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TMI Blog2022 (7) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial right in the nature of intangible asset - additional evidence is admitted taken on record for adjudication - HELD THAT:- The description of the list of items submitted in the additional evidence shows that expenditure is incurred towards windows , Core call , and Auto cad which according to the ld AR have a very short span of life and requires periodic renewal and upgradation by payment of license fee. We notice that the jurisdictional High Court decision in the case of IBM India Ltd [ 2013 (10) TMI 1225 - KARNATAKA HIGH COURT] as held that even if the application has an enduring benefit, it does not result in acquisition of capital asset. The decision cannot be applied generally to state that any software having a shelf life of more than two years is capital in nature since the decision in Toyota Kirloskar Motor (P) Ltd. ( 2013 (2) TMI 108 - KARNATAKA HIGH COURT ) was with respect to a particular software and that the nature of software whether it is a system software or application software needs to be analysed to decide the treatment under the Act. We remit the issue back to the AO to verify the facts afresh after considering the breakup of the softwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o relief consequential thereto. That the Appellant craves leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of appeal at any time before or during the hearing of the appeal. 3. The assessee is engaged in the business of designing, financing, construction, operation and maintenance of Bengaluru International Airport at Devanahalli. The assessee company filed its e-return of income for the AY 2012-13 on 29.11.2012 declaring total income of Rs.7,77,16,290 and a book profit of Rs.179,95,15,810 was computed u/s. 115JB of the Income-tax Act, 1961 [the Act]. The case was selected for scrutiny and notice served on 21.8.2013. The AO completed the assessment u/s. 143(3) of the Act making the following disallowances:- (i) Disallowance of concession fees Rs.85,42,00,000. (ii) Disallowance of depreciation of intangible assets Rs.2,25,00,657. (iii) Disallowance of repairs Building : Rs.13,56,30,000 Machinery: Rs.17,51,85,000. (iv) Disallowance of software expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med the disallowance relying on the decision of the CIT(A) in assessee s own case for the AY 2010-11 wherein the depreciation was disallowed. Aggrieved, the assessee is in appeal before the Tribunal. 8. Before us, the ld. AR reiterated the submissions made before the lower authorities and prayed for deletion of the disallowance. On the other hand, the ld. DR supported the orders of the lower authorities. 9. We have considered the rival submissions and perused the material on record. We notice that the coordinate Bench of this Tribunal in assessee s own case for AY 2010-11 in ITA No.510/Bang/2014 dated 27.09.2016 upheld the order of the CIT(Appeals) disallowing depreciation on intangible assets held that :- 5. We heard rival submissions and perused material on record. As submitted by the learned authorised representative of the assessee, the expenditure was incurred wholly in connection with entering into various agreements. Most of the expenditure was towards availing of professional and legal services during pre-operative period i.e. before commencement of the commercial operation. In our considered opinion, this expenditure is revenue in nature incurred during pre-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decide the enduring benefit. Aggrieved, the assessee is in appeal before the Tribunal. 14. Before us, the assessee has filed application for admission of additional evidence consisting of detailed break-up of software expenditure and prayed for admission of additional evidence. The ld. AR drew our attention to the description of items and claimed that they are in the nature of application software and have a short life span without any enduring benefit. He relied on the jurisdictional High Court decision in CIT V. IBM India Ltd. [2014] 43 taxmann.com 470 (Kar) in addition to various decisions cited before the lower authorities. 15. The ld. DR submitted that generally the software have a life of more than 2 years and gives enduring benefit in the day to day business of the assessee and hence it is capital in nature. He relied on the jurisdictional High Court decision in CIT v. Toyota Kirloskar Motor (P) Ltd. He submitted that and the life span of these software need to be considered. 16. We have considered the rival submissions and perused the material on record. The additional evidence now produced before us goes to the root of the matter to decide the issue whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s less than two years and as such, the right to use it for a limited period, the fee paid for acquisition of the said right is allowable as revenue expenditure and these softwares if they are licensed for a particular period, for utilizing the same for the subsequent years fresh licence fee is to be paid. Therefore, when the software is fitted to a computer system to work, it enhances the efficiency of the operation. It is an aid in manufacturing process rather than the tool itself. Though certain application is an enduring benefit, it does not result into acquisition of any capital asset. It merely enhances the productivity or efficiency and, therefore, it has to be treated as revenue expenditure. In that view of the matter, the finding recorded by the Tribunal is in accordance with law and does not call for any interference. Accordingly, the second substantial question of law is answered in favour of the assessee and against the Revenue. 11. The third substantial question of law relates to the computation of the income under the provisions of section 115JA of the Act. 12. The case of the assessee is that, while computing, within the meaning of section 115JA, the provision m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in this case has held that even if the application has an enduring benefit, it does not result in acquisition of capital asset. 19. The decision relied on by the ld. DR in Toyota Kirloskar Motor (P) Ltd. (supra) was rendered based on the specific facts in that case where the software viz., lotus notes had shelf life of less than two years based on which the Hon ble High Court held that it is revenue in nature. The decision cannot be applied generally to state that any software having a shelf life of more than two years is capital in nature since the decision in Toyota Kirloskar Motor (P) Ltd. (supra) was with respect to a particular software and that the nature of software whether it is a system software or application software needs to be analysed to decide the treatment under the Act. 20. In view of the above discussion, we remit the issue back to the AO to verify the facts afresh after considering the breakup of the software expenses submitted as additional evidence filed by the assessee and decide the issue after taking into consideration the ratio laid down by the jurisdictional High Court in the case of IBM India Ltd. (supra) . Needless to say that assess ..... 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