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2015 (6) TMI 395 - AT - Income TaxDisallowance of expenditure towards purchase of software - Held that:- AO at least in the case of one of the software, viz., MPC 4 data preparation software has observed that it enhances the technical capacity of the computers. If that is the case, then it cannot be said that it brings in a radical change to the operations of assessee or part of the profit making apparatus. Further, though, AO has observed that software packages are going to give benefit to the assessee in the ensuing years, hence are of enduring nature, but he has not examined the exact life span of the software packages. Ld.CIT(A) has also not examined these aspects. In our view, without examining the nature of software purchased by applying the tests laid down by the Special Bench of ITAT, Delhi in case of Amway International Vs. DCIT (2008 (2) TMI 454 - ITAT DELHI-C ), it cannot be condusively said that expenditure incurred on software is capital in nature. As the departmental authorities have not done the aforesaid exercise, we are inclined to remit the matter back to the file of the AO for deciding afresh keeping in view the decision of the Special Bench of ITAT, Delhi referred to above. Needless to say AO must afford a reasonable opportunity of being heard to the assessee in the matter. - Decided in favour of assessee for statistical purposes. Disallowance of expenditure incurred on repairs and maintenance - Held that:- On examining the details of expenditure, we are of the view that expenditure incurred towards replacement of flooring cannot be considered to be a 'Capital Expenditure' as no new asset comes into existence as a result of such expenditure, rather, the expenditures incurred is more in the nature of maintenance of a capital asset. However, as far as false ceiling and partition charges are concerned, admitted fact is these were not existing earlier. Thus, the expenditure incurred by the assessee has brought into existence certain new assets. Therefore, the expenditure incurred being of enduring nature, it has to be treated as 'Capital Expenditure'. Similarly, the expenditure of ₹ 16,100/- has not been explained by the assessee with proper evidence. Therefore, on over all consideration of facts and materials on record, we direct the AO to allow the expenditure incurred towards replacement of flooring. - Decided partly in favour of assessee. Disallowance of depreciation on Plant & Machinery due to foreign exchange fluctuation - Held that:- It is manifest from record that deduction claimed by the assessee is on the basis of notional loss due to foreign exchange fluctuation. In our view, no addition or deduction can be made to the cost of the asset on account of such notional loss/gain on account of foreign exchange fluctuations as the assessee has not made any payment during the year. Only when the assessee makes payment any loss or gain on account of foreign exchange fluctuations can be adjusted towards cost of the asset. In that view of the matter, we do not see any reason to disturb the finding of the Ld.CIT(A). - Decided against assessee. Disallowance of expenditure towards subscriptions - Held that:- On verifying the details of expenditure incurred, we are of the view that the subscription fees paid on behalf of the Directors cannot be allowed as expenditure at the hands of the assessee-company. However, as far as the amount of ₹ 50,000/- claimed to be towards insurance payment relating to earlier years is concerned, we are of the view that the same requires examination by the AO. Therefore, to the limited extent of verifying the payment of ₹ 50,000/-, we remit the issue back to the file of AO to verify and allow the expenditure if assessee's claim is found to be correct. - Decided partly in favour of assessee for statistical purposes. Disallowance of 'Miscellaneous Expenditure' - Held that:- As can be seen from the explanation of the assessee before the departmental authorities, assessee has claimed that such expenditures were incurred on employees when they were sent out station. However, considering the fact that the expenditures incurred were not supported by any authentic bills/vouchers, some amount of inflation by the assessee while claiming this expenditure cannot be ruled out. In these circumstances, disallowance of 25% of the expenditure claimed in our view is reasonable and need not be interfered with. - Decided against assessee.
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