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TMI Blog2002 (2) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... s a very limited life and therefore there is a constant need to update. The AR contended that since the software which needs to be updated repeatedly gets outdated also very fast as such it cannot be treated as capital asset. 5. The Ld. CIT(A) allowed the software expenses as revenue expenses. 6. Aggrieved, Revenue is in appeal before us. 7. We heard both the parties. We set aside this issue to the file of the AO to decide the same in the light of the ITAT Special Bench decision in the case of DCIT Vs Amway India Enterprises 301 ITR 129 (Del) after giving an opportunity to the assessee. 8. The 2nd, 3rd and 4th grounds raised by the Revenue read as under: 2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing ₹ 42,82,000/- as business loss. 3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in accepting the nexus of investment in Canexpo Unit to his business activity and thereby allowing the loss on sale of such units as business loss. 4. On the facts and in the circumstances of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is letter referred to the assessee's letter dated 20th April 94. The date of investment is 18.5.94 which clearly suggests that the investment has been made in Canexpo at the instance of Canbank and is made in the course of business. The assessee relied on Supreme Court's decision in the case of Patnaik Co. 161 ITR 365 and Bombay High Court's decision in the case of Gannon Dunkerley Co. Ltd 119 ITR 595. The assessee further stated that this investment has been shown in the balance sheet as trade investment but it does not mean that loss incurred on account of this investment has to be treated as capital loss. In this regard, the assessee placed reliance upon the decision of Supreme Court in the case of Investment Ltd vs CIT 77 ITR 533. 12. After considering the contentions of the assessee, the Ld. CIT(A) allowed the assessee's claim by observing as under: I have gone through the submissions of the assessee and also the order of the AO.As regards the units whether they are in the nature of shares I cannot support the view of the AO. In this regard. The explanation to sec 73 was inserted with a specific object i.e. to curb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al institution. Further it is also noticed that the assessee has never made such investments in the past. The sole object of making this investment appears to be to earn the goodwill of the financial institution of whose is going to be the broker of a financial institution of this magnitude. I am sure assessee would have earned substantial income in the form of brokerage. The loss incurred amounting to about ₹ 40 lakhs sale into insignificance in comparison with the profits made by the assessee as a broker of financial institution. The assessee's act has been solely guided by the principles of commercial expediency One should not take an abstract or academic view of what is proper expenditure laid out or expended wholly and exclusively for the purpose of one's business. What is required to be seen whether the expenditure was part of the process of profit making and the expenditure must be incidental to the business and must be necessitated and justified by commercial expediency. Thus the loss incurred by the assessee on sale of Cannexpo has been incurred during the course of the business as the investments were made by way of commercial expediency an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co (223 ITR 101)held that contribution made to District Welfare Fund, in the hope of getting a License or permit is an expenditure incurred for the purpose of business out of commercial expediency. Applying the same yardsticks, the investment made by the assessee can be classified as an investment made out of commercial expediency for betterment of his business. Hence, as per the ratio of the Apex Court (supra), the loss arising from sale of the same is to be allowed as a business loss. It is immaterial whether the assessee classified the same as investment. The reason for this investment is to gain the goodwill of the institution therefore commercial expediency required this investment which was made with anticipation that the assessee may be appointed as a broker to that institution. The loss on sale of the Canexpo units is a business loss because the investment has been made for the betterment of the business and does not depend on its classification in the books of accounts. 16. The fifth ground of appeal raised by the Revenue reads as follows: On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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