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TMI Blog2012 (12) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... Court rendered in the case of Exide Industries Ltd. and Another Vs UOI and Others as reported in 292 IT 470 (Cal.), disallowance of leave encashment is not justified. He submitted that in the first case, it was held by the Hon'ble Apex Court that leave encashment is not a contingent liability if the provision is made on some scientific basis. He also submitted that in the second case, Hon'ble Calcutta High court has duly considered the provisions of clause (f) of Section 43B and it was held that the amendment as per which this clause (f) was inserted by the Finance Act 2001 w.e.f. 01.04.2002 is held to be as arbitrary by Hon'ble Calcutta High Court and, therefore, the same was struck down by Hon'ble Calcutta High court being arbitrary, unconscionable and dehorse the Hon'ble Supreme Court decision. He submitted that in view of this judgement of Hon'ble Calcutta High Court, disallowance made by the A.O. is not justified. Ld. D.R. supported the orders of authorities below. 3.2 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgement of Hon'ble Calcutta High Court rendered in the case of Exide Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Hero Cycle holding that disallowance could only be made, if there was actual nexus between tax free income and expenditure. A.O. did not accept appellant's contention that no expenses were incurred in relation to earning of tax free income on the ground that appellant had not maintained separate details of expenses attributable to exempt income. A.O, held that provisions of section 14A(2) were attracted and made disallowance of Rs. 4,61,160/- U/S.14A read with Rule 8D." 4.2 Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) who has confirmed the same and now, the assessee is in further appeal before us. It was submitted by the Ld. A.R. that the similar issue was considered and decided by the tribunal in assessee's own case for the assessment year 2006-07 in I.T.A.No. 3254/Ahd/2009 dated 31.05.2012, copy of which is available on pages 9-20 of the paper book and our attention was drawn to para 4.2.3 of this tribunal order wherein, it was held that no disallowance is justified out of interest expenditure and out of administrative expenses of Rs. 1.02 lacs, disallowance of Rs. 50,000/- was confirmed in that year. He submitted that in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ends of justice. We hold accordingly. The A.O. is directed to restrict the disallowance u/s 14A to Rs. 1 lac. This ground is partly allowed. 5. Ground No.4 is as under: "4. The Hon'ble CIT (A) has erred in confirming the disallowance of Rs. 20,47,000/-being the software license fees claimed as revenue expenditure & treating the same as of capital in nature. During the year the company has paid Rs. 51.18 Lacs to GTL Ltd. for Oracle Product towards license fees for user of Finance, Purchasing, Order Management and Manufacturing users. The Software license fees paid is of revenue in nature. It be held so now and the AO be directed accordingly." 5.1 Brief facts till the assessment stage are noted by Ld. CIT(A) in para 5 of his order which is reproduced below: "5. Next ground of appeal is regarding disallowance of software license fees of Rs. 20,47,000/-. Appellant had paid software licenses fees of Rs. 51,18,588/- for Oracle product licenses for finance, purchase order, management and manufacturing. A.O. observed that lumpsum payment for purchase of Oracle licenses, made for the first time could not be in the nature of revenue expenditure and even though the benefit derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture and if it is only for increasing the organizational efficiency, the same cannot be treated as forming part of the profit making apparatus of the assessee company and should be treated as revenue expenditure. In the present case, we have already noted that the assessee is in the business of manufacturing of mining machinery and the software in question is for the purpose of finance, purchase order management and manufacturing. In our considered opinion, this software will help the assessee in increasing the efficiency but the same cannot be treated as forming part of profit making apparatus of the assessee company and, therefore, the expenditure on this software cannot be treated as capital expenditure. Out of this total expenditure of Rs. 62,30,245/- claimed by the assessee as revenue expenditure, the A.O. has already allowed deduction of Rs. 51.18 lacs being depreciation @ 60% and disallowance is amounting to Rs. 20.47 lacs being the 40% of such expenditure and since we are holding that it is not a capital expenditure, we delete this disallowance. This ground is allowed. 6. Ground No.5 is as under: "5. The Hon'ble CIT (A) has erred in confirming the disallowance of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified. In support of this contention, reliance was placed on the tribunal decision rendered in the case of Satender Jhujhunwala in I.T.A.No. 1088/Cal/2009 dated 11.11.2011 and also on another tribunal decision rendered in the case of Utility Powertech Ltd. Vs ACIT in I.T.A.No. 2561/Mum/2009 dated 19.04.2010. He also placed reliance on the tribunal decision rendered in the case of Om Satya Axim pvt. Ltd. vs ITO in I.T.A.No. 1335/Ahd/2010 dated 13.05.2011. He submitted a copy of all these three Tribunal orders which are available in the paper book. Ld. D.R. supported the orders of authorities below. 6.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the decision cited by the Ld. A.R. In the case of Om Satya Exim Pvt. Ltd. (supra), it was held by the Tribunal that if bills for reimbursement of expenditure have been raised by the commission agent separately, TDS was not required to be deducted for reimbursement and as a consequence, section 40(a)(ia) is not applicable with regard to such reimbursement. In the present case, such details are not available before us as to whether the amount of reimburs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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