ITA No. 6527/Del/2013
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `D' NEW DELHI
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
&
SHRI C.M. GARG, JUDICIAL MEMBER
I.T.A .No.-6527/Del/2013
(ASSESSMENT YEAR-2004-05)
ITO, vs Kedia Infotech Ltd.,
Co. Ward 5(2), 312, G.K. House, 187-A,
New Delhi. Sant Nagar, East of Kailash,
New Delhi.
AABCG2072L
Appellant by Sh. Atiq Ahmad, Sr. DR
Respondent by Sh. Prasant Khandelwal, CA
Date of Hearing 20.08.2015
Date of Pronouncement 28.8.2015
ORDER
PER C.M. GARG, J.M.
This appeal by the Revenue has been preferred against the
order of the CIT(A)-VIII, New Delhi dated 24.05.2013 in Appeal No.
539/2011-12 for A.Y. 2004-05.
2. The grounds raised by the Revenue read as under:
1. "Whether on the facts and circumstances of the case
and in law, the ld. CIT(A) has erred in deleting the
addition of Rs. 28,06,409/- made by the AO on
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account of disallowance of Licensing/registration fee
& ISO registration fees being of capital in nature?
2. That the order of the ld. CIT(A) is erroneous and is not
tenable on facts and in law."
3. We have heard arguments of both the sides and carefully
perused the relevant material placed on record, inter-alia,
assessment order, order of the CIT(A) and ratio of the
judgments/orders relied by both the sides. The ld. DR submitted
that the AO was correct in holding that the expenditure incurred on
account of licensing/registration fee and ISO registration fees is in
the nature of an expenditure which is of enduring benefit to the
assessee. The ld. DR vehemently submitted that CIT(A) granted
relief without any basis. Hence, impugned order may kindly be set
aside by restoring that of the AO.
4. The ld. Assessee's Representative (AR) replied that the AO
wrongly held that the expenses brought benefit enduring in nature
and was not justified in treating the same as capital in nature. The
AR further submitted that the CIT(A) rightly held that these
expenses were recurring in nature which were continuously
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incurred during preceding and subsequent years, hence, the same
are allowable as per rule of consistency.
5. On careful consideration of above rival submissions of both
the sides, we note that the assessee submitted written contentions
before CIT(A) challenging the conclusion of the AO which reads as
follows:
"Written submission
1. That tax Audit report of the company is enclosed
herewith.
In continuance to our earlier reply we submit as under:
2. That development centres are backbone of Kedia
Infotech Limited for servicing and promoting E-Tran
Digicash holders members. These centre provide
independent training and backup and delivering specific
services to members all over the country for which they
get development license fees. His role is to collect
2300/-per application form customer for which he get 3%
from amount collected in his territory as development
license fee. The details calculation is enclosed as per
annexure.
3. That tabular format of expenses incurred year wise is as
under:
Name 31.03.2003 31.03.2004 31.03.2005 31.03.2006
ISO 9001 10000 85000 21980 9367
Registration
License & 561347 2721409 760179 65100
Registration fee
That the license and registration is incurred every year
and our case was also scrutinized during assessment
year 2006-07 also and no addition was made during the
year. Copy of assessment order and balance sheet is
enclosed for your verification.
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That in our case we have incurred expenditure not for
acquiring any right to operate services etc. but are the
expenses paid to development centers providing
localized Global E-Commerce Services to Card Holder
and no new assets have been created of an enduring
nature but expenses have been incurred for maintaining
the business of the company. The name which the
parties may give to the transaction and the
characterization of the expense by them are of little
consequence. The assessee has not acquired any
ownership right also. Under the circumstances
expenditure incurred by the assessee could not be said
to be of capital in nature. Whereas with regard to ISO
9001 registration fee these are not one time but are to be
paid on regularly basis which can be verified from the
proceeding as well as succeeding years also as under:
31.03.2003 31.03.2004 31.03.2005 31.03.2006
10000/- 85000/- 21980/- 9367/-
6. From operating and concluding part of the impugned order of
the first appellate authority we note that the relief was granted with
following conclusion:
"My findings:
I have perused the written submission, grounds of appeal
and facts of the case, I discussed the matter with the AR
very carefully. The AO cannot understand the business
activity of the appellant properly. The appellant was
making cards, like credit cards for its customers at different
places in major cities of India by putting plant and
machinery and getting data from the customers into this
card, so that customers will come for purchase again and
again, they will be given certain discounts on sales to have
a better business relationship. The example of such cards
given by guardian pharmacy etc. So this appellant
company was doing this business of giving card to
customers of different business entities. Therefore, its
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expenditure of Rs. 28,06,409/- is nothing but expenditure of
plant registration and licensing and registration fee for
different places all over India. These expenditures are
allowed to the appellant company in other years except this
year. Hence, considering the Rule of consistency and
treating this as revenue expenditure for improving business
of the companies themselves, it is nothing but revenue
expenditure. The AO should enquire these facts at the
assessment stage and try to understand what the business
is going today with such plant and machinery, such
manpower deployment and resources so that unnecessary
infructuous addition can be avoided. He should discuss the
matter with his colleagues and supervisor officers in case
he has any doubt. Hence the addition of Rs. 28,06,409/- is
deleted."
7. In the light of above, we clearly note that the CIT(A) granted
relief by holding that the AO could not understand the business
activity of the assessee properly. He further observed that the
assessee company was doing business of giving card to customers
of different business entities and impugned expenditure incurred
towards plant registration and licensing and registration fee for
different places all over India. He also observed that these expenses
were allowed to the assessee in other preceding and succeeding
assessment years except A.Y. 2004-05 which is the period under
consideration. It is not the case of the AO that these expenses
incurred by the assessee brought any asset or benefit of enduring
nature for the assessee and these are one time expenditure, capital
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in nature, hence, the view taken by the CIT(A) is correct and
sustainable and we approve the same. Accordingly, we are unable
to see any valid reason to interfere with the impugned order and
thus, both grounds of the Revenue being devoid of merits are
dismissed.
8. In the result, the appeal filed by the Revenue is dismissed.
The order is pronounced in the open court on 28.8.2015.
Sd/- Sd/-
(N.K. SAINI) (C.M. GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 28th August, 2015
"GS"
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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