2015 (6) TMI 141 - HC - Income Tax

Software expenses - revenue v/s capital expenditure - ITAT holding software expenses as revenue in nature - Held that - Tribunal notes that the facts and circumstances in the previous assessment year and the assessment year in question are identical. There is absolutely no distinction pointed out by the departmental representative. Rather the departmental representative has conceded that the issue was covered in favour of the assesse. Merely because the revenue effect or the tax amount is found enormous, we are not required to take a contrary stand. There is sanctity to a judicial process and any Commissioner in hierarchy cannot disrespect and disregard the Tribunal s order passed on clear concession from the revenue or department and on facts. No substantial question of law. - Decided against revenue. Disallowance made under section 14A - ITAT deleted the addition - Held that - Question answered by a Division Bench of this Court in the case of Godrej & Boyce Manufacturing Co. Ltd. V/s. DCIT reported in 2010 (8) TMI 77 - BOMBAY HIGH COURT - Decided against revenue

Summary

Issues:
1. Classification of software expenses as revenue or capital expenditure.
2. Disallowance made under section 14A of the Act.

Analysis:
1. The High Court was tasked with determining the legality and validity of the Tribunal's order regarding the classification of software expenses as revenue or capital expenditure. The first issue revolved around whether the ITAT was justified in holding the software expenses as revenue in nature, contrary to the AO's treatment as capital expenditure. The Court observed that if the assessee considered the software as a license and not a capital asset, a partial relief was granted by the CIT (A). The Court noted that the issue was fully covered by the Tribunal's own order for a previous assessment year, and the facts were identical with no distinction pointed out by the departmental representative. The Court expressed surprise at the revenue's appeal under section 260A of the Income Tax Act, emphasizing the importance of respecting concessions made by the revenue on facts. The Court dismissed the appeal, stating that the questions did not raise any substantial question of law.

2. The second issue involved the disallowance made under section 14A of the Act. The Court referred to a Division Bench judgment in the case of Godrej & Boyce Manufacturing Co. Ltd. V/s. DCIT, where the last two questions were answered. The Court concluded that the appeal did not raise any substantial question of law and dismissed it without costs. However, the Court cautioned against repeatedly raising questions already settled against the revenue, warning that such actions would invite heavy costs and adverse remarks against the officers filing such appeals, with costs to be borne personally by them.