may consider valid. In other words, the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment....
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....se, there are other separate remedies provided under the Income-tax Act." (C) It is unnecessary to refer to all the judgments that the Full Bench referred to while answering the reference. The Full Bench referred to the observations of the Supreme Court in Jute Corpn. of India Ltd. (supra) set out above. It is important to note that even in this case, therefore, the ground existed when the return was filed. The mere fact that a decision of a court is rendered subsequently does not indicate that the ground did not exist when the law was enacted. Judgments are only a declaration of the law. The assessee could have raised the ground in its return itself. It did not have to await a decision of a court in that regard. Indeed, even if a judgment is against an assessee, it is always open to the assessee to claim the deduction and carry the matter higher. The words "could not have been raised", therefore, cannot be read strictly. Neither the Supreme Court nor the Full Bench of this Court meant them to be read strictly. They include cases where the assessee did not raise the claim for a reason found to be reasonable or valid by the appellate authorities in the facts and circumstances of ....
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.... 254 of the Income Tax Act the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with the appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income Tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arisin....
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....e decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Comp. Ltd. (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Co. Ltd. (supra) contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held :- "4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Ac....
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....ltancy or interior decoration or advertising or such other profession as is notified by the Board. for the "purposes of section 44AA or of this section; (b) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9; [(ba)] "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;] c) where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such sum, such crediting shall be deemed to be credit of such sum to the account of the payee and the provisions of this section shall apply accordingly." 17. The bench has sought the response to the amended provision, to that, the learned AR did not oppose and submitted that this issue is covered by the amended provision introduced in the Act. 18. Since the issue was decided by the Commissioner on the basis of the judgment pertaining to the period prior to the amendment of the explanation to section 194J, therefore the judgments relied were not applicable and the applicable provision was the amende....
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....evenues from software products. In this regard, we find that the Bangalore Bench of the Tribunal in the case of M/s. TDPLM Software Solutions Ltd. v. DCIT, ITA No. 1303/Bang/2012, by order dated 28.11.2013 with regard to this comparable has held as follows:- "11.0 Infosys Technologies Ltd. 11.1 This was a comparable selected by the TPO. Before the TPO, the assessee objected to the inclusion of the company in the set of comparables, on the grounds of turnover and brand attributable profit margin. The TPO, however, rejected these objections raised by the assessee on the grounds that turnover and brand aspects were not materially relevant in the software development segment. 11.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee in the case on hand. The learned Authorised Representative drew our attention to various parts of the Annual Report of this company to submit that this company commands substantial brand value, owns intellectual property rights and is a market leader in software development activities, whereas the assessee is merely a software service provider operating its business in Indi....
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....see and hence is not comparable and the finding rendered in the case of Trilogy E- Business Software India Pvt. Ltd. (supra) for Assessment Year 2007- 08 is applicable to this year also. We are inclined to concur with the argument put forth by the assessee that Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. It is ordered accordingly." The decision rendered as aforesaid pertains to A.Y. 2008- 09. It was affirmed by the learned counsel for the Assessee that the facts and circumstances in the present year also remains identical to the facts and circumstances as it prevailed in AY 08-09 as far as this comparable company is concerned. Respectfully following the decision of the Tribunal referred to above, we hold that Infosys Ltd. be excluded from the list of comparable companies." 26.3........ IT(T.P)A No. 1009/Bang/2014 "26.4 Tata Elxsi Ltd.:- As far as this company....
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....ollowing hybrid business model comprising of royalty income as well as regular software services income, for which revenue break-up is not available. He finally submitted that this was a good reason to exclude this company also from the list of comparables. 20. On the other hand, the learned DR supported the order of the lower authorities regarding the inclusion of Tata Elxsi and Flextronics Software Systems Ltd., in the list of comparables. He reiterated the contents of para 14.2.25 of the TPO's order. He also read out the following portion from the TPO's order : "Thus as stated above by the company, the following facts emerge : 1. The company's software development and services segment constitutes three sub-segments i) product design services; ii) engineering design services and iii) visual computing labs. 2. The product design services sub-segment is into embedded software development. Thus this segment is into software development services. 3. The contribution of the embedded services segment is to the tune of Rs. 230 crores in the total segment revenue of Rs. 263 crores. Even if we consider the other two subsegments pertain to IT enabled se....
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....provider, such as is the assessee in the case on hand, for identical reasons we direct the TPO to exclude aforesaid two companies from the list of comparables. It is ordered accordingly. The ld Department Representative relies upon the order of TPO and submits that the Infosys should not be excluded from the list of comparable. 22. We have heard the rival contentions of the parties and perused the record. In our view the exclusion of Infosys has been dealt by the coordinate bench, the coordinate bench after the detailed examination found that the Infosys is not comparable with the companies referred in the judgement. As the profile of the assessee is similar to that of the assessee referred in the judgement, therefore in our view the Infosys is required to be excluded and has been excluded by the Commissioner at the appellate stage. Therefore we have no hesitation to direct the exclusion of Infosys in the list of comparable. We found that the order of the ld CIT was in accordance with law and in conformity with the judgement passed by the coordinate bench. LGS Global Ltd. : 23. With respect to LGS Global Ltd., the following ground was raised by the Revenue. "On the facts....
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....e of the assessee's comparable viz.. LGS Global satisfies the TPO's export earning filter. It was stated that the assessee follows a mercantile system of accounting and sale proceeds were realized in the next year. But for accounting purpose, the export revenue was definitely more than 75% .. The TPO is directed to look into this matter and take rectificatory action on his/her satisfaction." 27. We have heard the rival contentions of parties and have gone through the order passed by the learned CIT(A). It is contended that the learned CIT(A) instead of deciding the issue of exclusion of LGS Global Ltd., has remitted back the issue to the file of the TPO for fresh adjudication. In our view, the learned CIT(A) under the Income-tax Act is required to decide issue at his own level and should not have remitted matter back to the file of the TPO. 28. In the light of above, this issue is sent back to the file of the CIT(A) to decide afresh on the basis of material available with him in accordance with law. IT(TP)A No. 55/Bang/2015 (Assessee appeal) 29. At the outset, the learned AR has brought to our notice the order passed by the DCIT Circle-6(1)(1), Bangalore dated 31....