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TMI Blog2012 (9) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... g in shares and securities . For the year under consideration return of income was filed on 21.10.2005 declaring income at Rs.1,72,70,560.00. Return was selected for scrutiny assessment and accordingly notices u/s 143[2] & 142[1] were issued and served upon the assessee . During the course of scrutiny proceedings, the AO found that the assessee has claimed depreciation of Rs.21,56,250.00 on the membership right in BSE @ 25 % on 86,25,000.00 . The AO asked the assessee as to why the claim of depreciation should not be disallowed, the assessee replied that it is holding BSE membership since December, 1997 and provisions relating to depreciation on intangible assets were introduced w.e.f 1/04/1999 , however due to different opinions and judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Stocks Ltd. Vs Commissioner of Income-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore the claim as revenue expenditure should be allowed. The contention of the assessee did not find any favour from the AO who, relying upon the decision of Rajasthan High Court in the case of CIT V/s Arawali construction Co [P] ltd 259 ITR 30 wherein it was held that software expenditure are in the nature of capital expenditure and are not allowable as revenue expenditure, disallowed the claim as revenue expenditure and allowed depreciation @ 60 % and added back Rs. 2,03,479.00 to the returned income. 10. The assessee assailed the assessment order before the CIT [ A ] but without any success .The CIT [ A ] dismissed this ground holding that with the amendment in the Income Tax Act now software are also eligible for depreciation and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 softwares. Since this exercise is required to be done in respect of each and every software independently having regard to the criteria laid down above, we are of the view that the matter needs to be restored back to the file of the Assessing Officer for doing such exercise. The Assessing Officer shall examine the question whether expenditure on computer software is capital or revenue in the light of the criteria laid down abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erns : 1. Sovereign global finance pvt Ltd Rs. 2516280.00 2. Stock guardian India pvt ltd Rs. 219000.00 3. NSE IT Rs. 5000.00 Total Rs 4357840.00 18. The AO sought explanation regarding above payments and in particular payments to Sovereign Global Finance. The Assessee explained that this payment is made to take over the clientele business of the said company pursuant to the SEBI regulations. It was nothing but compensation for loss incurred by the said company for 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 servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. We have heard the rival submissions and perused the orders of the lower authorities . The salient features of the said MOU show that the assessee company has agreed to pay Rupees two lacs per month for twenty four months for the transfer of all the clients of SGFPL to the assessee company which in itself show that the assessee company has purchased entire clientele business of SGFPL . Clause 6 of the said MOU reads as under: "( 6 ) SSPL to provide temporary advances to SGFPL as and when required to ensure smooth transition for SGFPL . Such funds will not carry interest ." 22. A plain and simple reading of this clause show that the appellant's intention is to purchase the business of SGFPL by purchasing the entire clientele of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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