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TMI Blog2013 (5) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... not been pressed at the time of hearing, accordingly the same is dismissed as not pressed. 3. The second issue, raised by the assessee, is with regard to the disallowance made by the Assessing Officer of ₹ 4,02,11,000/- representing product development expenses. The Assessing Officer had made the disallowance by relying on his stand in assessee s own case for the assessment year 2003-04 vide assessment order under Section 143(3) of the Act dated 28.02.2006. Before the CIT(A), assessee pointed out that in the assessment order, the Assessing Officer has wrongly taken the figure of disallowance under this head at ₹ 2,77,07,736/-, which was the figure for assessment year 2003-04 whereas the actual amount of product development expenses claimed as deduction was at ₹ 4,02,11,000/-. Moreover, the Assessing Officer had allowed depreciation on the same, and the same @ 25% worked out to ₹ 1,52,750/- instead of ₹ 69,26,934/- mentioned in the assessment order. Pertinently, as per the Assessing Officer, the product development expenses were not allowable as revenue expenditure and instead he granted depreciation @ 25% on the same basis as for assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the assessee, we may now examine the expenditure referred to as product development expenditure of ₹ 2,77,07,736/-, which is in dispute. Details of such expenditure show that the same comprises of employees salaries, software consultancy/training expenses and indirect costs by way of administrative/ other expenses, e.g. power and fuel, printing stationery, marketing expenses, rent, professional fees, office expenses, rates and taxes, books and periodicals, etc. The details of such expenditure are found placed in the Paper Book as submitted at the time of hearing. Be that as it may, it is quite evident that the expenditure in question cannot be said to have resulted in acquisition of any new asset. So, however, the plea of the Revenue is that such expenditure has resulted in development of software products, which in turn are being sold by the assessee to various customers over a period of time 4 including in the subsequent years and, therefore, it results in an enduring benefit, and accordingly, such expenditure was to be held as capital expenditure. 10. In our considered opinion, the aforesaid proposition of the Revenue is quite alien to the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is in the revenue field, inasmuch as it seeks to improve the profitability of the assessee and the enduring benefit cannot be regarded to be in the capital field. The parity of reasoning laid down by the Hon ble Apex Court in the case of Empire Jute Co Ltd (supra), as extracted above, clearly supports the stand of the assessee, inasmuch as the expenditure in question merely results in development of new products by the assessee in its existing line of business. Even otherwise, it is noteworthy that none of the expenditures in question are of capital nature and in fact, the expenditure which has been referred to by us in the earlier paragraph clearly are such expenditure, which are incurred in the course of carrying on of business. 5 11. The other objection of the Revenue that the assessee had treated the impugned expenditure as a deferred revenue expenditure in the books of account and claimed it as a revenue expenditure in the computation of income, is of no consequence. The Hon ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd (supra) and also thereafter in the case of Tuticorin Alkali Chemicals v. CITR 227 ITR 172 (SC) and Sutlej Cotton Mills Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue nature, the alternative plea is rendered academic and is, therefore, not being adjudicated at the present. 6 6. Following the aforesaid precedent in assessee s own case which is in relation to the similar dispute before us, the claim of the assessee deserves to be allowed. Accordingly, we set aside the order of the CIT(A) and direct the Assessing Officer to allow the claim of the assessee in accordance with the order of the Tribunal dated 27.07.2012 (supra). Thus, on this Ground assessee succeeds. 7. The assessee has also raised an alternative plea to the effect that if the said claim is not allowed under Section 37(1) of the Act, the same is allowable under Section 35(1)(i) or under Section 35(1)(iv) of the Act. Since the assessee has succeeded on its substantive plea that the impugned expenditure is revenue in nature, the alternative plea is rendered academic and is accordingly dismissed as infructuous. 8. In the result, the appeal of the assessee is partly allowed. 9. Now, we may consider the cross-appeal of the Revenue wherein the following Grounds of appeal have been raised by the Revenue :- 2. The learned CIT(A) grossly erred in blanketly holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/- and with regard to the assessee s claim for exemption under Section 10A of the Act on the revised assessed income, he held as under :- It is now stated that claim u/s. 10A be allowed on the revised working made of profit at ₹ 92,58,610/- after order u/s 154 dtd. 27.01.2011. The claim of the appellant u/s. 10A in so far as income has arisen out of the eligible business is liable to be allowed, if the conditions are otherwise fulfilled, after set off of the unabsorbed carry forward losses/depreciation etc. Accordingly, ground No. 10 11 will be treated as allowed for statistical purposes. 12. In the aforesaid background, we have heard the rival parties and find that the CIT(A) made no mistake in holding that the claim of the assessee 8 under Section 10A of the Act be allowed, subject to fulfillment of all the conditions. Ostensibly, there is no dispute to the position that the disallowance of ₹ 1,21,57,820/- made by the Assessing Officer is erroneous as no such claim has been made in the return of income, and the CIT(A) rightly deleted the same. Thus, Ground of appeal no. 2 raised by Revenue is dismissed. 13. In so far as Grounds of appeal no. 3 and 4 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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