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2014 (2) TMI 173 - AT - Income TaxDeletion made of capitalization of capital expenditure u/s 37(1) of the Act Software expenses Held that - The decision in CIT - I Versus ACL Wireless Ltd. 2013 (12) TMI 1160 - DELHI HIGH COURT followed - There has to be recurring expenditure which has to be incurred in the said business to ensure sale of the software,for removal of obstructions, restrictions or disabilities on the sale - The determination should be based upon consideration of facts and circumstances and by applying principles of commercial trading and business expediency Decided against Revenue. Deletion made of capitalization of license fee Fees paid as Royalty Held that - The decision in Income Tax Officer Versus M/s ACL Wireless Wireless Limited 2014 (1) TMI 1305 - ITAT DELHI followed - the expenditure in question was incurred as a matter of routine, for the business and commercial expediency of the assessee s business Decided against Revenue. Deletion made u/s 40(a)(ia) of the Act TDS not deducted Held that - The assessee claimed that he did deduct the tax at source and deposited the same with the Government of India before the due date for filing of the return - the claim of the assessee needs to be factually examined - order set aside and the matter remitted back to the AO - Decided in favour of Revenue. Addition made for Non-deduction of TDS Application of Section 9 of the Act - Held that - The decision in CIT Vs. Angelique International Ltd. - 2013 (10) TMI 17 - DELHI HIGH COURT followed - payments in the form of a commission or discount to the foreign party were not chargeable to tax in India under section 9(1)(vii) of the Act - in the relevant accounting year tax did not have to be deducted - The deletion of disallowance under section 40(a)(i) was justified Decided against Revenue.
Issues:
1. Whether the deletion of addition of software expenses as capital expenditure is justified. 2. Whether the deletion of addition of license fee paid as intangible asset is justified. 3. Whether the deletion of disallowance under section 40(a)(ia) is justified. 4. Whether the deletion of addition of provision for commission and commission paid to foreign parties is justified. Analysis: 1. The first issue pertains to the deletion of the addition of software expenses as capital expenditure. The ITAT found this issue to be covered in favor of the assessee by previous decisions. It was noted that the nature of the expenses was not disallowed under section 37(1) and the expenditure aimed at bringing an enduring benefit to the business. The ITAT upheld the order of the CIT(A) based on previous judgments, rejecting the Revenue's appeal on this ground. 2. The second issue involves the deletion of the addition of license fee paid as an intangible asset. The ITAT ruled in favor of the assessee based on the fact that the license fee was paid for one year only, making it ineligible to be treated as capital expenditure. Following the decision in the assessee's own case for a previous year, the ITAT upheld the CIT(A)'s order and rejected the Revenue's appeal on this ground. 3. The third issue concerns the deletion of disallowance under section 40(a)(ia). The ITAT directed the matter back to the Assessing Officer for factual examination of the assessee's claim that tax was deducted and paid before the due date for filing the return. The ITAT set aside the orders of the authorities below on this point and instructed the Assessing Officer to determine whether disallowance should be made under section 40(a)(ia) based on the factual examination. 4. The fourth issue revolves around the deletion of additions related to provision for commission and commission paid to foreign parties. The ITAT upheld the CIT(A)'s decision based on a previous judgment of the Hon'ble Jurisdictional High Court, which clarified that payments in the form of commission to foreign parties were not taxable in India under section 9(1)(vii) of the Income Tax Act. The ITAT applied the ratio of the High Court decision to the assessee's case, rejecting the Revenue's appeal on these grounds. In conclusion, the ITAT partly allowed the Revenue's appeal, upholding certain deletions of additions while directing further examination on the issue of disallowance under section 40(a)(ia). The decisions were based on previous judgments and legal interpretations, ensuring a thorough analysis of each issue involved in the appeal.
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