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TMI Blog2022 (12) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... I 1 - SUPREME COURT] since there does not exist an all-embracing formula which can provide a ready solution to the problem; no touchstone has been devised and that every case has to be decided on its own facts keeping in mind the broad picture of the whole operation in respect of which the expenditure has been incurred. The appellant is admittedly in the business of development of software solution and management, and therefore, it s endeavour to develop a new software was nothing but an endeavour in its existing line of business of developing software solutions. Admittedly, the product which was sought to be developed, never came into existence and the same was abandoned. No new asset came into existence which would be of an enduring b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under section 143(3) read with section 147 of the Act. The AO found that the assessee had debited to the profit and loss account an amount of Rs.7.09 crores under the head Exceptional Items , which expenditure, the AO held after investigation, was incurred in connection with the development of a new product. The assessee had treated the expenditure as a part of capital work in progress for the assessment years 2004-05 to 2007-08. The development of this software was abandoned and the assessee then claimed the whole capital work in process as revenue expenditure. The AO accordingly made an addition of Rs.7.09 crores. 4. In Income Tax Appeal No. 640 of 2018 :- The assessee fled its return of income on 30th October 2006 declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (A) held that though the assessee had also shown the expenditure as capital work in progress for the assessment years 2004-05 to 2007-08, the deduction had to be allowed as a revenue expenditure in the year in which the project in question was abandoned. 6. The revenue preferred an appeal against the order of the CIT (A), dated 31st March 2015 which too, came to be dismissed, by placing reliance upon the judgment of Delhi High Court in the case of Indo Rama Synthetic (I) Ltd. (Supra) and IL FS Education Technology Services Pvt. Ltd. (Supra). The ITAT upheld the views expressed by the CIT (A), by virtue of its order dated 6th June 2017 impugned in the present appeals. 7. Learned counsel for the appellant urged that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cables Ltd. Vs. Atherton 10 TC 155. The principle as stated therein was as under : When an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. 11. However, notwithstanding that a reference had been made to the said principle of law, the Apex Court held that the enduring benefit test was not a certain or conclusive test and cannot be applied mechanically without regard to the particular facts and circumstances of a given case and that what w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure. See Bombay Steam Navigation Co. (1953) Pvt. Ltd. v. Commissioner of Income-tax(2) The same test was formulated' by Lord Clyde in Robert Addze Son's Collieries Ltd. v. Inland Revenue(3) in these words: Is it part of the company's working expenses, is it expenditure laid out as part of the process of profit earning ? or, on the other hand, is it a capital outlay, is it expenditure necessary for the acquisition of property or of rights of permanent character, the possession of which is a condition of carrying on its trade at all ? 12. In Indo Rama Synthetic (I) Ltd. (Supra), it was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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