TMI Blog2011 (2) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that it is giving enduring benefit. Further, the enduring benefit is not the only test for determining the nature of the expenditure. As held by the Hon ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd.[ 1997 (4) TMI 5 - SUPREME COURT] if the expenditure is so related to the carrying on of or the conduct of the business, it has to be treated as revenue expenditure. Undoubtedly, the assessee cannot carry on the business in the leased premises without making improvement to the interiors and electrical works, cabling and networking etc. In view of the same, we hold that the expenditure is to be allowed u/s 37 as revenue expenditure. Thus, ground No.2 of the assessee s appeal is allowed. Ground No.3 which is an alternative ground to ground No.2 is rejected. Depreciation on the Automated Teller Machines (ATMs) and Encoders - HELD THAT:- We find that this issue is more or less covered by the decision of the Special Bench in the case of Datacraft India Ltd.[ 2010 (7) TMI 642 - ITAT, MUMBAI] wherein it has been held that as long as the functions of the computer are performed along with other functions and the other functions are depend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortage of stock and as to how there is shortage of stock. Even before us, the assessee has not been able to produce any evidence as to the reasons for the shortage of stock. In view of the same, we are not inclined to accept the contention of the assessee and therefore, we confirm the addition confirmed by the CIT(A). This ground of appeal is accordingly rejected. Change in revenue recognition policy - change in the nature of contract from the contracts entered into in earlier years and the change in method of execution of the contract - HELD THAT:- The present system being followed by the assessee on recognizing the revenue only after the ATM machines have been properly installed at the premises, in our view, is the correct method of recognizing the revenue as it would be in accordance with the matching principle and the correct income of the assessee can be computed. The learned counsel for the assessee has submitted that the assessee has followed this method after the relevant assessment year and as long as the AO is able to compute the correct income of the assessee from the method of accounting followed by the assessee, the assessee is entitled to change the method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) has erred in not giving appropriate directions to the assessing officer that the amount of ₹ 136,700,515 should be made part of the opening stock of the immediately succeeding financial year as the same has been considered to be part of the closing stock in the assessment of the subject financial year, by not allowing the deduction for loss of stock. 7. The learned CIT(A) has erred in law and on facts in upholding the disallowance by the assessing officer of miscellaneous expenses incurred amounting to ₹ 4,023,567. 8. The learned CIT(A) has erred in law on facts in rejecting the claim of the appellant in connection with the change in revenue recognition policy and upholding the action of the assessing officer of assessing the amount of ₹ 115,738,979 as income for the subject financial year. 3. At the time of hearing, Shri Sriram Seshadri, learned counsel for the assessee, submitted that due to smallness of the amount he does not wish to press ground No.7 and it is accordingly rejected as not pressed. 4. As regards the grounds No.2 3, brief facts of the case are as under: The assessee is a company engaged in the business of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciples of commercial expediency. The question must be viewed in the particular context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on, or conduct of the business, that it may be regarded as an integral part of the profit making and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure. Thus, the learned counsel for the assessee submitted that the expenditure incurred by the assessee to make the leased premises fit for carrying on the business is revenue expenditure and allowable as such. Shri G.V.Gopala Rao, the learned Departmental Representative, on the other hand, supported the orders of the authorities below and also placed reliance upon the decisions relied on by the AO. 6. Having heard both the parties, we find that the expenditure is mainly on improvement of interiors and electrical works, modeling and networking of computers, other miscellaneous works, work station etc. These may give some benefit to the assessee but the premises being leased premises and that too for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame and giving the output. He submitted that ATM is a computer terminal activated by a magnetically encoded debit card that allows you to make deposits to and withdrawal from your account, pay bills, transfers money between your accounts at any time. It also allows you to access your financial expenditure account and to transfer from on account to another or to check your account balances. Thus ATM is a computer that let us access your financial institution accounts to withdraw or deposit money, transfer funds from one account to another or check your account balances. He submitted that a computer system is the synthesis of hardware and software and thus even an ATM is a synthesis of a hardware and software. He