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TMI Blog2017 (5) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... poration [AEBC]. Pursuant to receipt of certain AIR information, the assessee was found to have paid Rs. 20,90,702/- to AEBC against credit card payment which was not reflected in the books of accounts and further no response was received by AO against 133(6) notice issued to the AEBC which led to impugned disallowance in the hands of the assessee. The Assessee contested the same before Ld. CIT(A) on the premises that the assessee paid Rs. 13,95,503/- to AEBC on account of business related travels expenses incurred by assessee which was duly reflected in the books and the balance difference arose due to erroneous reporting in AIR by AEBC. In support, the assessee produced a confirmatory letter dated 26/12/2011 from AEBC. The Ld. CIT(A) after considering the remand report, deleted additions to the extent of Rs. 13,90,003/-, being amounts reconciled by the Assessee but confirmed balance addition of Rs. 6,95,199/- in view of the fact that the assessee could not adduce evidence to show that the mistake in AIR was subsequently been rectified by AEBC as stated in the said confirmatory letter. The Ld. Counsel for assessee [AR] placed reliance on the same letter issued by AEBC to contend t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commission from export and incurred travelling expenses to negotiate the business deals and hence the same was allowable particularly when the assessee has already paid Fringe Benefit Tax [FBT] against those expenses and therefore, adhoc disallowance against the same could not be sustained in view of various judgment of Mumbai Tribunal in the following cases, the copies of which has been placed before us:- (i) Hansraj Mathurdas Vs. ITO [ITA No. 2379/M/10 order dated 16/09/2011] (ii) K.S.Jewellery & Co. Vs. ACIT [ITA No. 7495/M/2013 order dated 03/06/2015] (iii) Om International Vs. ACIT [ITA Nos.2310-11/M/2012 order dated 25/04/2013] (iv) DCIT Vs. Kamal Associates [ITA No. 4326/M/2014 order dated 21/07/2016] (v) Indo Bearing Traders Vs. ACIT [ITA No.7119/M/2011 order dated 10/10/12] A perusal of the above orders of Tribunal lends strength to the argument of Ld. AR that since FBT has been paid on these expenses, disallowance thereof u/s 37(1) was not warranted for. Therefore, we are inclined to delete the said additions subject to verification of payment of FBT on these expenses by Ld. AO. Therefore, the matter is restored back to the file of Ld. AO for limited pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance has been placed on the judgment of Hon'ble Andhra Pardesh High Court in CIT Vs. Coromandal Fertilizers [247 ITR 417]. Per contra, Ld. DR placed reliance on the stand of lower authorities and contended that the same being incurred to set up new business and therefore, not allowable. 7. After hearing rival contentions and perusing relevant material on record, we find that the said expenditure were in the nature of upfront consultancy fees to identify the projects which may be taken up by the assessee in future. A perusal of financial statements of the assessee reveals that as at the beginning of the year, the assessee had reserves of more than Rs. 20 Crores. The quantum of the amount or payment thereof has not been doubted by the revenue. The assessee has reflected income from House Property. Therefore, on the totality of these factors, we find strength in the arguments of Ld. AR that the said expenditure was nothing but in the nature of revenue expenses being paid to explore the new business opportunities so as to deploy the excess resources more profitably and efficiently and payable irrespective of the fact whether the project materialized or not. Further by incurring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken from time to time. The Assessee in such cases installs the computers. This technology is now said to be acceptable in changing world. The rapid advancement of research also contributes a small degree of endurability, but that by itself does not mean that the expenses incurred cannot be revenue in nature. Since technology advancement is an aspect which must be taken judicial note of, so also, machinery becoming obsolete that there is necessity of acquiring further technology. This is to meet the growing competition and considering trends in the market. Therefore, such expenditure will have to be treated as revenue expenditure. This decision of the Tribunal for the present Assessment Years also is in accord with its earlier decisions which are referred to in paragraph 14 of the order under challenge. 13. Further, in the case of CIT v. Raychem RPG Ltd. [2012] 346 ITR 138/21 taxmann.com 507, a Division Bench of this Court held that similar view of the Tribunal in the case of that Assessee cannot be said to be perverse or vitiated by any error of law apparent on the face of record. This Court approved the findings of the Tribunal in favour of the Assessee-Raychem RPG Limited. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of fact has returned a finding that the expenditure undertaken was for overhauling the accountancy of the assessee and to efficiently train the accounting staff of the assessee. The Tribunal, which is decidedly the final fact finding authority has after noticing the material on record observed that the expenditure was incurred under various sub-heads, which included licence fee, annual technical support fee, professional charges, data entry operator charges, training charges and travelling expenses. The final figure was a consolidation of expenses incurred under these sub-heads. The Tribunal, in our view, and rightly so, came to the conclusion that none of these resulted in either creation of a new asset or brought forth a new source of income for the assessee. The Tribunal classified the said expenses as being recurring in nature to upgrade and/or to run the system. Therefore, Hon'ble High courts have taken a consistent view favorable to the assessee that even if the software expenses incurred by the assessee results into enduring benefit to assessee, the same could not be treated as capital expenditure and real intent and purpose of the same has to be looked into. A perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation @25% only which was confirmed by Ld. CIT(A). The Ld. AR has placed reliance on the judgment of Hon'ble Bombay High Court in CIT Vs. Saraswat Infotech Ltd. [ITA NO. 1243 of 2012 15/01/2013] to contend that UPS being integral part of computer system was entitled for higher deduction of 60% as applicable to computer system. After perusing the cited judgment, we find strength in the arguments of Ld. AR and therefore, following the jurisdictional High Court, we hold that UPS being integral part of computer system being installed to regulate the flow of the power to avoid any kind of damage to the computer network due to fluctuation in power supply which could lead to loss of valuable data and hence, entitled for same rate of depreciation as applicable to computer system. This ground of assessee's appeal succeeds. 12. In Ground No.13, the assessee is aggrieved by non-grant of interest u/s 244A. The same being allowable to assessee as per relevant statutory provisions and hence do not require our interference at this stage and accordingly dismissed. 13. Ground Nos. 14 is related with initiation of penalty proceedings u/s 271(1)(C). The same being premature at this stage, also d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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