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ITO, Co. Ward 5(2), New Delhi. Vs. Kedia Infotech Ltd., 312, G.K. House, 187-A, Sant Nagar, East of Kailash, New Delhi.
August, 31st 2015
                                                       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


                                                                          1
                                                               ITA No. 6527/Del/2013


       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




                                                                                  2
                                                          ITA No. 6527/Del/2013


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.


                                                                             3
                                                       ITA No. 6527/Del/2013


        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

                                                                          4
                                                      ITA No. 6527/Del/2013





     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

                                                                         5
                                                      ITA No. 6527/Del/2013


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




                                                                         6

 
 
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