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TMI Blog2018 (3) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... to the file of the Assessing Officer for deciding afresh. Allowability of software expenses - nature of expenditure - Held that:- In the instant case, we find that the issue before us is in respect of the custom duty of SAP software purchased by the assessee. No details have either been provided by the lower authorities or by the assessee as how the expenditure incurred on purchase of SAP has been dealt by the Assessing Officer. Further, there are no facts available on record as in which fields of the business activity, the said SAP software has been used by the assessee. For determining, whether the expenditure incurred on the software is capital expenditure of revenue expenditure in view of the decision in the case of Asahi India Safety Glass Limited (2011 (11) TMI 2 - DELHI HIGH COURT ), above facts are crucial and in absence of which, the issue cannot be decided judiciously. Thus restore the issue to the file of the Assessing Officer for deciding afresh in accordance with law. Addition u/s 14A - Held that:- By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the order dated 10/09/2014 passed by the Ld. Commissioner of Income-tax (Appeals), XXI, New Delhi [in short 'the Ld. CIT(A)'] for assessment year 2010-11. Since both the appeals have emanated from the same impugned order, both these appeals were heard together and disposed off by way of this consolidated order for convenience. 2. The grounds of appeal raised by the Revenue in ITA No. 6611/Del/2014 are reproduced as under: 1. On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition/disallowance of ₹ 13,15,248/- made by the AO on account of mutation of land. 2. On the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition/disallowance of ₹ 3,90,000/- made by the Assessing Officer on account of SAP software license. Ld. CIT(A) had also erred in allowing the depreciation of SAP Software @60% instead of 25%. 3. On the facts and in the circumstance of the case, Ld. CIT(A) erred in deleting the addition/disallowance of ₹ 50,35,000/- made by the AO u/s 14A 4. The appellant craves, leave or reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved with additions/disallowances, the assessee filed appeal before the Ld. CIT(A), who allowed the appeal partly vide the impugned order. 3.1 Aggrieved, both the parties are in appeal before the Tribunal, raising the grounds as reproduced above. 4. The ground No. 1 of the appeal of the Revenue relates to addition/disallowances of ₹ 13,15, 248/- made by the Assessing Officer on account of mutation of land. 4.1 Before us, the Ld. DR submitted that Ld. CIT(A) has not passed a speaking order on the issue in dispute and, thus, the issue might be restored back to the file of the Ld. CIT(A) for deciding a fresh. 4.2 On the contrary, the Ld. counsel submitted that the Assessing Officer has wrongly disallowed the expenses considering the same in the nature of mutation charges. According to the Ld. counsel, the payment was in the nature of land revenue except for a small amount of ₹ 10,200/- which was paid for changing the name of the company from 'Jay Engineering Works' (old name) to 'Usha International Ltd'. The Ld. counsel filed a paper book containing pages 1 to 82 and referred pages 6 to 16, which are receipt of land revenue charges paid in respect of the land. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uer for reconciliation of land measurement. 4.6 The Ld. Counsel has also enclosed letters addressed by the assessee company to "Land and Land Reforms Officer" for payment towards land revenue charges of land situated in "Roynagar Mouza". All these letters are available from pages 7 to 12 of the paper book. Contents of one such letter dated 7th July, 2009 regarding payment of ₹ 5,34,820/- are reproduced as under: "We hereby tender the land revenue vide Cheque No.056620 dt. 06.07.2009 for ₹ 5,34,820/- (Rupees Five lacs thirty four thousand eight hundred and twenty only) towards payment of land revenue for Bangla San 1416 in respect of our various premises totaling 27.80 acres in Roynagar Mouza." 4.7 Thus, it is manifested that, these payments are in the nature of land revenue charges of lands, which prima facie appears to be related to agricultural land. If these expenses are incurred related to agricultural land, then, in our opinion, such land revenue charges paid are not in any manner incurred wholly and exclusively for the purpose of the business, as income from agricultural activity is exempted from Income-tax. The letters issued by the land revenue authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the highest rate of 60% in the computer and the computer accessories and no fruitful purpose will be served by treating the same as capital expenditure and allowing the depreciation @ 60%. After considering all the facts and circumstances of the case, I am of the view that the expenses are of the revenue in nature and also not of much revenue significance and accordingly the addition made by the AO is deleted." 