TMI Blog2014 (5) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... venue - if the expenses is considered to be capital expenditure, the Assessee will have to be granted depreciation @ 60% on WDV basis in A.Y. 06-07 and also in subsequent years - the total taxable income determined by the AO, the changes that would be required to be made in subsequent assessments orders if the depreciation is to be allowed in all subsequent years, the claim of the assessee is to be allowed - the allowance of the expenditure should not be considered as a precedence for allowance of the expenditure – Decided in favour of Assessee. - I.T.A. Nos. 1328 & 1310/AHD/2011 - - - Dated:- 29-4-2014 - Shri G. C. Gupta And Shri Anil Chaturvedi,A.M.,JJ. For the Appellant : Shri Yogesh C. Shah For the Respondent : Shri P. L. Kureel, Sr. D.R. ORDER Per Shri Anil Chaturvedi,A. M. 1. These two appeals, one filed by the Revenue and the other filed by the Assessee, are against the order of CIT(A)-VI, Ahmedabad dated 17.02.2011 for A.Y. 2006-07. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a company stated to be engaged in the business of hydraulic equipments parts. It electronically filed its return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar issue in earlier years has been decided in favour of appellant by CIT appeal as well as ITAT in the appellant s own case. The claims have been made on the basis of pending warranty claims received from branches at the close of the year. It is also seen that in earlier years, the C.I.T appeals have deleted such addition on the basis of the order of ITAT in the appellant s own case therefore following the orders of ITAT and my predecessors, the addition made by the assessing officer is deleted Since facts are identical in this year also, following the aforesaid decision and also decision of ITAT referred above, addition made by the assessing officer is deleted. 6. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 7. Before us, Id D.R. relied on the order of AO. On the other hand, the Ld AR submitted that the facts of the case in the year under appeal are identical to that of earlier years and in A.Y. 02-03, on identical issue, the matter has been restored to the file of CIT(A) by Hon ble ITAT (ITA No. 30/AHD/2003) order dated 15.05.2009. to re-examine the claim of the Assessee in the light of the decision of Tribunal (ITA NO. 4158/AHD/1995) in AY 1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le the Id. DR relied upon the findings of the lower authorities. 2.2 We find that in the aforesaid order dated 31.08.2007, the ITAT in taxpayer s own case held as under: 4. The next ground relates to the disallowance of provision made for after sales service amounting to Rs,8,44,526/-. In this regard the Tribunal in AY 1992-93 ITA No.4158/Ahd/95 vide order dated 18-09- 2001 under pa ra-17 has held as under: 17. The last ground of appeal is relating to the deduction on account of provision for after sales service. The AO disallowed the claim on the ground that the actual expenditure has been incurred in the subsequent assessment year and the deduction would be permissible in the year of crystallization of the liability on account of warranty obligation. The ld. counsel for the assessee has relied upon the order of the Tribunal in assessee's own case in ITA No.2010/Ahd/1994 for assessment year 1991-92 para 7 of the order. It has further been clarified before us that the provision is being made by the assessee on the basis of actual expenditure incurred in the subsequent assessment year relating to sales made in the relevant previous year. Respectfully following the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognising the liability are satisfied, the claim could not be automatically allowed as a provision made on a historical trend. 10. In the present case, we find that there is no finding by the lower authorities about the compliance by the assessee of the conditions laid down in the aforesaid decision of Apex Court. We therefore are of the view that in the light of the aforesaid decision of co-ordinate Bench and the decision of Apex Court in the case of Rotork Controls (supra) , the matter needs re-examination at the end of CIT(A). We accordingly remit the issue to the file of CIT(A) to re-examine the issue in the light of the decision of Apex Court in the case of Rotork Controls (supra) and the decision of co-ordinate Bench for A.Y. 03-04 and thereafter decide the issue. Needless to state that CIT(A) shall grant adequate opportunity of hearing to both the parties. Thus this ground of Revenue is allowed for statistical purposes. 11. In the result the appeal of Revenue is allowed for statistical purposes. Now we take up Assessee s appeal (ITA No.1328/AHD/2011) 1st ground is with respect to non allowing of software expenses as revenue expenditure: 12. During the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere for the purchase of software application having a short life span. AO has considered the expenses as capital expenditure and eligible for depreciation @60% and granted depreciation of Rs 5,24,091/- and thereby made a disallowance of Rs 3,49,384/-. In the present case, the incurring of expenses has not been disputed by the Revenue. It is also a fact that the matter pertains to AY 2006-07 and if the impugned expenses is considered to be capital expenditure, the Assessee will have to be granted depreciation @ 60% on WDV basis in A.Y. 06-07 and also in subsequent years. The depreciation of WDV for subsequent years will work out to Rs. 2,09,630/- (for A.Y. 07-08), Rs. 83,854 (for A.Y. 08-09), Rs. 33,542(for A.Y. 09-10) and so on. Considering the totality of the facts, the total taxable income of Rs 35.85 crore as determined by the AO, the changes that would be required to be made in subsequent assessments orders if the depreciation is to be allowed in all subsequent years and the peculiar facts of the case, we are of the view that the claim of the assessee be allowed in the present case. We may however add that the allowance of the expenditure in the present case should not be consi ..... 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