submitted that a typical computer system employs a computer that uses programmable devices to store, retrieve and process data and the Personal computer or PC exemplifies one example of a computer system. Likewise ATM is an example of another computer system. He submitted that inside every ATM there is a computer which is not very different from any other personal computer but the basic function of connecting you to the bank ATM network and accessing your account informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh and thereafter dispenses the cash and gives a printed receipt. Thus as can be seen, the computer is an intergral part of the ATM machine and on the basis of the information processed by the computer in the ATM machine only, the mechanical functions of the dispensation of cash or deposit of cash is done. Its functions are not limited to the location at which it is placed but it also records the increase or decrease of the balance in the assessee s account in the bank consequent to such deposit or withdrawal and all this is done instantly. Thus it involves the use of internet facilities also to discharge the above functions. However, as regards the encoders are concerned, we find that they are used for encoding the cheques but whether any processing activity is involved is not clear from the orders of the authorities below. Therefore, we direct the AO to consider if the Encoders also involve any processing activity such as the ATM machine as mentioned above and if it is found to be involving such activity, the AO is directed to allow depreciation at 60% otherwise at 25%. This ground is accordingly partly allowed. In view of the same, we are inclined to hold that the ATM machines a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2003-04 after verification of the claim of the assessee that the same has been offered to tax in assessment year 2004-05. Aggrieved, the assessee is in second appeal before us. 12.At the time of hearing, the learned counsel for the assessee submitted that though the assessee is aggrieved by the confirmation of the addition of ₹ 5,60,51,491/- the assessee has erroneously mentioned the entire addition of ₹ 13,67,00,515/- made by the AO in the grounds of appeal. Therefore, the correct figure of ₹ 5,60,51,491/- is taken. Learned counsel for the assessee reiterated the submissions made before the authorities below while the learned Departmental Representative supported the orders of the authorities below. 13. Having heard both the parties and having considered the rival contentions and the material on record, we find that the assessee has claimed an exorbitant amount of ₹ 13 crores and odd as damage in stock or shortage in stock and wrote it off and has by itself offered an amount of ₹ 8,06,49,024/- for the next assessment year. It is the duty of the assessee to prove its claim with evidence but it has not been able to substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, he placed reliance upon the decision of the Hon ble Karnataka High Court in the case of CIT vs. Syndicate Bank (261 ITR 528). He also drew our attention to the purchase order copy for ATM issued by Indian Overseas Bank and also by Punjab National Bank placed at pages 52 to 61 of the paper book and to the relevant clauses at page 53 of the paper book, wherein terms of payment are mentioned as under: 2) Terms of payment: ATM a. On delivery : 20% of Hardware cost b. On transfer of ownership : 60% of Hardware cost c. Balance in one month after transfer of ownership : 20% SITE PREPARATION a. On delivery of materials : 50% of the infrastructure cost b. On completion of site : 50% Thus, he submitted that only 20% of the hardware cost is paid on delivery while 60% is paid on transfer of ownership and 20% after one month of transfer of ownership. He also drew our attention to clause 8 of the said agreement where the transfer of ownership of the property is mentioned to be effective as soon as the equipment is brought to the site of the bank premises, installed there and accepted by the bank after conducting acceptance test. Clause 7 of the said agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen from the said purchase order, we find that the revenue is received by the assessee only after the ATM machines are installed and acceptance test are conducted thereafter. Therefore, the method adopted by the assessee earlier by recognizing the revenue immediately on the dispatch of the ATM machine would not show the correct picture as only 20% of the sale price would have been received at that time and the correct income of the assessee could not have been computed. The present system being followed by the assessee on recognizing the revenue only after the ATM machines have been properly installed at the premises, in our view, is the correct method of recognizing the revenue as it would be in accordance with the matching principle and the correct income of the assessee can be computed. The learned counsel for the assessee has submitted that the assessee has followed this method after the relevant assessment year and as long as the AO is able to compute the correct income of the assessee from the method of accounting followed by the assessee, the assessee is entitled to change the method of accounting from the method of accounting followed by the assessee, as the assessee is e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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