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2023 (7) TMI 687 - HC - Income TaxDeduction u/s 10A - claim allowed for initial years - HELD THAT:- Issue are covered by the decision in CGI Information Systems and Management Consultants Pvt. Ltd. [2022 (10) TMI 1186 - KARNATAKA HIGH COURT] in assessee's own case. Nature of expenses - expenses incurred towards subscription of Microsoft licences - treated as capital in nature on the basis that the said software was an operating system software - HELD THAT:- It is not disputed that software licence fee is paid annually. Revenue's contention that software is embedded into personal computer and the computer has been treated as a capital expenditure, on the face of it, is untenable because there is no dispute with regard to expenditure which is an annual subscription charge. Once the payment is for a fixed period, it is obvious that the said software cannot be used after expiry of that year. As decided in Toyota Kirloskar Motors [2013 (2) TMI 108 - KARNATAKA HIGH COURT] when the life of a computer or software is less than two years and as such, the right to use it for a limited period and without renewing the licence or without paying the fee on such renewal, it is not possible to use those software in those circumstances the findings recorded by the authorities that the fee paid for obtaining the software and the licence and for renewing the same is to be construed as only revenue expenditure - Decided in favour of assessee. Disallowance of the provision for expenses - Addition on the basis that they were contingent in nature and the details as to the manner of creation of the provisions were not furnished - HELD THAT:- The contention urged on behalf of the Revenue that the determined amounts were not made available before the Revenue is factually incorrect and therefore untenable. Now, the point that remains to be considered and answered is whether the above seven expenditures could be allowed or not. The specific contention of the assessee is that these expenditures are ascertained liabilities as on the date of closure of books of account. The objection raised by the Revenue that there are possibilities of employees leaving the company and not getting paid is also untenable because the percentage of the employees leaving their employment will be minimal and in such an event, the assessee is duty bound to reverse the entry in the following year. Since, the provisions made are ascertained figures, the dis- allowance made by the AO and confirmed by the two authorities is perverse and unsustainable. Entitlement to tax credit withheld in the US and Canada - as argued assessee has availed of deduction u/s 10A. Therefore, the assessee is not entitled to the benefit under DTAA - HELD THAT:- As noticed that the AO has assessed the income of the assessee - assessee is liable to pay tax on the said income. If the argument of Revenue that the assessee has availed of deduction u/s 10A is to be accepted, the assessee's income will have to be re-computed and after giving deduction u/s 10A, if the assessee becomes liable to pay tax, he must be entitled to tax credit. As brought to the notice of this court that section 10A deduction has been allowed by this court [2022 (10) TMI 1186 - KARNATAKA HIGH COURT] - In view of our findings, notwithstanding section 10A deduction, the assessee shall be entitled for tax credit (See : Wipro Ltd v. Dy. CIT [2015 (10) TMI 826 - KARNATAKA HIGH COURT]). Accordingly, this question is answered in favour of the assessee.
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