TMI Blog1999 (4) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... ftwares and the programmes which are required to do the job undertaken as per the specifications of the customers. Such programmes are need based and got developed in accordance with the requirements of specific customers. As per written submission filed by assessee wherein it is mentioned that a programme prepared to perform one particular job cannot be used for other jobs and even for the same job, if there arise substantial difference in the requirements of the customer o in the changing situation. 3. During the years under consideration, the assessee incurred job service charges of Rs. 2,93,082 and Rs. 4,51,828 for assessment years 1989-90 and 1990-91 respectively. These expenses were debited to the Profit Loss Account. These expenses also included the expenses for development of software. During the assessment year 1989-90 the expenses on development of software were made at Rs. 85,000 and during the year 1990-91 the expenses were at Rs. 1,35.000. The Assessing Officer disallowed the claim of these expenses by treating these expenses as capital in nature and he allowed depreciation of 1/3rd on these two amounts. Accordingly, additions of Rs. 56,667 and Rs. 71,111 were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same into mark sheet proforma. Various machine language softwares are used to prepare application software. For example, a programme for marks may be made in various machine languages software depending on the hardware used and requirement of user. Various machine languages are BASIC, COBOL, ORACLE, FOXPRO, C language etc. 5.3 With the change of hardware configuration and capability also, software and programme require changes. The software or the programme also require changes if the 'logic' for the desired results is being changed. The change in the legal requirement or other governing regulations also requires modification, substantial amendments or even re-writing of the programmes. Sometimes, the substantial change in reporting requirements call for rewriting the whole programme even without its user for very less time. There are many programmes which prove to be of short life because of loops in the programme, revealed as a result of practical user. Further, certain computer bugs and viruses also makes the programmes out of use. Another reason for uncertain, short and unwarranted life of programmes is fast and vast technological changes in and around computer because of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, and if the work could not be to the satisfaction of the customers, the contract is terminated because the 'time' as well as 'accuracy' remains the essence of these kind of contracts. It was further stated that whenever the programme is replaced with new one, the old programme losses its utility and is worthless. The assessee has certain programmers also engaged in modification, amendments to the programmes and writing supplementary/smaller programmes. It has been further stated that on account of uncertainties, instead of developing all the programmes in house, it is getting developed through outside agencies. Therefore, the expenses incurred on development of software are of revenue in nature. 5.6 Shri C.L. Jhanwar, the ld. A/R has further stated that the development of computer software in the present case has direct nexus with assessee's revenue generation and considering the nature of assessee's business, it is not a long lasting expenditure. It is not even an indirect expenses for it like the expenses for development of an accounting software for its own accounts. It is, as per its nature, a direct expenditure. Therefore, he pleaded that these are revenue expenditure in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and improvement of the existing business and was revenue in nature and was allowable as a deduction in computing the business profits of the appellant". It was further observed by the Hon'ble Apex Court as under:- "It would be unrealistic to ignore the rapid advances in research in antibiotic medical microbiology and to attribute a degree of endurability and permanence to the technical know-how at any particular stage in this fast changing area of medical science. The state of the art in some of these areas of high priority research is constantly updated so that the know-how cannot be said to be the element of the requisite degree of durability and non-ephemerally to share the requirements and qualifications of an enduring capital asset. The rapid strides in science and technology in the field should make us a little slow and circumspect in too readily pigeon-holding an outlay, such as this, as capital". We have considered other case laws also which was relied upon by the ld. A/R. In case of CIT v. Western India State Motors [1993] 203 ITR 363 (Raj), the Hon'ble Jurisdictional High Court has held that "according to normal accepted principles, a capital expenditure is somethin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble used in industry does not always mean that the fallout by way of benefit would not overstep the accounting year. For that reason, it cannot be said that it is not chargeable against revenue of the year. An example of this category of expenditure is repairs to permises and machinery where the benefit certainly over-runs the year." Likewise, we have also considered other case laws and we find that they all in support of assessee's case. We have also seen the order for Assessment Year 1988-89 in case of assessee itself where the department has allowed the similar claim by holding that the expenses are revenue in nature. 6. In view of all the above discussion, we are of the view that assessee deserves to succeed. We find that software used by assessee are not of any enduring benefit as assessee has to change these software within a short span of time i.e. 4 months or 6 months. We also noted that sometimes they are of no use at all because they become out-dated because of change of system and change of technology. The time is of fast changing and computer system is emerging as a very important component during this period of fast changing era. Day by day the systems are develope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above while disposing of the ground on account of conveyance and car expenses. 12. The next objection is against RST and P.F. This ground was not pressed and accordingly dismissed the same. 13. Ground No. 3 is against sustenance of Rs. 5,000 out of travelling expenses. This ground was not disposed of by the CIT (A). Therefore, the same is restored to the file of CIT(A) for disposing of and after giving an opportunity to the assessee. The above grounds were for Assessment Year 1989-90. 14. Similar additions were made for Assessment Year 1990-91. Ground No. 1 is similar to the ground No. 1 of Assessment Year 1989-90. Therefore, the same is disposed of as per appeal for Assessment Year 1989-90. 15. Ground No. 2 is against the various disallowances. Car repairing expenses are restricted to Rs. 10,000 on the reasons given in appeal for Assessment Year 1989-90. 16. Conference and Staff welfare expenses are deleted as we have already discussed this issue as they were made for business expediency. The telephone expenses is restricted to Rs. 2,000 on the reasoning given in Assessment Year 1989-90. 17. Next objection is in regard to RST and P.F. which was not pressed. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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