TMI Blog2013 (2) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... membership of the club was treated as revenue expenditure – Against the Revenue. Contribution made to traffic police - Held that:- It is well settled that in order to claim deduction under section 37 the expenditure should be wholly for the purpose of business of the assessee and it is well settled that it is the duty of the police to regulate the traffic and the amount spent towards regulation of traffic can at the most be considered as donation – Further as decided in CIT v. Neelavathi [2010 (2) TMI 176 - KARNATAKA HIGH COURT] contribution made to traffic police would not qualify for deduction under section 37 of the Act – In favour of revenue. Expenses incurred for repairs and maintenance of the leased premises - premises had been taken on lease for a period of six years - Held that:- As building required extensive repairs and renovation and the same has been done in connection with the business of the assessee to improve the ambience of the office and expenditure was revenue in nature – Mere fact that it was taken on lease for six years would not itself render the expenditure capital in nature – Repairs that are carried out to use the premises as the office, as there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure under section 37 of the Act. The Assessing Officer held that it is the duty of the traffic police to regulate the traffic and, therefore, contribution made for regulating the traffic cannot be treated as a revenue expenditure under section 37 of the Act and accordingly passed an order of assessment dated March 26, 1999. Being aggrieved by the said order of the Assessing Officer, the appeal was filed before the first appellate authority. The first appellate authority was of the view that the expenditure incurred in foreign currency has to be excluded while computing the export turnover and the total turnover before granting deduction under section 80HHE of the Act. The appellate authority further held that for the purpose of computation, the method which should be adopted was dealt with and consequently the Assessing Officer was directed to rework the deduction in accordance with the directions issued. The appellate authority further held that the expenses incurred amounting to Rs.15,89,613 under the head "building maintenance expenditure" towards brick work, cement, plastering, painting walls, ceiling and providing and laying ceramic tiles and other works was extensive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed premises for a period of six years should be treated as an allowable revenue expenditure under section 30(a) of the Act, without taking into consideration the Explanation which omitted capital expenditure from the purview of section 30(a) of the Act and the Explanation being only explanatory was always retrospective ? (4) Whether the Tribunal was correct in holding that the contributions made to the traffic police, Bangalore, to regulate the traffic on Hosur Road, of a sum of Rs. 6,93 lakhs was out of business compulsions and commercial expediency and, therefore, allowable under section 37 of the Act ? (5) Whether the Tribunal was correct in allowing the deduction in respect of payments made to police for maintaining traffic without taking into consideration and appreciating that the police were public servants discharging public duty being the Stale Government servants and any payment received to discharge such a public duty is prohibited under law and which is also an offence as per the Indian Penal Code and the Prevention of Corruption Act and, therefore,cannot be allowed as a deduction as per the Explanation to section 37 of the Act ?" 6. I. T. A. No. 2972 of 2005 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, it is the contention of the Department that the amount received as per the certificate issued by the chartered accountant as required under section 80HHE(4) of the Act would clearly show that the amount that is received is towards providing technical services outside India, in connection with production and development of software and not in connection with export of software or its transmission to its place in India. The Assessing Officer and the appellate authority have held that the amount spent in foreign exchange is towards consulting services outside India and, therefore, cannot be included in the export turnover to arrive at the deduction under section 80HHE of the Act. It is clear from the information that is published by the assessee as required under the provisions of the Companies Act, 1956, the following information regarding the total turnover and the expenditure in foreign exchange has been furnished : Assessment years Total turnover in Rs. Expenditure in foreign currency other than on marketing offices 1993-94 14,52,41,229 2,24,45,978 1994-95 30,08,47,456 7,43,70,642 1995-96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis accepting the contention of the assessee that software is required to be developed outside India and the amount spent in foreign exchange is towards the development and export of the software at site and the same is to be included in the turnover is clearly erroneous and contrary to the certificate issued by the chartered accountant of the assessee for the abovesaid assessment years. The said certificate would show that only for the assessment years 1997-98, the amount incurred in foreign exchange is shown towards export turnover relating to transmission to a place outside India and no amount has been shown towards providing technical services outside India in connection with the development of software. Therefore, the Tribunal was not at all justified in holding that the expenses incurred in foreign currency is not towards rendering technical services outside India but towards development and export of the software and the same is liable to be set aside and once it is held that the expenditure incurred for the abovesaid assessment years pertains to technical services outside India, the same has to be excluded from the turnover for the purpose of arriving at the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 15,89,613 incurred on the extensive repairs are enduring in nature and, therefore, it should be treated as capital expenditure in view of the decision of the hon'ble Supreme Court in Ballimal Naval Kishore v. CIT [1997] 224 ITR 414 (SC). The first appellate authority held that the said expenditure incurred by the assessee towards renovation of the premises taken by it on lease for a period of six years, no advantage of enduring benefit is derived. The appellate authority further held that the said repairs are carried out by the assessee in a leased building for the purpose of business and confirmed the order passed by the Assessing Officer holding that the expenditure incurred by the assessee is capital expenditure. However, allowed the depreciation at the rate applicable to the buildings. However, the Income-tax Appellate Tribunal has held that the said expenditure is not of any enduring nature and having regard to the explanation offered by the assessee that the premises required repairs when it was taken on lease and in order to improve the ambience of the office of the assessee to be housed, it was necessary to carry out the repairs as the same was necessary for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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