TaxTMI 
TaxTMI 
2022 (12) TMI 1611
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.... the case and material on record. 2. Notwithstanding the above ground of appeal, on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the Disallowance on account of Purchase Shown of Rs. 2,76,75,720/- as the nature of the work done by the supplier for the Assessee does not fall under the exception clause of section 194C and liable for disallowance u/s 40(a)(ia). 3. On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the Disallowance on account of Purchase Shown of Rs. 2,76,75,720/- specially when Assessee failed to substantiate before the AO 'as well as before the Ld. CIT (A) whether some modification to the product supplied were made to meet the 'Requirement or Specification' of the Assessee being a condition precedent for exception clause of section 194C of the Act to be operative. 4. On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the Disallowance on account of data processing charges of Rs. 1,81,25,931/-. As the DOEACC Society (NIELIT) itself confirmed that no work ....
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....issued the notice u/s 133(6) to M/s. Mindtree Exports Pvt. Ltd but the same was returned back with a postal remark "left". The said fact was brought to knowledge of the Assessee who through its submission dated 11.01.2016 provided another address of M/s. Mindtree Export Pvt. Ltd. On that particular address also further notice u/s 133(6) of the Act was sent on 08.02.2016 by fixing the case for hearing on 15.02.2016. But the confirmation from above party was received only on 29.02.2013 i.e. after the date fixed on 15.02.2016. Therefore, the ld. AO doubted the confirmation. 5.5 The ld. AO also observed on perusal of the bills issued by M/s. Vakrangee Software Ltd showed discrepancies of the transactions related to printing supplementary voter list book of 9 Assembly Constituencies of Rajasthan, as transactions relates with sale and purchase of printed books of voter list. 5.6 The ld. AO also issued 133(6) to Election Commission on dated 04.03.2016. In response to the said notice, Election Commission vide its reply dated 16.03.2016 mentioned that commission has not permitted any private person/ publisher/ agency to compile and then publish printed electoral rolls in the form of p....
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....angee Software Ltd is bogus. Hence, the amount of Rs. 2,76,75,720/- is added back to the taxable income of the Assessee Company as bogus purchase. 6. The Assessee being aggrieved preferred first appeal before the Ld. Commissioner, who during the appellate proceedings, with regard to addition of Rs. 27675720/- qua expenses incurred for purchase of printing Voter lists, asked the Assessee to explain the following points:- a) As to why the appellant company had received said contract? b) For what purposes the printed electoral rolls are used? c) Why the contract was sub-contracted to M/s Vakrangee Limited? 6.1 The Assessee in response to the query raised by the ld commissioner, replied as under:- "The AR of the appellant company vide written submissions dated 23/10/2017 stated that the appellant company was a subsidiary of M/s Virgo Softech Limited (formerly known as M/s Virgo Micro Services Pvt. Ltd.). The holding company, M/s Virgo Softech Limited was working under several contracts regarding printing of electoral rolls since 1996 and the management had expertise in data entry, generation, printing, distribution and database manage....
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....he said transaction was held as bogus transaction based on the facts of the case and material on record by the AO. Further the ld. Commissioner has erred in law and facts in deleting the disallowance on account of purchase shown of Rs. 2,76,75,720/- as the nature of work done by the supplier for the Assessee, it does not fall under the exception clause u/s 194C and thus liable for disallowance u/s 40(a)(ia) of the Act. Further, the ld. Commissioner erred in law and facts in deleting the said addition, specifically when the Assessee failed to substantiate before the ld. AO as well as before the Commissioner whether same modification to the product supplied were made to meet the "requirement or specification" of the Assessee being a condition precedent for exception clause of section 194C of the Act to be operative. 8. On the contrary, the ld. AR relied upon the impugned order specifically the determination made by the ld. Commissioner on the issue under consideration. With regard to non applicability of the provision of section 194C, the Assessee relied upon the order passed by the Hon'ble Mumbai High Court in case of BDA Ltd ITO (2006) 281 ITR 0099 (Mum HC) and in the c....
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....yment. The Ld. Commissioner also taken into consideration the peculiar facts to the effect that the Assessing Officer has duly accepted the sales made to M/s. Mind Tree Exports Pvt. Ltd. and thus, genuineness of the business cannot be doubted. 9.2 The ld. Commissioner also held that in case the purchase has to be doubted, then the sale is also not possible and therefore, deserves to be reduced from the assessed income of the Assessee. With regard to the non-confirmation of publishing/order for printing of voter list by the Election Commission, the ld. Commissioner observed that M/s. Mind Tree Export Pvt. Ltd. vide submission dated 29.02.2016 filed in the office of the Assessing Officer has already confirmed the transaction. Since the data was available for public display, though not permitted by the election Commission, it was not impossible to publish the same. Further, since the Assessee has duly furnished confirmations regarding the transaction of sales and purchase and both the buyers and sellers have responded to the notices u/s. 133(6) of the Act, the identity of the supplier and customer and genuineness of the transaction is duly established. 9.3 The ld. Commissioner a....