5.3 Before us, Ld. DR submitted that the expenditure on software would be revenue, if the software helps in running the business more efficiently without touching the profit-making structure of the assessee and it would be capital expenditure, if it has enhanced capacity of profit-making apparatus of the assessee. According to Ld. DR, the lower authority has not visited the said expenses from this angle and, therefore, the issue may be restored back to the file of the Assessing Officer for deciding afresh. 5.4 On the contrary, Ld. counsel submitted that computer software license charges are in the nature of revenue expenditure as held by the Hon'ble Delhi High Court in the case of CIT Vs. Asahi India Safety Glass Limited, (2012) 346 ITR 329(Delhi). 5.5 We have heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure incurred on purchase of SAP has been dealt by the Assessing Officer. Further, there are no facts available on record as in which fields of the business activity, the said SAP software has been used by the assessee. For determining, whether the expenditure incurred on the software is capital expenditure of revenue expenditure in view of the decision of the Hon'ble Delhi High Court in the case of Asahi India Safety Glass Limited (supra), above facts are crucial and in absence of which, the issue cannot be decided judiciously. 5.7 In view of the above facts and circumstances, we feel it appropriate to restore the issue to the file of the Assessing Officer for deciding afresh in accordance with law. The assessee is directed to furnish all necessary documents for deciding the issue in view of the decision of the Hon'ble Delhi High Court discussed above. It is needless to mention that the assessee shall be provided adequate opportunity of being heard. Accordingly, the ground no. 2 of the appeal of Revenue is allowed for statistical purposes. 6. The ground No. 3 of the appeal of the Revenue relates to disallowance of ₹ 50,35,000/- made by the Assessing Officer under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that Ld. CIT(A) dismissed the ground raised by the assessee holding that there was no cause of action as the issue was not emanating or arising from the order of the Assessing Officer. 7.2 The Ld. counsel submitted that issue is covered in favour of the assessee by the order dated 15/01/2013 of the Hon'ble Gujarat High Court in the case of Torrent Private Limited Vs. CIT, Special Civil Application No. 5857 of 2004. 7.3 On the contrary, Ld. DR relying on the order of the Ld. CIT(A) submitted that the Ld. CIT(A) has rightly not adjudicated the issue as it was not emanating from the order of the Assessing Officer 7.4 We have heard the rival submission and perused the relevant material on record. The Ld. counsel drawn our attention to page No. 30 and 31 of the paper book, which is an application filed by the assessee before the Assessing Officer on 18/04/2012 and submitted that the Assessing Officer did not decide the issue of refund of dividend distribution tax raised in the said application. We note that since the Assessing Officer did not decide the issue in the assessment order, the ld. CIT(A) did not adjudicate on the issue. In our opinion, if the Assessing Officer had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able security deposit cannot be allowed as deduction as it was not incurred wholly and naturally for the purpose of business. 9.2 Before us, the Ld. counsel of the assessee submitted that the amount will remain continued to be deposited till the membership of the company would continue and at the end, the company, may not get refund of the same. The Ld. counsel submitted that considering the operation and a status of the company, this is a small amount and if refund is received same shall be considered as income at that stage. The Ld. counsel in support of his contention relied on the CBDT Circular dated 27/10/1993 in regard to security deposit for telephone connection. The Ld. counsel submitted that club expenses in any case are allowable as per the decision of the Supreme Court in the case of CIT Vs. United Glass Manufacturing Company Limited (2012) TIOL -102-SC-IT. 9.3 We have heard the rival submission and perused the relevant material on record. There is no dispute on the fact that the amount paid is refundable security deposit made to the club. In our opinion, any security deposit made cannot be a revenue expenditure allowable under section 37 of the Act. The amount is lyin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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