Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (6) TMI 1376 - ITAT MUMBAIAllowable Revenue expenses u/s 37(1) - cost towards development of software products, solutions and management - treatment as expenditure as incurred for the purpose of setting up a new project -Expenditure incurred on development of a product of the same line of business - HELD THAT/:- We find assessee is engaged in the business of developing software, that it had debited an amount as exceptional item in its books of accounts under the head developing a new item, that the expenditure of the product pertained to the AY. 2004-05 to AY. 2007-08, that in the year under consideration it abandoned the development of the software, that it claimed the expenditure as revenue expenditure. Expenditure incurred on development of a product of the same line of business, in our opinion, held to be allowed as revenue expenditure. It is possible that the assessee, may due to certain reasons, abandoned the product but that would not make the expenditure of capital nature. Entries in the books of accounts are important to a certain extent only. What is to be seen is the real nature of the expenditure. In the case under consideration the incurring of expenditure is not in doubt, the AO has not held that expenditure was not incurred for development of software i. e. for the existing business of the assessee. See IL & FS Education and Technology Services Private Ltd [2013 (4) TMI 992 - ITAT CHENNAI] , M/S BINANI CEMENT LTD.[2015 (3) TMI 849 - CALCUTTA HIGH COURT] and Indoram Synthetic India Private Ltd. [2009 (9) TMI 635 - DELHI HIGH COURT] Thus we hold that the order of the FAA does not suffer from any legal or factual infirmity. As far as case of EID Perry[2001 (11) TMI 25 - MADRAS HIGH COURT] is concerned, we would like to state that in that matter the Hon’ble Madras High Court had held that it was clear from the assessee’s own case that the expenditure was incurred for the purpose of setting up a new project. The case before us, is not of ‘setting up of new project’. In that matter the assessee, a manufacturer of sugar, wanted to set up a new project for the manufacture of methanol. Thus, the case is of no help to decide the issue. Effective ground of appeal against the AO.
|