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TMI Blog2024 (8) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Pramod Kedia, AR For the Revenue : Shri Santosh Kumar, Sr.D.R. ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER :- This appeal is filed by the Assessee as against the appellate order dated 09.01.2024 passed by the Additional Commissioner of Income Tax (Appeals)-4, Kolkata, arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relating to the Assessment Year 2013-14. 2. The brief facts of the case is that the assessee is a Company engaged in the business of Software Development and Maintenance. The assessee filed its Return of Income for the Asst. Year 2013-14 on 30.09.2012 declaring total income of Rs. 38,825/-. The return was taken up for scrutiny assessment. The Assessing Officer disallowed Product Development expenses written off Rs. 19,66,641/- and added as the income. The assessee explained the expenditure was incurred for development of one software product on HR Management System in the name of ProHR for linking strategy and performance with integrated payroll and Web based self-service which was started in the year 2009-10. The expenditure of Rs. 19,27,806/- relates to expenses for the developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the subject project was completed whereby the software was developed and it already came in to existence. The Ld. CIT(A) ought to have accepted the appellant's contention that the judicial precedents relied upon by the appellant were applicable to the facts of the case and in law and ought to have deleted the impugned disallowance of Rs. 19,27,806/- made in the assessment order dated 15/02/2016 passed u/s 143(3) of the Act. Accordingly, your appellant prays that it may please be held that the impugned disallowance of Rs. 19,27,806/- is not sustainable and deserves to be deleted.. 3. Without prejudice, Section 37(1) of the Income Tax Act, 1961 permits deduction of any other expenditure (not being personal or capital expenditure and expenditure mentioned in Sections 30 to 36 of the said Act) laid out or expended wholly and exclusively for the purpose of business or profession. The appellant respectfully prays that the impugned expenditure incurred of Rs. 19,27,806/- is also allowable on the grounds of commercial principles and expediency as this was a genuine expenditure expended during the AY: 2013-14 wholly and exclusively for the purpose of business of the appellant. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature in the following judicial precedents. 8. The Hon ble Bombay High Court in the case of PCIT-Vs-Trigent Software Ltd. (in ITA No. 634 640 of 2018) order dated 02.12.2022 wherein it was held as follows: 10. The issue as to whether a particular expenditure incurred was of capital or revenue in nature has been the subject matter of legal debate before various Courts in the Country. As held by the Apex Court in the case of Empire Jute Co. Ltd. (Supra), 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. However, it referred to one celebrated test laid down in the case of British Insulated Helsby Cables Ltd. Vs. Atherton 5. 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 treati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (1) Ltd. (Supra), it was held that if the expenditure was incurred for starting a new business which was not carried out by the assessee earlier, then such expenditure would be held to be of a capital nature and it would be irrelevant as to whether the project really materialized or not. However, if the expenditure incurred was in respect of the same business, which was already carried on by the assessee, even if it was for the expansion of the business, i.e., to start a new unit and there was unity of control and a common fund, then such an expense was to be treated as business expenditure. It was held that in such a case whether a new business/asset came into existence or not would become a relevant factor and that if there was no creation of a new asset, then the expenditure incurred would be of revenue nature and that if the new asset came into existence which was of an enduring benefit, then such expenditure would be of a capital nature. This view was also followed in the case of Commissioner of Income-tax, Ranchi Vs. Tata Robins Fraser Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are used for the assessee's own business, are new source of income. A cellular tower can be a new independent source of Income, if it is erected exclusively for leasing out to the other operators. However, on facts, this was not the position and the tribunal, therefore, rightly concluded that in series of decisions, the High Courts and the Hon'ble Supreme Court of India has laid down the principle that if an expenditure is incurred for doing the business in a more convenient and profitable manner and has not resulted in bringing any new asset into existence, then, such expenditure is allowable business expenditure. In the present case, no new business was set up, but towers in addition to which were already set up were proposed at site, which project was later on abandoned. 10. We do not find that the tribunal has committed any perversity or applied incorrect principles to the given facts and circumstances. When the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that questions (a) and (b), as pressed, are substantial questions of law. The appeal is devoid of merits and it is dismissed. 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