TMI Blog2004 (7) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... arding the aforesaid expenditure had not been incurred in acquiring any capital asset or further also such an expenditure had not been incurred in capital field. 3. That the learned Commissioner of Income tax (Appeals) has erred on facts and in law in holding that the revenue expenses incurred by the Appellant on accounting software will provide to the Appellant an advantage of enduring nature and that accounting software can be used for a number of years with slight modifications and upgradation. Even assuming the aforesaid finding was correct (though was disputed) the expenditure incurred even then ought to have been allowed as a business expenditure, as claimed. 4. That without prejudice to the above and in the alternative the learned Commissioner of Income Tax (Appeals) has erred even in holding that even in the event the expenditure is taken as capital expenditure, the appellant is not entitled for depreciation, as the rate applicable to "intangible assets" under the provisions under section 32(1) of the Income-tax Act, 1961 ( the Act ) are not applicable to capital expenditure on purchase of "software" disregarding his own findings. 5. That further in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut it was a system which would continue to be used by the assessee for a number of years with little future modification and upgradations. The Assessing Officer while agreeing that the expenses incurred on upgrading and maintenance of this package were allowable as revenue expenditure took the view that insofar as the expenses relating to the acquisition of the accounting software were concerned, these were not allowable as revenue expenses since the assessee company would continue to derive benefit of enduring nature from this software for a number of years. Since the assessee had incurred these expenses for the business purposes, the Assessing Officer accordingly held that the expenses would be spread over a period of four years and in each of the year 1/4th of the expenses would be allowed. The Assessing Officer accordingly allowed 1/4th of the expenditure in the year under consideration and the remaining expenditure was added to the income of the assessee. With regard to the alternate contention of the assessee that in case the expenditure was held to be capital in nature, the assessee should be allowed depreciation thereon at the rates applicable on intangible assets under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) now the assessee is in appeal before the Tribunal. 5. At the time of hearing the learned counsel for the assessee submitted that expenditure of Rs. 61,72,800 incurred on software is duly supported by copy of invoice and foot note and has been incurred under an agreement dated 23rd July, 1999 for providing to the assessee an accounting software. According to Article 5 of the Agreement, the software SAS-S provided to the assessee M/s. Sumitomo Corporation, Japan could be used at all personal computers in the business use at its offices located in India. Article 7 provides certain restrictions for the use of software acquired by it. It is thus evident that the expenditure was a business expenditure of the nature of revenue expenditure and was thus to be allowed as revenue expenditure. He further argued that Assessing Officer himself has admitted it to be revenue expenditure, but he has erred in holding the same as deferred revenue expenditure. It is not a case where the assessee is seeking expenditure to be allowed to it by treating the same as deferred revenue expenditure. The finding that the advantage is of enduring benefit is not a sufficient ground to hold an expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from assessment year 2003-04 and not retrospective. Therefore, the contention of the assessee that the expenditure incurred on computer software during the year under consideration was not required to be capitalized but it was to be allowed as revenue expenditure, was supported from the aforesaid amendment in the Income-tax Rules, 1962. 6. The learned counsel for the assessee further relied on the new accounting standard 26 on intangible assets, issued by the Institute of Chartered Accountants of India and effective from accounting periods commencing on or after 1-4-2003 to demonstrate that the same clearly provides that the software acquired for internal use are revenue expenditure unless it meets the specified conditions only from the financial year 2003-04 and onwards. Thus, the accounting standard too prescribes the capitalization prospectively from financial year 2003-04 and not retrospectively. It is settled law that in absence of statutory provisions, accounting practices laid out by professional bodies should be adopted for computing the income of the assessee company. In support of this argument the learned counsel relied on the ratio of decision of Hon ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings and conclusions both are in disregard of the facts on record and the conclusion is also unsustainable. 8. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the expenditure incurred was on repair and maintenance and as such the amount claimed aggregating to Rs. 26,40,167 ought to have been allowed as a deduction while computing the total income of the assessee company." 10. The Assessing Officer, from the details of repairs and maintenance expenses, incurred by the assessee on two buildings, noticed that the assessee had shown an amount of Rs. 19,13,000 as site expenses and Rs. 10,20,518 as maintenance charges of CMD House. The assessee explained before the Assessing Officer that the expenses of Rs. 10,20,518 were incurred on laying of water pipes, taps and other accessories purchased for water maintenance and the amount of Rs. 19,13,000 had been incurred on dismantling and structural repairs of the premises of a building in Mumbai taken on lease for the purpose of making the premises congenial and better in ambience as per the needs of the business operation. The Assessing Officer had noted that the assessee company had capitalized certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998] 233 ITR 468 (SC) and Girdhari Dass Sons v. CIT [1976] 105 ITR 339 (All.). 12. The learned CIT(A) was in complete agreement with the findings of the Assessing Officer to hold that expenditure incurred by the assessee on structural changes of the premises was in the nature of capital expenditure; it was a one time expenditure which would result in enduring benefit to the assessee. He, therefore, confirmed the order of the Assessing Officer. 13. Aggrieved by this order of the learned CIT(A) the assessee is in appeal before the Tribunal. At the time of hearing the learned counsel for the assessee reiterated the stand taken by the assessee before the lower authorities. It was contended that the expenditure incurred should be held to be revenue as it had been incurred on premises taken on lease and expenses are on repairs and maintenance and are also small expenses. It was emphasized that the expenditure had been incurred in respect of the premises taken on lease and are admittedly being used for the purpose of business and as such revenue in nature. In support reliance was placed on the ratio of decision of Hon ble Apex Court in the case of Madras Auto Services (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstallation of a dust extraction plant to protect the health of the workmen is a revenue expenditure. Likewise, in the case of Hindustan Electro Graphites v. CIT [1996] 218 ITR 688 the Hon ble Madhya Pradesh High Court has held that the expenditure on plantation in the factory and the residential quarters of the assessee with a view to making the atmosphere pollution free, is also a revenue expenditure. 15. It was, therefore, submitted that the CIT(A) failed to appreciate that the expenditure incurred was allowable as revenue expenditure and could not by any stretch of imagination be held to be capital expenditure. According to him the ratio of decision laid down in the case of Madras Auto Services (P.) Ltd. ( supra ) is directly applicable to the facts of the case in hand as the expenditure has not resulted into any expansion of the profit making apparatus of the assessee. Various clauses of lease deeds of the building showed that no structural change was permitted in leased premises and therefore the entire amount was revenue expenditure. Learned counsel also relied on the decision in the case of CIT v. Shri Ram Refrigeration Industries Ltd. [2002] 253 ITR 783 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re effected. It was held by the Hon ble Supreme Court that what the assessee did was not mere repairs but a total renovation of the theatre. New machinery, new furniture, new sanitary fittings and new electrical wiring were installed besides extensively repairing the structure of the building. It was further held that by no stretch of imagination could the said repairs qualify as "current repairs" within the meaning of Income-tax Act. In the instant case the assessee has incurred the expenditure on repairs and maintenance of premises taken on lease by him for business purposes. The nature and magnitude of the expenditure on repairs and maintenance of these leased premises is such that it cannot be said that expenditure was one time, which would result in enduring benefit to the assessee. The case laws relied by the assessee and discussed earlier in our order support the contention of the assessee squarely. Therefore, the addition made by the Assessing Officer and sustained by the CIT(A) on this count is deleted. 19. In ground No. 9 the assessee has challenged the charging of interest under sections 234B and 234C. Admittedly the charging of interest under the aforesaid sections ..... X X X X Extracts X X X X X X X X Extracts X X X X
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