TMI Blog2014 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... f the advancement of its business and/or its diversification, if any; the changes brought about due to statutory amendments by law or by professional bodies, which are given the responsibility of conceiving and formulating the accounting standards from time to time, and perhaps also, by reason of the fact that expenses may have to be incurred on account of corruption of the software due to unintended or intended ingress into the system, ought not give a colour to the expenditure incurred as one expended on capital account - The treatment of a particular expense or a provision in the books of account can never be conclusively determinative of the nature of the expense - The expenditure incurred by the assessee on account of software expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the ld.CIT(A) has erred in holding that Software expenses regarding accounting an upgradation software are revenue in nature and hence allowable as expenses. Reliance is placed on the judgement of the Hon'ble Supreme Court in the case of Tata Consultancy Services Vs. State of Andhra Pradesh (2004) 271 ITR 401. 2. On the facts and circumstances of the case, the ld.CIT(A) has erred in ignoring the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC), wherein it has been held that the AO has no power to entertain a claim made otherwise than by filing a revised return of income and directing the AO entertain the claim of the assessee for additional unabsorbed business loss which was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services (supra). However, we find that the above decision was under the Andhra Pradesh General Sales Tax Act, 1957 and the dispute was whether the software packages are goods within the meaning of Andhra Pradesh General Sales Tax Act. The issue whether the expenses on software packages are capital or revenue was not before the Hon'ble Apex Court. Therefore, in our opinion, the above decision of Hon'ble Apex Court would be of no help to the Revenue in the present case. On perusal of the decisions relied upon by the learned counsel, we find that Hon'ble Jurisdictional High Court in a series of decisions has held that the expenditure incurred by the assessee on purchase of software application is a revenue expenditure. In the case of Asahi I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that expenses may have to be incurred on account of corruption of the software due to unintended or intended ingress into the system - ought not give a colour to the expenditure incurred as one expended on capital account. Given the fact that there are myriad factors which may call for expenses to be incurred in the field of software applications, it cannot be said that either the extent of the expense or the expense being incurred in close proximity, in the subsequent years, would be conclusively determinative of its nature. The Assessing Officer has erred precisely for these very reasons. [Para 12] The contention of the revenue that in the books of account, the assessee had not written off the expense in issue, while in the succee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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