Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2023 (12) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (12) TMI 1133 - DELHI HIGH COURTTP Adjustment - comparable selection - HELD THAT:- Rejection of comparables as functional dissimilar as covered against the appellant/revenue by the decision rendered by this Court in the matter of Principal Commissioner of Income Tax vs. ST Microelectronics Private Limited [2017 (11) TMI 266 - DELHI HIGH COURT] Nature of expenses - purchasing software licenses - revenue or capital expenditure - HELD THAT:- There is no dispute that the respondent/assessee had purchased licensed software, of which, it did not have ownership or title. It is also not in dispute that the license had a duration that did not exceed one (1) year. Assessee’s stand that the licensed software was used for business operations was also not disputed by the appellant/revenue. That said, the test employed by the AO and the DRP, that is “enduring benefit” is not, in our view, a conclusive test to determine the nature of the expense [See Empire Jute Company Limited vs. Commissioner of Income Tax 1980 (5) TMI 1 - SUPREME COURT]. The ratio of the judgment rendered in the Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] as held that the expenditure which is incurred, which enables the profit-making structure to work more efficiently leaving the source of the profit-making structure untouched, would in our view be an expense in the nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably; leaving the fixed assets untouched would be an expenditure in the nature of revenue expenditure even though the advantage may last for an indefinite period. Test of enduring benefit or advantage would thus collapse in such like cases. It would in our view be only truer in cases which deal with technology and software application, which do not in any manner supplant the source of income or added to the fixed capital of the assessee In our view, would apply to the facts of this case, and therefore, no substantial question of law arises with regard to the said issue. Amount expended on training its employees - capital or revenue expenses - ITAT Ruled in favour of the respondent/assessee - HELD THAT:- In our view, qua this issue as well, the test employed, i.e., the advantage of “enduring nature” is not the correct one. Training accorded to employees, which may have a lasting impact, is not determinative of the fact that the expenditure should be treated as one incurred on the ‘capital’ account. In determining the treatment to be given to expenses, it has to be seen whether the profit structure of the assessee is altered. It is well established that if the profit structure is left undisturbed, such an expense is to be treated as one incurred on the revenue account. The mere fact that employees' efficiency improves with learnings acquired through seminars, conferences, and other forms of training, cannot be the reason to treat such expenses as ‘capital’ expenditure. As noted by the Tribunal, it is not as if the employees stay with the employer (in this case, the respondent/assessee) for all times to come. It is quite possible that the employees may shift to another employer.no substantial question of law arises.
|