The A.C.I.T 8(1), Mumbai. (Respondent) ITA NO.1160/MUM/07(A.Y. 200102) ITA NO.54/MUM/2007(A.Y.20022003) ITA NO.4853/MUM/2007(A.Y.200304) The A.C.I.T 8(1), Mumbai. (Appellant) M/s. Financial Technologies (I) Ltd., 1st Floor, Malkani Chambers, Off. Nehru Road, Vile Parle(E), Mumbai 400 099 PAN: AAACW 0292M (Respondent) CO.NO.96/MUM/07(Arising out of ITA No.54/M/07,A.Y.200203) M/s. Financial Technologies (I) Ltd., 1st Floor, Malkani Chambers, Off. Nehru Road, Vile Parle(E), Mumbai 400 099 PAN: AAACW 0292M (Cross Objector) Vs. The A.C.I.T 8(1), Mumbai. (Appellant in Appeal) Assessee by : Shri Chetan Karia Respondent by : Smt. Ashima Gupta ORDER PER N.V.VASUDEVAN, J.M, ITA No.3537/Mum/2005 is an appeal by the assessee against the order dated 22/3/2005 of CIT(A)VIII, Mumbai relating to assessment year 200102. ITA No.54/M/07 is an appeal by the revenue against order dated 30/10/2006 of CIT(A),VIII, Mumbai relating to A.Y 200203. The assessee has filed a Cross Objection i.e. C.O.No.96/Mum/2007 against the very same order of the CIT(A). 2. Ground No.1 & 3 raised by the assessee in ITA No.3537/M/07 and Ground No.6 to 10 raised by the revenue in ITA No.54/M/07 can be conveniently decided together as the arise on the same facts and circumstances. These grounds read as follows: Grounds No.1 of ITA No.3537/M/05: "1.0 The Learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of claim for deduction of Rs.1,09,56,923/ being sales return. 1.1 Without prejudice the Learned Commissioner of Income Tax (Appeals) erred in treating amount of Rs.1,09,56,923/ as part of income and failed to appreciate that the said sum had not accrued as income at all. 1.2 Without prejudice to the above the Learned Commissioner of Income Tax (Appeals) failed to appreciate that the customized software specifically developed for the customer did not have any market value and the value thereof should be taken as Nil." Grounds No.6 to 10 of ITA No.54/M/07: "6. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing deduction of sales return of Rs. 1,09,56,923/. 7. Without prejudice to ground No.6, the CIT(A) erred in allowing deduction of sales return of Rs. 1,09,56,923/ which was not claimed in the return and therefore, the deduction was not be allowed in view of the judgment of Hon'ble Supreme Court in Goetze (India) Vs. CIT, 284 ITR 323(SC). 8. "Without prejudice to grounds No.6 & 7, the CIT(A) erred in observing that the Assessing Officer has disallowed the claim of sales return made by the assessee on the ground that such claim was made by the appellant in the earlier year when the discussion made by the CIT(A) shows that the claim was not made in regular assessment carried out u/s. 143(3) of the Act for A.Y 200203."n 9. "Without prejudice to grounds No.6 to 8, the CIT(A) erred in not giving opportunity to the Assessing Officer and in not taking into account the discussion in the order u/s. 143(3) of Income Tax Act, 1961 for A.Y 200102 dt. 9/2/2004 where the claim of deduction of sales return was rejected by the Assessing officer on merits also. 10." Without prejudice to grounds No.6 to 9, the CIT9A) erred in not taking into account that there was no finding by his predecessor in order dated 22/3/2005 for A.Y 200102 that the claim of deduction of sales return of Rs.1,09,56,923/ be allowed in a.Y 200203." 3. The assessee is a company. It is engaged in the business of development of software and provision of software consultancy. The assessee derives income in the form of licence fee for allowing its customers to use software developed by it. The assessee sold (granted licence for use which is described as sales) software to Sunidhi Consultancy Services Ltd. (SCS). The sale was in respect of client access licence for ODIN front office software product for NSE and BSE ( 40 access licences) for Rs. 25,70,400/. This sale was on 31/12/2000. On 31/3/2001 the assessee also sold software for Rs. 1,02,81,600/. This sale was for allowing SCS Access Licence for Net.net Internet Trading Software Product. Both the aforesaid software products were meant to be used for online share trading. SCS expressed its desire not to use these software and, therefore, these licences were uninstalled. Thus sale to the extent of Rs. 1,09,56,923/ was treated as sales returned by the assessee. SCS had expressed its desire not to use this software in the month of September, 2001 and accordingly sales to extent of