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TMI Blog2017 (5) TMI 1826X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred by the assessee in earlier years and have been allowed by the Revenue in scrutiny assessments and that AO has not brought any material which could prove of bringing any new asset into existence or that the expenditure was towards replacement of existing assets. Revenue has not brought any material on record to point out any fallacy in the finding of CIT(A). In view of the aforesaid facts, we see no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed. Non deduction of TDS - Expenses as Clearing and Forwarding charges on export - Assessee challenged the proposed disallowance by the A.O. on the ground that the payments are nothing but reimbursement charges and, therefore, not liable for any deduction of tax at source - HELD THAT:- We find that the order of the First Appellate Authority in A.Y. 2008-09 was challenged before the Tribunal but this relief given by the First Appellate Authority was never questioned before the Tribunal. This means that the issue has attained finality. Since in earlier assessment year, the deletion of the disallowance was not challenged before the Tribunal, we do not find any reason why on similar set of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies below. The issue in the present is whether the software expenses are allowable are Revenue expenses. We find that the ld. CIT(A) while deciding the issue has noted that identical facts arose in assessee's own case in AY 2007-08. He thereafter following the decision of his predecessor, decided the issue against the assessee. We find that against the order of ld. CIT(A) for AY 07-08 the matter was carried before the Coordinate Bench of Tribunal (ITAT B Bench Ahmedabad). The Coordinate Bench of Tribunal vide order dated 02/05/2016 decided the issue in favour of assessee by observing as under: 8. We have heard the rival contentions and perused the material on record. The sole grievance of the assessee in this appeal is against the action of the ld. CIT(A) in treating the expenditure of Rs. 35,30,328/- towards purchasing and upgrading software as capital expenditure which has been claimed by the assessee as revenue expenditure in its return of income. The itemize break-up of the impugned expenditure of Rs. 35,30,328/- is as under: Sr. No. Particulars Amount (Rs.) 1. Software License 16,07,497 2. AUTO CAD LT-2007 59,280 3. AUTO CAD Software 118,560 4. AUTO Desk Software 1,274,624 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee will have to be granted depreciation @ 60% on WDV basis in A.Y. 06-07 and also in subsequent years. The depreciation of WDV for subsequent years will work out to Rs. 2,09,630/- (for A.Y.07-08), Rs. 83,854 (for A.Y. 08-09), Rs. 33,542(for A.Y. 09-10) and so on. Considering the totality of the facts, the total taxable income of Rs. 35.85 crore as determined by the AO, the changes that would be required to be made in subsequent assessments orders if the depreciation is to be allowed in all subsequent years and the peculiar facts of the case, we are of the view that the claim of the assessee be allowed in the present case. We may however add that the allowance of the expenditure in the present case should not be considered as a precedence for allowance of the expenditure. Thus these grounds of the Assessee are allowed. 10. We further observe that the Hon'ble Delhi High Court in the case of CIT v. Asahi India Safety Glass Ltd (supra) has also dealt with the similar issue, wherein the assessee incurred revenue expenditure towards application software to be run on oracle application and the decision was given in favour of the assessee by observing as under: The test of endurin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /or to run the system. [Para 9.1] In the background of the aforementioned findings, it cannot be said that the expenses brought about in an enduring benefit to the assessee. The Assessing Officer was perhaps swayed by the fact that in the succeeding financial year, i.e., 1997-98 (assessment year 1998-99), the amount spent was large. First of all, the extent of the expenditure cannot be a decisive factor in determining its nature. As observed by the Tribunal, the assessee in the relevant assessment year had a turnover of Rs. 150 crores and that even without this expenditure it would have continued to achieve the said turnover, though the expenditure in issue would have enabled it to run its business more efficiently. Therefore, the rationale supplied by the Assessing Officer in support of its order is flawed and, hence, it would have to be rejected. [Para 10] Secondly, the mere fact that the Assessing Officer records that the expenditure, in financial year 1997-98 (assessment year 1998-99), was incurred towards what he terms as an on-going project would not ipso facto give it a colour of capital expenditure. A careful reading of the Tribunal's judgment shows that after noticing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that either the extent of the expense or the expense being incurred in close proximity, in the subsequent years, would be conclusively determinative of its nature. The Assessing Officer has erred precisely for these very reasons. [Para 12] The contention of the revenue that in the books of account, the assessee had not written off the expense in issue, while in the succeeding assessment year only a part of the expense had been written off and, therefore, the assessee's own understanding of the nature of the expense involved was that it was expended on capital account is be rejected. The reason being: that the treatment of a particular expense or a provision in the books of account can never be conclusively determinative of the nature of the expense. An assessee cannot be denied a claim for deduction which is otherwise tenable in law on the ground that the assessee had treated it differently in its books. [Para 13 13.1] Therefore, the aforesaid contention is of no avail to the revenue. [Para 13.2] Therefore, the Tribunal was correct in law in holding that the expenditure incurred by the assessee on account of software and professional expenses was a revenue expenditure. [Para 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed. 6. As no distinguishing decision has been brought on record before us, respectfully following the findings of the Co-ordinate Bench (supra), we decline to interfere. Ground no. 3 is dismissed. 7. Coming to the grievance raised vide ground no. 2 of the appeal, we find that during the course of the assessment proceedings, the A.O. noticed that the assessee has debited expenses of Rs. 17,11,387/- as Clearing and Forwarding charges on export. The A.O. noticed that the assessee has not deducted tax at source on these payments. The assessee was asked to show cause why the payments made to clearing forwarding charges agents should not be disallowed u/s. 40(a)(ia) of the Act. Assessee challenged the proposed disallowance by the A.O. on the ground that the payments are nothing but reimbursement charges and, therefore, not liable for any deduction of tax at source. The contention of the assessee did not find any favour with the A.O. who proceeded by placing reliance on the CBDT Circular No. 715 and made the addition of Rs. 17,11,387/-. 8. The assessee strongly objected to this addition made by the A.O. before the ld. CIT(A). 9. After considering the facts and the submissions, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed a downward adjustment in the payment of guarantee to the extent of Rs. 23,51,667/-. Taking a leaf out of the findings of the TPO, the A.O. made the disallowance of Rs. 23,51,667/-. 14. Assessee assailed the findings of the A.O. before the ld. CIT(A). 15. After considering the facts and the submissions, the ld. CIT(A) observed that in the earlier assessment year also similar transaction was there with the AE and was part of Transfer Pricing records which has not been controverted by the A.O./TPO and since on similar facts, no adjustment was made in the earlier assessment year, following the rule of consistency, such adjustment cannot be made in the current assessment year also. 16. Before us, the ld. D.R. strongly supported the findings of the A.O./TPO. Per contra, the ld. Counsel for the assessee reiterated what has been stated before the lower authorities. 17. There is no dispute that all the three entities that is the assessee company, the lender company and the guarantor company are Associated Enterprises. There is also no dispute that the assessee has borrowed the money on interest of 12.25% per annum as against interest of 15% quoted by the Bank. Considering the guara ..... X X X X Extracts X X X X X X X X Extracts X X X X
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