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2015 (8) TMI 611 - AT - Income TaxDisallowance of software expenditure by holding it as capital in nature - Held that:- In view of the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court), where the expenditure has been incurred for facilitating the business and which does not form part of profit making apparatus, then the software expenditure is to be allowed as revenue expenditure. Where the assessee had incurred expenditure on software which has been acquired to facilitate the smooth functioning of day-to-day business operations of the assessee and which do not form part of its profit making apparatus, then the expenditure is allowable as revenue expenditure in the hands of the assessee. The expenditure incurred by the assessee totaling ₹ 2,33,725/- has been incurred in the ordinary course of carrying on the business and does not form part of its profit making apparatus, hence, the said expenditure is duly allowable as revenue expenditure in the hands of the assessee. - Decided in favour of assessee. Disallowance of deduction on amortised lease premium expenditure, landscaping and development charges - Held that:- This issue was decided against the assessee in earlier year [2015 (8) TMI 557 - ITAT PUNE] wherein the Tribunal after considering the plea of the assessee with regard to amortization of lease hold premium has rejected the same by following the decision of Co-ordinate Bench in the case of M/s. Drillbits International P. Ltd. Vs. DCIT [2011 (8) TMI 1083 - ITAT PUNE ] - Decided against assesse. Disallowance of provision for expenditure in respect of benefit under Bhavishya Kalyan Yojana (BKY) an employee welfare scheme and Disallowance of provision for Medi-claim insuranc coverage scheme - Held that:- Since, the issue in present set of appeals is similar to the one already decided by the Tribunal in earlier year [2015 (8) TMI 557 - ITAT PUNE], we remit this issue back to the Assessing Officer with a direction to determine the deduction on account of BKY scheme and medi-claim insurance in the same terms. Decided partly in favour of assessee way of remand. Disallowance of deduction claimed u/s. 35D in relation to expenditure incurred for increasing authorized share capital - Held that:- Since, the issue in present set of appeals is similar to the one already decided by the Tribunal in earlier year [2015 (8) TMI 557 - ITAT PUNE] wherein held held that undisputedly the expenditure was incurred by the assessee for increasing share capital thus it is capital in nature. Thus, the same cannot be considered for computing deduction u/s 35D of the Act. In the present set of appeals also, it is an admitted position that the expenditure claimed as deduction under section 35D is with respect to increase in authorized share capital. Decided against assessee Disallowance of entrance fee paid to Poona Club - Held that:- This issue is squarely covered in the case of CIT Vs. Groz Beckert Asia Limited (2013 (2) TMI 375 - PUNJAB & HARYANA HIGH COURT ) wherein held that the Corporate Membership of the club was obtained for running business with a view to produce profit. Such membership did not bring into existence an asset or an advantage for enduring benefit of business. It is an expenditure incurred for the period of membership and is not long lasting. By subscribing to membership of a club, no capital asset was created, only, a privilege to use facilities of a club, were conferred and that too for a limited period. Thus the expenditure incurred by the assessee towards payment of Corporate Membership fee of the club for its employees is Revenue expenditure - Decided in favour of assessee. Disallowance of deduction u/s. 80HHE - fist limb of submissions is that for computing deduction u/s 80HHE, the export turnover of the unit on which benefit of section 10A has been claimed has to be included - Held that:- This issue has been decided by the Tribunal in assessee's own case for the assessment year 2001-02. The relevant extract of the order of the Tribunal deciding the issue in favour of the assessee and we direct the Assessing Officer to include the export turnover of the EOU unit while computing the deduction under section 80HHE of the Act - Decided in favour of assessee. AMC receipts - whether are integral part of the business income of the assessee? - Held that:- It is an undisputed fact that the assessee has been showing AMC charges in the profit and loss account under the head "Income from services". A perusal of the profit and loss account for the year ended 31-03-2004 would show that under the head "Income", the assessee has three sub heads viz "Income from services", "Sale of products" and "Other income". Under the head "Income from services" the assessee has included income from various services rendered by it and AMC charges. Under the head "Sale of products" the