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2014 (11) TMI 378 - AT - Income TaxSoftware expenses disallowed – Revenue expenses or not – Held that:- Assessee rightly contended that the softwares purchased by the assessee were used to carry on the business more efficiently and they do not fall in the category of profit making apparatus of the assessee’s business - they fall in the category of Revenue expenditure relying upon the tests laid down in Amway India Enterprises. Versus Deputy Commissioner Of Income-tax, Circle - 1(1), New Delhi [2008 (2) TMI 454 - ITAT DELHI-C] - the software named “Wealth spectrum” is supportive software for PMS application - Similarly the software named “i-deal” is also supportive software for i-deal application - The nature of software named “Chart FX” is not stated - The description given for the software supports the submission of the assessee that they are not the primary software, on which the business of the assessee is run, but they perform supporting role and they are having short life due to continuous upgrading - All the submissions have not been controverted by the revenue – thus, the order of the CIT(A) is set aside and the AO is directed to allow the claim – Decided in favour of assessee. For the remaining two softwares that are Windows Server, 2003 and Abode Photoshop etc., the first one is an operating system and the second one is application software - Both the softwares are also having fairly long utility life - CIT(A) was justified in holding that the expenses incurred in acquisition of the softwares is capital in nature. Disallowance u/s 14A – Application of formula provided under Rule 8D - Held that:- The assessee had held investment of ₹ 70.62 crores as on 1.4.2007 and it has come down to ₹ 68.26 crores as on 31.3.2008 - the assessee has invested mainly in various schemes of Reliance mutual fund and its subsidiaries - out of aggregate investments of ₹ 68.25 crores, the investment made in other companies was only ₹ 8.00 crores - The remaining investments are mainly in various schemes of Reliance mutual fund only and also in other group concerns - the investments made in the various schemes of Reliance mutual fund and also in other group concerns are usually made out of business policy and the same does not require complex analysis by technical experts - there is no necessity to apply the formula prescribed in Rule 8D(2)(iii) of the Income tax Rules - the disallowance worked out by the assessee also appears to be on a lower side - the assessee has allocated salary of a junior executive in the workings - Though the investments made in the schemes of Reliance mutual fund and group concerns do not require technical analysis, yet the decision to make investment is normally taken at a higher level - thus, the disallowance under Rule 8D(2)(iii) is determined at ₹ 3,50,000 – thus, the order of the CIT(A) is modified – Decided partly in favour of assessee.
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