TMI Blog2012 (9) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of requirement of the business and then decide whether it is revenue or capital in nature. Dis-allowance of service charges paid by the appellant to M/s Sovereign to take over the clientele business of the said company pursuant to the SEBI regulations - Held that:- MOU clearly shows that assessee company has purchased entire clientele business of SGFPL. We fail to understand how payments made to SGFPL for purchase of its clientele business can be termed as service charges as no services have been provided by the said company except transferring its entire clientele as per MOU. Entire payment is of capital in nature and deserves to be added back to the returned income - Decided partly in favor of assessee - ITA No. 2716/Mum/2009 - - - Dated:- 22-6-2012 - SHRI B.R. MITTAL AND SHRI N.K. BILLAIYA JJ. Appellant by: Shri Vipul Joshi Respondent by: Shri Parthasarthi Naik O R D E R PER N.K. BILLAIYA (AM): This appeal by the assessee is directed against the order of the Ld. CIT[A] IV, Mumbai dated 19/11/2008. The Assessee has raised four grounds of appeal . 2. Ground No. 1 relates to the confirmation of disallowance of depreciation of Rs.21,56,250.00 on BSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax 327 ITR 323 wherein the Hon ble Apex Court has confirmed the findings of the Income-tax Appellate Tribunal in the aforesaid case . 6. The Ld DR relied upon the orders of the lower authorities. 7. We have heard the rival contentions and perused the orders of the lower authorities and order of the Hon ble Supreme court relied upon by the counsel . We find that the only ground on which the depreciation has been disallowed is that the BSE membership card is not an intangible asset and therefore not entitled for depreciation. This issue has been set at rest by the Hon ble Supreme Court in the case of Techno Shares [Supra] wherein the apex court has thus held : Reversing the decision of the High Court, on a consideration of the BSE rules, that the right of membership was a "business or commercial right" and could be said to be owned by the assessee and used for business purposes in terms of section 32(1)(ii). The right of membership, which included the right of nomination, was a "licence" or "akin to a licence" which was one of the items which fell in section 32(1)(ii). The right to participate in the market had an economic and money value. It was an expense incurred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee . We find that the Special Bench of Income-tax Appellate Tribunal , Delhi in the case of Amway India enterprises v/s Dy. CIT 111 ITD 112 has applied the functional test for deciding whether expenditure incurred on software is capital or revenue . The tribunal thus held Once the tests of ownership and enduring benefit are satisfied, the question whether expenditure incurred on computer software is capital or revenue has to be seen from the point of view of its utility to a businessman and how important an economic or functional role it plays in his business. In other words, the functional test becomes more important and relevant because of the peculiar nature of the computer software and its possible use in different areas of business touching either capital or revenue field or its utility to a businessman which may touch either capital or revenue field. Having laid down the criteria for determining the nature of expenditure incurred on acquisition of software, whether capital or revenue, we are of the view that these criteria need to be applied to determine the exact nature of expenditure incurred by the assessees in the present cases for acquiring different software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of business. To substantiate its claim assessee filed the copy of MOU which is exhibited at para 7.2 of the assessment orde . The claim of the assessee was rejected by the AO who was of the opinion that the payments were not in any way related to the rendering of services as claimed by the assessee earlier and no services were rendered by the said company to the assessee company therefore payments made to this are not wholly incurred for the purpose of business and the AO accordingly disallowed the payment of Rs.25,16,280.00. 19. The assessee took the matter before the CIT [A] but without any success . The ld CIT [A] thus held : Thus , it is absolutely obvious that the MOU is not related to rendering of service but only with a view to reduce the tax liability of the appellant company and avoid payment of tax in the associated concern . The payment of service charges by the assessee company to sovereign global finance Pvt ltd is not at all for the purpose of business but only with a view to avoid payment of tax by sovereign global finance Pvt ltd [SGFPL] or by the assessee company, and accordingly confirmed the addition of Rs.25,16,280.00. 20. Before us the counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
