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TMI Blog2018 (7) TMI 2282X X X X Extracts X X X X X X X X Extracts X X X X ..... AKA HIGH COURT] and answered the substantial question of law in favour of the Assessee and against the Revenue, treating the software expenses as revenue expenditure. - I.T.A. No. 510/2016 - - - Dated:- 30-7-2018 - THE HON'BLE Dr. JUSTICE VINEET KOTHARI AND THE HON BLE Mrs. JUSTICE S. SUJATHA For the Appellant : Mr. E.I. SANMATHI, ADV. For the Respondent : Mr. ANKUR PAI, ADV. JUDGMENT 1. The Appellants-Revenue have filed this appeal u/s.260A of the Income Tax Act, 1961, raising purportedly certain substantial questions of law arising from the order of the ITAT, C Bench, Bangalore, dated 27.11.2015 passed in IT(TP)A No.551/Bang/2015 (Moog Controls (India) Pvt. Ltd., vs. The Deputy Commissioner of Income Tax) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tware to the assessee and thereby does not lead to creation of any capital asset. The license used by the assessee is application software designed to perform various business processes. The application software enables the assessee to carry out its business operations efficiently and smoothly and does not provide any enduring benefit. Such software enhances the efficiency of the operations. It is an aid in the manufacturing process. Considering the above facts and the judicial precedents relied upon by the assessee company, we hold that the said license fees and maintenance fee is to be allowed as revenue expenditure . 5. This issue has been considered by the coordinate Bench of this Court in the case of Commissioner of Income Tax vs. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry out his business operation efficiently and smoothly. However, such software itself does not work on stand alone basis. The same has to be fitted to a computer system to work. Such software enhances the efficiency of the operation. It is an aid in manufacturing process rather than the tool itself. Thus, for payment of such application software, though there is an enduring benefit, it does not result into acquisition of any capital asset. The same merely enhances the productivity or efficiency and hence to be treated as revenue expenditure. In fact, this Court had an occasion to consider whether the software expenses is allowable as revenue expenses or not and held, when the life of a computer or software is less than two years and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had accepted the same as a comparable before the CIT(Appeals), but it is now sought to be rejected as a comparable on the ground that it is functionally dissimilar. It was also contended that the company is into development of software products and there is presence of significant inventory. The ld. counsel for the assessee relied on the decision of CISCO Systems (India) Pvt. Ltd. in IT(TP)A No.271/Bang/2014, order dated 14.08.2014, wherein it was held as follows:- xxxxxxxxxxxx 13. Following the aforesaid decision of the Tribunal in the case of CISCO Systems (India) Pvt. Ltd. (supra), we are of the opinion that KALS Information Systems Ltd. is functionally dissimilar to that of the assessee and hence it is not to be regarded as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in ITA No.536/2015 C/w ITA No.537/2015 delivered on 25.06.2018 (Prl. Commissioner of Income Tax Anr. Vs. M/s. Softbrands India Pvt. Ltd.,), whereby it has been held that in these type of cases, unless an exfacie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable. The relevant portion of the said judgment is quoted below for ready reference: Conclusion: 55. A substantial quantum of international trade and transactions depends upon the fair and quick judicial dispensation in such cases. Had it been a case of substantial question of interpretation of provisions of Dou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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