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....g company) on 23.02.2016. In response, the said company M/s. Virgo Softech Ltd. filed its reply along with copy of work order given by DOEACC SOCIETY (NIELIT) to Virgo Softech Ltd. which was received by the ld AO on 03.03.2016. 10.3 In order to further verify, the ld. AO also issued notice u/s 133(6) of the Act to the Director in charge of DOEACC SOCIETY (NIELIT) on 04.03.2016 through e-mail. In response to which the reply was filed on dated 11.03.2016. On perusal of the reply, it was observed by the AO that in point no. 01 it is clearly mentioned that under no circumstances, the work can be outsourced to any other associate/ franchise/ third party. 10.4 The ld. AO ultimately held that it is rather possible that no transaction took place during the year under consideration. 10.5 The Assessee company was asked to provide the copy of services tax return. On perusal of the bills issued by the Assessee company it was also noticed by the ld. AO that service tax @12.36 is included the billing amount, further till the passing of the assessment order no details or documents have been provided by the Assessee company therefore receipt of Rs. 2,08,24,432/- was treated as "incom....
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....will not change the nature of revenue generated from the said transactions. Thus, the revenue of Rs. 2,08,24,432/- incurred by the appellant is assessed as business income only. 7.5 In respect of the disallowance of NPR expenses it is observed that the appellant has duly furnished the details during the course of assessment proceedings and the claim of the appellant that for earning revenue of Rs. 2,08,24,432/- incurring of expenses of Rs. 1,81,25,931/- on data processing was inevitable and thus, without incurring said expenses earning of revenue was impossible. Further, the said details were again furnished by the appellant during the appellate proceedings. 7.6 In view of the stated circumstances this ground of appeal is allowed and the disallowance of expenses of Rs. 1,81,25,931/- made by the AO is deleted. Appellant -succeeds in this ground of appeal. 10.8 The revenue department has also challenged this addition under consideration before us, mainly on the ground that when the DOEACC SOCIETY itself has confirmed that no work could be outsourced, so there is no question of transaction have been taken place during the year under considerati....
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....data processing was inevitable and thus, without incurring said expenses earning of revenue was impossible. Further, the said details were again furnished by the appellant during the appellate proceedings. In view of the stated circumstances the disallowance of expenses of Rs. 1,81,25,931/- made by the AO is deleted. We have given thoughtful consideration to the determination made by the Ld. Commissioner and observe that the Ld. Commissioner thoroughly considered all factual aspects, sub contract and the submission of the Assessee and the impugned order and then only reached to the conclusion. Even otherwise we do not find any reason or material to controvert the findings of the Ld. Commissioner on the issue in hand and thus inclined not to interfere the same. Consequently ground no. 3 also stands dismissed. 12. Ground No. 4 is general in nature, hence, needs no independent adjudication. ITA No. 162/Del/.2018 13. In ITA No. 162/Del/2018 the revenue department has raised following grounds of appeal. 1. "On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and facts in deleting the Disallowance on account of Expe....
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....printing of voter list. The facts and issues involved in this case, are exactly similar with regard to facts and issues as involved in the case pertain to Assessment Year 2013-14 i.e. in ITA No. 161/Del/2019 except in variation of amount involved. Hence, in view of the decision on the issue under consideration at para-9 of this order, Grounds no. 1 & 2 stands dismissed. 15. Coming to the Ground no. 3/second issue which relates to depreciation of Rs. 1,67,58,000/- claimed on fixed assets i.e. software purchased by the Assessee from M/s. Virgo Softech, which was disallowed the ld. AO mainly on the ground that a similar disallowance is made in earlier year. Secondly, the fixed assets were not used during the year under consideration. Further in the previous year the ld AO in its order dated 28.03.2016 for Assessment Year 2013-14 has conclusively proved that there were no business activity done by the Assessee in view of the fact that the Assessee has shown amount of Rs. 3,99,00,000/- under the head investment and no bills regarding purchase of fixed assets was submitted by the Assessee. Therefore, depreciation claimed by the Assessee is also disallowed this year. The....
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....he software was furnished before the AO and the transfer of software was confirmed by the seller, M/s Virgo Softech Limited u/s 133(6} of the Act. Further, the fact of sale of software by M/s Virgo Softech Limited is also evident from its audited financials for A.Y. 2013-14. In view of the above observation and the fact that the transaction of purchase of software has been accepted in earlier year and the claim of depreciation has been allowed, the disallowance of depreciation on the said basis cannot be upheld. 7.2 The AO has stated that since the fixed assets held by the Assessee company were not used in the year under consideration and there was no revenue using the same no depreciation could be allowed on the same. 7.3 In this regard the AR of the appellant company stated that the Fixed Assets being software were put to use in the earlier year itself and the appellant company had also derived revenue from the same. However, due to uncertainties of business, no revenue could be generated using the said software during the year under consideration. Further, in respect of the claim of depreciation, the AR stated that the depreciation is claimed as per th....
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..... Answer would be "No". 15.3 We observe that the Hon'ble Delhi High Court in the case of National Thermal Power Corpn Ltd Vs. CIT (2013) 357 ITR 0253 (Delhi), allowed the depreciation on the "capital construction equipment" kept ready for use in that particular year, but was used actually in the subsequent year. 15.4 The Hon'ble Delhi High court in the case of CIT vs. Yamaha Motor India Pvt. Ltd. (2010) 328 ITR 0297 also held "as long as the machinery is available for use, though not actually used, it falls within the expression "used for the purposes of the business" and the Assessee can claim the benefit of depreciation." The Hon'ble High Court also distinguished the discarded and the existing machinery. 15.5 The ld. Commissioner by considering the claim made by the Assessee and observation made by the ld. AO on the issue under consideration, observed that the Assessee Company has purchased software to use in FY 2012-13 itself and revenue was generated by utilizing the same, the depreciation was rightfully allowed in the said order. Thus, in the subsequent year i.e. the year under consideration, the inability of the appellant company to generate revenue, using the sa....