revenue generated from sale of own products and trading products is included whereas under the head other income, interest income, foreign currency gain miscellaneous income is reckoned. It is also not disputed that the assessee has been consistently following similar method of accounting in respect of AMC charges for the past several years, as well as, in the subsequent years. It is also not disputed that the assessee is primarily engaged in providing I.T. related services. Therefore, by no stretch of imagination the AMC charges received by the assessee can be held to be income of the assessee under the head "Other sources". In view of the above undisputed facts, we are of the considered view that the AMC receipts are integral part of the business income of the assessee - Decided in favour of assessee. Reallocation of expenditure between Software Technology Park (STP) and Non-STP Unit - Held that:- Allocation of depreciation on the basis of turnover is not acceptable. The depreciation on vehicles can be allowed on the basis of use of vehicles for the specific unit. Vehicles are allocated to the staff of the STP and Non-STP unit. The vehicles allocated to two different units can be identified. Depreciation on the asset utilized for a particular unit has to be allocated to that unit alone. We do not find any infirmity in the method of depreciation on vehicles adopted by the authorities below. The submissions of the Ld. AR on this issue are rejected. As regards allocation of travelling assessee and conveyance expenditure has allocated directly identifiable expenditure on actual basis to the STP and Non-STP unit and common expenses on the basis of turnover. We do not find any error in allocating of travelling and conveyance expenditure on actual directly identifiable basis and payments made to Tata Technology (US) since, the expenditure are identifiable unit wise, and have been separately invoiced, we accept the contention of the assessee. we remit the latter two issues back to the Assessing Officer to verify the allocation of both expenses on above noted basis. The Assessing Officer after affording opportunity of hearing to the assessee shall allocate expenditure to STP and Non-STP units - Decided partly in favour of assessee by way of remand. Re-computation of deduction u/s. 10A of the Act - Held that:- he Assessing Officer after reallocation of certain expenditure [depreciation on vehicles, travelling and conveyance and payment to Tata Technology (US)] has restricted the claim of exemption u/s. 10A in the assessment year 2004-05 and 2005-06. Since, the ground of appeals of the assessee with regard to reallocation of the expenses has been partly accepted. We remit this issue back to the Assessing Officer for re-computation of exemption u/s. 10A in accordance with the directions of the Tribunal in respect of allocation of expenses and in line with the decision of Hon'ble Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd. reported as [2010 (6) TMI 65 - BOMBAY HIGH COURT] Decided in favour of assessee by way of remand. Levy of Interest u/s. 234B and 234C is mandatory and consequential. Disallowance u/s. 14A. - CIT(A) delted addition - Held that:- . The assessee has claimed interest expenditure in the assessment years 2004-05 and 2005-06. The Assessing Officer held that the expenditure incurred for earning income exempt from tax is not allowable under the provisions of section 14A. The Assessing Officer estimated the disallowance @ 2.5% and computed interest attributable to long term investment. The Commissioner of Income Tax (Appeals) reversed the findings of the Assessing Officer on the ground that no dividend was earned by the assessee from the investments made in Tata Technology (US). Even if the assessee would have earned dividend on such investment it is taxable in India being dividend earned from foreign country. Therefore, the provisions of section 14A of the Act are not applicable. We are in agreement with the findings of Commissioner of Income Tax (Appeals) - Decided in favour of assessee. Non deduction of TDS - disallowance of taxes claimed to be payments on account of VAT, Advance tax, Employee Cost etc. paid in Korea - CIT(A) delted disallowance - Held that:- It is an un-rebutted fact that the assessee has not claimed any deduction with respect to payment of tax, rates etc. in Korea. The assessee has created provision for the same. The assessee in Profit & Loss Account for the period relevant to the impugned assessment year has debited the 'Provision for taxation account' below the line. This factual findings have not been refuted by the Revenue. We do not find any infirmity in the findings of the Commissioner of Income Tax (Appeals) on this issue. Accordingly, this ground of appeal of the Revenue is dismissed.- Decided in favour of assessee.
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