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TMI Blog2018 (9) TMI 1548X X X X Extracts X X X X X X X X Extracts X X X X ..... at the payment of such damages is allowable business expenditure u/s. 37(1) of the Act. - Decided in favour of assessee. - ITA No.1979/PUN/2016 - - - Dated:- 12-9-2018 - Shri Anil Chaturvedi, AM And Shri Vikas Awasthy, JM For the Assessee : Shri Kishor Phadke For the Revenue : Shri J.P. Chandrakar ORDER PER VIKAS AWASTHY, JM : This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-7, Pune dated 02-05-2016 for the assessment year 2011-12. 2. The assessee in appeal has assailed the findings of Commissioner of Income Tax (Appeals) by raising following grounds: 1. The learned CIT(A)-7, Pune erred in law and on facts in confirming the action of the learned ACIT, Circle 11(2), Pune (hereinafter referred to as the learned AO) in treating the enrollment expenditure of ₹ 19,82,32,378/- incurred by the appellant towards Rashtriya Swasthya Bima Yojana (RSBY Scheme) as deferred revenue expenditure, liable for amortization over a period of three (3) years. 2. The learned CIT(A)-7, Pune erred in law and on facts in not appreciating the fact that the same Insurance company or Third Party Administrator (TPA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 and 2010-11. The matter travelled to the Tribunal in both the aforesaid assessment years. The Tribunal in ITA No. 2585/PN/2012 for assessment year 2009-10 decided on 10-07-2014 dismissing the appeal of Revenue held that the expenditure is allowable. In assessment year 2010-11 the assessee carried the matter in appeal in ITA No. 829/PN/2014. The Tribunal vide order dated 27-07-2016 following its earlier order deleted the addition. 3.1 In respect of ground Nos. 6 and 7 the ld. AR submitted that the assessee has incurred legal expenditure to the tune of ₹ 10,00,000/- defending the suit filed by Microsoft Corporation USA against the assessee. The assessee was using software/operating system licensed by the Microsoft in excess of authorized/licensed version purchased by assessee. For this mismatch Microsoft Corporation USA and its Indian Associate filed civil suit against the assessee before Hon ble Delhi High Court for grant of permanent injunction and violation of copyrights, etc. The assessee in order to settle the dispute made payment of ₹ 10,00,000/- to the Microsoft Corporation. The ld. AR submitted that the payment made by the assessee was on revenue account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as income and the assessee has claimed the corresponding expenditure incurred on the printing and issue of smart cards. Under these circumstances and in view of the detailed reasoning given by the CIT(A) we find no infirmity in her order. The Ld. Departmental Representative also could not point out any other mistake in the order of the CIT(A). Merely because the amount appears to be huge cannot be a ground to disallow the same on the ground of enduring benefit to the assessee when the corresponding revenue earned has been considered as income of the impugned year. In this view of the matter and in view of the detailed reasoning given by the CIT(A) we find no infirmity in the same. Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed. 6. On similar set of facts the Tribunal deleted the addition in assessment year 2010-11 as well. In the assessment year under appeal the ld. DR has failed to point out any distinguishing factor. Since, the nature of expenditure is same, following the order of Tribunal in assessee s own case in preceding assessment years, we hold that ₹ 19,82,32,378/- incurred by the assessee towards making of enrollment ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights Act. However, ultimately, the matter was settled by way of Compromise decree, under which, the assessee was allowed to use licenced software after the final settlement. The assessee and others undertook to pay sum of ₹ 35 lakhs which would cover litigation and other related costs suffered by Microsoft and others. The computer systems seized by the Commissioner was released for the use of assessee and the assessee undertook to clean / delete the hard drives of seized computer systems of all illegal / pirated / un-licenced software of the Microsoft companies. The said compromise entered into between the parties was approved by the Hon ble High Court of Delhi vide its order dated 31.08.2009. The question which arises before us is whether the payment made pursuant to the said compromise is for infraction of law or is expenditure which is wholly and exclusively incurred for the purpose of business and is allowable as expenditure in the hands of assessee. The amount which has been agreed to be paid by the assessee and its group companies to Microsoft Corporation and others is on account of contractual liability. It is not the case of payment of any penalty. In any case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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