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TMI Blog2016 (7) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... cash. In our view this entry makes the fact very clear that ₹ 25,000 was part of the total value of the rotary machine at ₹ 12,75,000 and further no supporting evidence was placed on record by the assessee to prove that there were two separate bills one for the cost of the machine of ₹ 12,50,000 and the other for expenditure incurred for rotary machine for ₹ 25,000 relating to repair, etc., and, therefore, in these circumstances, we are unable to accept the contention of the learned authorised representative and inclined to believe that ₹ 25,000 was part of capital expenditure of ₹ 12,75,000 incurred for purchase of rotary machine and the learned Assessing Officer has rightly disallowed the same and allowed depreciation on ₹ 25,000. - Decided against assessee - I. T. A. No. 2332/Ahd/2011 - - - Dated:- 18-5-2016 - Shailendra Yadav (Judicial Member) And Manish Borad (Accountant Member) For the Appellant : Mehul Shah, Authorised Representative For the Respondent : Dileep Kumar, Senior Departmental Representative ORDER Manish Borad (Accountant Member) 1. The assessee is in appeal against the order of the learned Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee following the mercantile system of account consistently and the expendi ture incurred during a year irrespective of the date on which it has been paid for, needs to be entered in the books on the basis of the date of incur ring such expenditure which in this case was the assessment year 2007-08. To this observation the assessee replied that the work of programming and installation of customised software was going on up to May, 2007, and the bill was actually received in the first week of May, 2007, and as such the liability crystallised during May, 2007, so it was debited in the books relevant to the assessment year 2008-09. However, the learned Assessing Officer was not satisfied with the reply of the assessee and disallowed the expenditure of ₹ 15,08,000 on the basis of the observation that it should not be allowed for the assessment year 2008-09 as it pertained to the assessment year 2007-08. In appeal before the learned Commissioner of Income-tax (Appeals), out of the total expenditure incurred by the assessee for purchase of software during the year at ₹ 16,83,000, the learned Commissioner of Income-tax (Appeals) held that ₹ 15,08,000 pertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer was not justified in disallowing the amount of ₹ 15,08,000. 7. On the other hand, the learned Departmental representative supported the orders of the lower authorities. 8. We have heard the rival contentions and perused the material on record. Through this ground the assessee has challenged the order of the learned Commissioner of Income-tax (Appeals) for sustaining the disallowance of ₹ 15,08,000 out of software expenses made by the Assessing Officer on the ground that it is pertaining to the earlier year. From going through the paper book we observe that bill number 00010 dated March 31, 2007, and challan number 00010 dated March 31, 2007, issued by Dynamic Softlink Pvt. Ltd. have been received by the assessee on May 1, 2007, towards purchase of customised business software at ₹ 15,08,000 which formed part of the software expenses, ledger for the financial year 2007-08 wherein the total expenditure for the year has been shown at ₹ 16,93,000 which is inclusive of bill for ₹ 15,08,000 issued by Dynamic Softlink Pvt. Ltd. The learned Assessing Officer while dealing with the expenditure of ₹ 15,08,000 has disallowed the expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the assessment year 2008-09 or in the assessment year 2007-08 which, in our view, can be cross checked only with a confirmation to this effect by the party which has issued this bill. If on cross-verification it is revealed that M/s. Dynamic Softlink Pvt. Ltd. have either booked the revenue of ₹ 15,08,000 during the assessment year 2008-09 or the impugned software was handed over to the assessee in April, 2007, for use then certainly the contention of the assessee can be accepted that the liability crystallised during assessment year 2008-09 only and for verification of these limited aspects, the matter is set aside to the file of the learned Assessing Officer who will call the requisite information from Dynamic Softlink Pvt. Ltd. and also give an opportunity of being heard to the assessee. Accordingly, this ground is allowed for statistical purposes. 11. Ground No. 2 of the appeal reads as under : 2. That, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has grossly erred in sustaining the action of the Assessing Officer in treating the software expenses of ₹ 1,82,300 as capital expenditure instead of revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Redington India Ltd. ₹ 8,840 ₹ 1,82,300 While going through the above bills, we find that apart from expend iture of ₹ 1,56,000 paid to Dynamic Softlink P. Ltd., the remaining amount of ₹ 26,300 are minor expenditure for software upgradation and other related expenditure which as per the learned authorised represent ative were having enduring benefit less than a year and, therefore, they are treated as revenue expenditure. As far as expenditure of ₹ 1,56,000 is concerned from going through the copy of the bill placed on record at page 5 of the paper book we observe that this bill which is issued by Dynamic Softlink P. Ltd. and it is mentioned in the bill itself that the business software customised expenditure of ₹ 1,50,000 is charged for providing services from April 1, 2007, to March 31, 2008, and after adding VAT four per cent. which comes to ₹ 6,000 the total expenditure amount of bills is ₹ 1,56,000. This bill itself clarifies that this expenditure is incurred for only the financial year 2007-08 and no defect has been pointed out in this bill by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory expenses treating it as capital expenditure. From going through the records, we observe that at pages 7 to 11 of the paper book there appears factory expenditure account which totals to ₹ 4,51,408, a cash payment of ₹ 25,000 has been shown to be paid vide voucher No. 537 and in the details of entry itself there is mention that this amount of ₹ 25,000 is the balance amount of rotary machine which valued at ₹ 12,75,000 and after paying of ₹ 12,50,000 the balance amount has been paid in cash and this machine was purchased from Suhag Prints Pvt. Ltd. In our view this entry makes the fact very clear that ₹ 25,000 was part of the total value of the rotary machine at ₹ 12,75,000 and further no supporting evidence was placed on record by the assessee to prove that there were two separate bills one for the cost of the machine of ₹ 12,50,000 and the other for expenditure incurred for rotary machine for ₹ 25,000 relating to repair, etc., and, therefore, in these circumstances, we are unable to accept the contention of the learned authorised representative and inclined to believe that ₹ 25,000 was part of capital expenditure of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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