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TMI Blog2017 (5) TMI 1546X X X X Extracts X X X X X X X X Extracts X X X X ..... implementation of SAP ERP system - Held that:- Expenditure incurred on implementation of SAP ERP systems was revenue in nature. See Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court) Licence fees paid to SDRC India Private Ltd - allowable revenue expenditure Consultancy charges paid in connection with transport solution group - Held that:- We find that the assessee had made payment in connection with transport solution group for consultancy. The AO has not brought on record anything to prove that the assessee had acquired any IPR/tangible assets. It was plain and simple consultancy. Therefore, there was no justification for the FAA to hold that expenditure was of capital nature. Depreciation on item sold as slum sale - Held that:- It is were purely consequential claim following the orders of the Tribunal for the above-mentioned two AY. We find that to give consequential effect to the order of the Tribunal, the FAA directed the AO to exclude the sale proceeds of assets from block of assets while calculating depreciation. We are of the opinion that there is no need to disturb the finding given by the FAA. GOA-5A stands dismissed. - I. T. A. 3998/Mum/2010 , I. T. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Following the above orders of the Tribunal we hold that the expenditure was of capital nature and the assessee should be allowed deprecia - tion, as per rules. 4. Next Ground is regarding staff cost of ₹ 8. 48 crores incurred as part of development projects. We find that while deciding the appeal for ITA/8597/M/10; AY 2006-07(pgs. 12-23 at paras 3-4 and ITA/7999/M11; 2007-08 (Pg. 8 ground No. 2) (supra), the Tribunal has held that similar expenditure was revenue in nature. Following the same decide the issue before us in favour of the assessee. 5. Next ground pertains to development expenditure of ₹ 9. 14 crores paid by the assessee for development of diesel engines. It was brought to our notice that at pg no. 12-23 of the order for AY 2006-07(supra), the Tribunal had decided that similar expenditure was capital in nature and that the assessee was entitled to depreciation. The AO is directed to follow the direction of the Tribunal for AY. 2006-07. 6. Fourth Ground deals with prior period expenses of ₹ 39. 56 lakhs . The representatives of both the sides stated that in ITA 2523 3078/Mum/2005-AY 1998-99(Page-4, para 10-11), the Tribunal had directed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that the investment in subsidiaries, being strategic investment should be excluded from investments. He relied upon the cases of JM Financial Ltd. (ITA/4521/Mum/2012) and Garware Wall Ropes Ltd. (ITA/5408/Mum/2012). The DR supported the order of the FAA. 10. 2. After considering the rival submissions we are of the opinion that matter has to be restored back to the file of AO for fresh adjudication. There is no need to cite any authority to hold that the provisions of Rule 8D of the Rules would not be applicable for the year under appeal. The AO would decide the issue after hearing the assessee and considering the case laws relied upon by it befor us. Eighth Ground is decided in favour of the assessee, in part. 11. Ground No. 9 (Euro Issue Expenses) was not addressed by the assessee before us, hence, same stands dismissed as not pressed. 12. Ground No. 10 is with regard to prior period expenses of ₹ 11. 03 lakhs. We find that while deciding the appeal for AY 1998-99 and 1999-2000 (ITA/2523 3078/Mum/2005 and ITA/2344/Mum/2009) . The matter was restored back to the file of AO. He would decide the issue afresh after affording a reasonable opportunity to the assessee . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext ground is about development expenditure of ₹ 17. 93 crores and staff cost of ₹ 3. 49 crores. Following our order for the earlier year, we restore back the matter to the file of the AO. 21. Development expenditure of ₹ 8. 10 crores is the subject matter of third ground of appeal. Following the order for the earlier year, we hold that disputed expenditure was capital in nature and the assessee was entitled to depreciation. 22. Fourth ground of appeal is about technical service fees paid to various parties, amounting to ₹ 34. 17 crores, staff cost of ₹ 3. 89 crores and material consumption of ₹ 6. 92 crores as part of development projects. Following the order of the Tribunal for the AY. s 2006 -07 and 2007-08, we hold that expenditure was revenue in nature. Ground number 4 stands allowed. 23. Next ground is about expenditure on implementation of SAP ERP system of ₹ 1. 08 crores. During the assessment proceedings, the AO held that expenditure was capital in nature and allowed depreciation thereon at the rate of 25% as applicable to intangible assets. In the appellate proceedings, the FAA upheld the disallowance made by the AO, foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmine ambit of taxable income. The DR relied upon the order of the FAA. 25. 2. We have heard the rival submissions. We find that the assessee had made payment in connection with transport solution group for consultancy. The AO has not brought on record anything to prove that the assessee had acquired any IPR/tangible assets. It was plain and simple consultancy. Therefore, there was no justification for the FAA to hold that expenditure was of capital nature. We allow ground number 7, filed by the assessee. 26. Next ground pertains to consultancy charges paid in connection with assessee s business customer center. The revenue authorities had held that expenditure was of capital nature and had allowed depreciation according. Following our order with regard to consultancy charges paid in connection with transport solution group, we decide eighth ground in favour of the assessee. 27. Ground no. 9 is about expenditure on employees welfare, amounting to ₹ 12. 07 lakhs. Following our order for the earlier year (GOA-5), we decide the issue in favour of the assessee. 28. Next ground deals with provision for warranty costs of Ruby 7. 91 crores. While dealing with ground of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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