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TMI Blog2013 (9) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt income in terms of Section 14A of the Act. The Assessing Officer, however, was of the opinion that the provisions of Rule 8D of the Income Tax Rules, 1962 (in short "the Rules") read with Section 14A of the Act was attracted and therefore he disallowed a sum of ₹ 1,15,20,158/- being 0.5% of average investments as amount disallowable in terms of Rule 8D of the Rules out of the indirect expenses. The CIT(A) noted that application of Rule 8D of the Rules was contrary to the judgement of the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. vs. DCIT (2010) 328 ITR 81 (Bom.) wherein it was opined that Rule 8D of the Rules was applicable only with effect from assessment year 2008-09. The CIT(A) further noticed that in the course of assessment proceedings, assessee had suo motto offered for disallowance a sum of ₹ 20,96,382/- out of specific finance and accounts personnel salaries and other costs, which were allocable to the earning of exempt dividend income. After negating the action of the Assessing Officer to apply Rule 8D of the Rules following the judgement of the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Co. Ltd. (supra), the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine the disallowance under Section 14A of the Act as the same is applicable from assessment year 2008-09 onwards. Therefore, invoking of Rule 8D of the Rules by the Assessing Officer has been rightly set-aside by the CIT(A). 6. Further, in our view, having regard to the discussion made by the Assessing Officer in para 6.3 of the assessment order, it is found that he was not satisfied with the plea of the assessee that no expenditure has been incurred in relation to earning of the exempt income. The satisfaction so recorded by the Assessing Officer, in our view, deserves to be upheld and no cogent arguments to the contrary have been advanced by the appellant before us. In so far as the amount of disallowance under Section 14A of the Act is concerned in this assessment year, in the absence of Rule 8D of the Rules, the same is required to be calculated on a reasonable basis; and, in the course of assessment proceedings, assessee itself computed such disallowance at ₹ 20,96,382/- out of the salaries and general expenses. Notably, in so far as the interest cost is concerned, assessee offered an explanation to the effect that the investments in question were made out of the GD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputer Software Expenses treating the same to be capital expenditure, out of which the CIT(A) allowed ₹ 3,86,545/- as 'revenue expenditure' and the balance of ₹ 33,85,562/- was treated as 'Capital expenditure'; as detailed above. Before us, the learned counsel has made a solitary plea based on the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Raychem RPG Ltd. (2011) 64 DTR 57 (Bom) to point out that where the software acquired by the assessee did not form part of the profit-making apparatus, the same was liable to be allowed as 'revenue expenditure'. Considering the aforesaid judgement of the Hon'ble Bombay High Court in the case of Raychem RPG Ltd. (supra), we find that the expenditure incurred by the assessee of ₹ 23,08,305/- in order to acquire the 'Office pro win 32 Licenses' software is liable to be considered as a 'revenue expenditure'. Ostensibly, the appellant is engaged in the manufacture and sale of steel forgings, etc. and the impugned software is to facilitate trading operations or enabling it to conduct its business profitably and is not a part of profit-making apparatus. In so far as the other expenditure on softwares amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the learned counsel pointed out that the Tribunal in its order dated 31.01.2013 (supra) in the assessee's own case, held that the action of the assessee in deducting the tax under Section 194C in relation to the payments by way of Testing Inspection Fee was justified. Following the aforesaid decision, therefore, it has to be held that there was no default on the part of the assessee in deducting the tax at source under Section 194C of the Act in the present case and therefore, the Assessing Officer wrongly invoked Section 40(a)(ia) of the Act to make the disallowance, which is hereby deleted. 15. The third limb of the disallowance is an amount of ₹ 20,68,111/- representing crane hire charges. In this regard also, the only difference between the assessee and the Revenue is the section under which the tax was liable to be deducted at source. Assessee deducted the tax under Section 194C of the Act whereas the Assessing Officer opined that the tax was deductible under Section 194J of the Act. For the said reason the expenditure was disallowed by invoking Section 40(a)(ia) of the Act. On this aspect also the assessee has relied upon the order of the Tribunal dated 31.01.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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