TMI Blog2013 (12) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act - the said expenditure is to be deducted - Decided against Revenue. - IT Appeal No. 515 of 2007 - - - Dated:- 30-10-2013 - N. KUMAR AND MRS. RATHNAKALA, JJ. For the Appellant : K.V. Aravind. For the Respondent : K.P. Kumar. JUDGMENT:- PER : Kumar, J. The Revenue has preferred this appeal challenging the order passed by the Tribunal, which has upheld the order of the Commissioner of Income Tax (Appeals), who held that, the expenditure incurred is in the nature of a capital expenditure and therefore, the assessee is entitled to deduction out of the total income under Section 35(1)(iv) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 2. The assessee - Company is in the business of software de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rming the order of the Appellate Authority. It is against the said order, the Revenue is before this Court. 4. The substantial questions of law, which arise for consideration in this appeal, are as under: 1. Whether the Appellate Authorities were correct in holding that the expenses incurred by the assessee were improvement of capital assets, should be treated as a capital asset as held by the Assessing Officer but also should be given deduction u/s.35(1)(iv) of the Act, based on an alternative plea raised by the assessee before the Appellate Commissioner for the first time without raising this issue before the Assessing Officer? 2. Whether the Appellate Authorities were correct in granting relief to the assessee u/s.35(1)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing facility resulted in poor customer service. With a view to integrate customer information for all business functions in an organization, an improved version of product "Talisma Enterprise 2.5" was developed. That is a new product, which is a Customer Relationship Management solution that captures, documents and integrates customer information for all business functions like marketing, sales, services, human resources and finance through the medium of e-mail, chat, wireless, fax," phone, etc. The Revenue's contention was that the expenditure and purchase of Talisma software had been capitalized by the assessee. Therefore, any expenditure incurred on further development of the software has to be treated as capital in nature. 7. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductable. 9. It is the specific case of the Revenue that, the amount of Rs. 10.82 crores spent by the assessee in acquiring an intellectual property is capitalized in the books. Now further amount of Rs. 9,27,34,277/- is spent in developing and improving the said product. Therefore, the expenditure on further development of software, which is treated as a capital in nature, is also capital in nature. This development is on account of scientific research. The evidence on record shows most of the money is spent towards cost of the employees, who had developed the product "Talisma Enterprise 2.5", multi channel customer relationship management solution, which provides sales, marketing, services, human resources and finance through the medi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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