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TMI Blog2023 (7) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... n Toyota Kirloskar Motors [ 2013 (2) TMI 108 - KARNATAKA HIGH COURT] when the life of a computer or software is less than two years and as such, the right to use it for a limited period and without renewing the licence or without paying the fee on such renewal, it is not possible to use those software in those circumstances the findings recorded by the authorities that the fee paid for obtaining the software and the licence and for renewing the same is to be construed as only revenue expenditure - Decided in favour of assessee. Disallowance of the provision for expenses - Addition on the basis that they were contingent in nature and the details as to the manner of creation of the provisions were not furnished - HELD THAT:- The contention urged on behalf of the Revenue that the determined amounts were not made available before the Revenue is factually incorrect and therefore untenable. Now, the point that remains to be considered and answered is whether the above seven expenditures could be allowed or not. The specific contention of the assessee is that these expenditures are ascertained liabilities as on the date of closure of books of account. The objection raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conditions for claiming the deduction in question under section 10A of the Act ? 2. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in upholding the disallowance made by the Assessing Officer under section 10A of the Act merely on the basis that the appellant did not challenge the Com missioner of Income-tax's order for the assessment year 1998-99 ? 3. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the expenses incurred towards subscription of Microsoft licences was capital in nature on the basis that the said software was an operating system software ? 4. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in upholding the disallowance of the provision for expenses to the extent of Rs. 50,08,053 /-on the basis that they were contingent in nature and the details as to the manner of creation of the provisions were not furnished ? 5. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has been in error in not adjudicating on the alternativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard to expenditure which is an annual subscription charge. Once the payment is for a fixed period, it is obvious that the said software cannot be used after expiry of that year. In the case of Toyota Kirloskar Motors, this court has held that : 3. . . when the life of a computer or software is 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, without renewing the licence or without paying the fee on such renewal, it is not possible to use those software in those circumstances the findings recorded by the authorities that the fee paid for obtaining the software and the licence and for renewing the same is to be construed as only revenue expenditure . . . (emphasis supplied) 9. We are in respectful agreement with the authority in Toyota Kirloskar Motors. Hence, this question needs to be answered in favour of the assessee. 10. Question No. 4 is disallowance of provision made for Rs. 50,08,053 by the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ana, disallowance made by the Assessing Officer has been set aside by the Commissioner of Income-tax (Appeals), resultantly, the provision has been allowed. 14. The contention urged on behalf of the Revenue that the determined amounts were not made available before the Revenue is factually incorrect and therefore untenable. Now, the point that remains to be considered and answered is whether the above seven expenditures could be allowed or not. 15. The specific contention of the assessee is that these expenditures are ascertained liabilities as on the date of closure of books of account. The objection raised by the Revenue that there are possibilities of employees leaving the company and not getting paid is also untenable because the percentage of the employees leaving their employment will be minimal and in such an event, the assessee is duty bound to reverse the entry in the following year. Since, the provisions made are ascertained figures, the disallowance made by the Assessing Officer and confirmed by the two authorities is perverse and unsustainable. 16. The last question is whether the Income-tax Appellate Tribunal was correct in holding that the appellant was not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee-company is claiming exemption under section 10A in respect of profits of Mumbai unit. Only during this year the asses see had loss and therefore, the assessee was claiming refund of taxes deducted in USA and Canada. 18. We have carefully perused the assessment order. The Assessing Officer has assessed the income of assessee as Rs. 11,32,90,110. For the reasons stated in paras 9.3 and 9.4 the tax credit has been denied and the said view has been approved by the CIT (A) and the ITAT. 19. Shri Suryanarayana contended that the assessee has two units, one in Mumbai and another in Bangalore. Mumbai unit has incurred loss and Bangalore unit is making profit. The assessment order covers both units. The Assessing Officer has assessed income and, therefore, the assessee is liable to pay tax. The assessee has also paid tax both in the USA and Canada, therefore under the DTAA Double Taxation Avoidance Agreement, the assessee is entitled for tax credit. 20. Shri Sanmathi's argument is that the assessee has availed of deduction under section 10A. Therefore, the assessee is not entitled to the benefit under DTAA. It is to be noticed that the Assessing Officer has ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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