9911796707
TMI Blog2012 (12) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... led its return for Assessment Year 2005-06 on 29.10.2005 declaring loss of Rs.82,28,850. The assessee's case was taken up for scrutiny by issue of notice under section 143(2) of the Income Tax Act, 1961 (herein after referred to as 'the Act') on 11.8.2006. The assessment was completed by an order under section 143(3) of the Act on 24.12.2008 determining the income of the assessee at Rs.9,08,48,203 which included the following additions /disallowance : a) Donation Rs.5,61,576 b) Software Expenses Rs.52,49,862 c) Foreign Exchange Loss Rs.26,02,245 d) Legal and professional charges Rs.3,94,061 e) Transfer Pricing Adjustment Rs.9,06,67,366 2.2 Aggrieved by the order of assessment for Assessment Year 2005-06 dt.24.12.2008, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted that the grounds of appeal at S.No.2 and 4 in respect of the disallowances of (i) donation amounting to Rs.5,61,578 and (ii) legal and professional charges amounting to Rs.3,94,061 are not being pressed in this appeal. In this view of the matter, these grounds are accordingly dismissed as not pressed. 6.1 Only ground raised at S.No.3 survives for consideration. In this ground, the assessee challenges the order of the learned CIT(Appeals) confirming the action of the Assessing Officer in treating software expenses of Rs.52,49,862 as capital in nature. The learned counsel for the assessee supporting the grounds raised submitted that the breakup of software expenses were at Annexure 1 to the assessee's written submissions d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of Amway India Enterprises Vs. DCIT reported in 111 ITD 112 (SB) (Del). 6.2 Per contra, the learned Departmental Representative supported the orders of the authorities below. 6.3 We have heard both parties and carefully perused the material on record. On perusal of the orders of the authorities below, we find that no proper examination of the issue has been carried out to establish whether the software expenses claimed were revenue in nature as claimed by the assessee or capital expenditure as held by the Assessing Officer and confirmed by the learned CIT(Appeals). At para 7.3 of the order of assessment the Assessing Officer noted that "the assessee company could not substantiate its claim for the same being revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count should be decided from the practical and business view point and in accordance with sound accountancy principles. The Tribunal further observed that while dealing with this complex issue, these tests generally applied to decide the nature of expenditure as to whether it is capital or revenue, are the fact of enduring benefit, ownership test and functional test. These tests when applied would decide whether the expenditure incurred on software is of capital or revenue in nature. These observations on the tests to be applied have been dealt with in detail at paras 43 to 58 thereof. The conclusions in the Tribunal order at paras 59 and 60 are summarized as under : i) When the assessee acquires a computer software or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amway India Enterprises (supra) is similar to that of the present case of the assessee. We, therefore, respectfully following the decision in the case of Amway India Enterprises (supra), hold that since the examination of whether software expenditure incurred is capital or revenue in nature would require to be done in respect of each and every software independently having regard to the criteria / principles laid down in the cited case, the matter requires to be restored back to the file of the Assessing Officer for carrying out the same. The Assessing Officer is directed to examine the question of whether expenditure on computer software is capital or revenue in the light of the criteria / facts laid down in the case of Amway India Enterp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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