TMI Blog2015 (2) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... Jain Deepashre Rao, Adv For the Respondent : Vikram Sahay, Sr. DR ORDER Per A. T. Varkey, Judicial Member This is an appeal preferred by the assessee against the order of the ld CIT(A)-2, Faridabad dated 21.07.2014 for Assessment Year 2009-10. 2. Grounds of appeal are as follows:- 1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in affirming the action of the assessing officer in treating expenditure of ₹ 1,01,54,665/-incurred towards obtaining research report as 'capital' in nature as against revenue expenditure claimed by the appellant. 2. That the Commissioner of Income Tax (Appeals) failed to appreciate that the expenditure incurred by the appellant was towards obtaining research report in order to facilitate business operations and not for acquisition of any capital asset, much less an intangible asset. 3. That the Commissioner of Income-tax (Appeals) erred on facts and in law in affirming the net disallowance of expenditure amounting to ₹ 88,85,332/- (net of depreciation on ₹ 1,01,54,665/-, on the alleged ground that incurrence of such expenditure had resulted in benefit of an 'enduring n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eports provided by Zensar so as to add value to them. The reports obtained from Zensar were customized by the various executives on the payroll of the assessee company by putting in various man hours.The assessee company during the course of its business had incurred expenditure of ₹ 101,54,665/- on such acquisition of research reports and claimed the same as an expense as per the provisions enunciated u/s 37(1) of the act. However, Assessing officer has made addition of ₹ 88,85,332/- by treating the said expenditure as capital expenditure. It was further submitted that the assessing officer had made such addition without any material on record to prove that expenditure if of capital nature. According to the ld AR, the basis adopted by the Assessing Officer is unwarranted, unjustified and bad in law. 7. The ld AR brought our attention to Page 1 of the PB in which the detailed break-up of invoices raised by M/s Zensar Technologies Ltd in the Assessment Year 2009-10 are given below:- Date of receipts report Invoice No. Invoice date Cost Service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensar was obtaining expert's opinion on particular subject under consideration. The reports are not obtained for trading purposes or obtaining any know how which could further be used for trading. And the report were obtained from Zensar fortnightly, monthly or period based on the Industry Norms. The ld AR pointed out that the reports provided by Zensar Technologies Limited are perishable in nature since the same are based on present market scenario and economic conditions. The economic conditions in market are never static and are dynamic in nature rendering the reports outdated with changing scenarios. It was further submitted by the ld AR that in certain cases prospective client specify the company on which they would want a sample report, such reports-have no subsequent value as there is very little likelihood of any other client seeking a report on the same company. Such reports even if be stored in library would not render any benefit to the assessee company as they would not hardly be referred to in future. The ld AR pointed out that during the Financial Year 2008-09, which is relevant to the Assessment Year under consideration. Overall 81 reports were purchased from Zen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture on acquisition of intangibles assets. And since the expenditure has been treated as capital expenditure, depreciation at the rate prescribed for the tangible assets is allowed. Total expenditure incurred, as discussed above ₹ 1,01,54,665/- Less: Depreciation allowed 12.5% (1/2 of 25%) ₹ 12,69,333/- Balance expenditure disallowable ₹ 88,85,332/- 13. The ld CIT(A) has also upheld the above view and was of the view that as the expenditure incurred by the assessee company was for expansion of business by means of acquisition of research reports, it is of capital nature. 14. The Hon ble Delhi High court in the case of CIT Vs. Priya Road Show Ltd. Held that expenditure incurred for carrying out technical and financial feasibility is revenue expenditure, even if the assessee dropped the said project. In holding so, the hon ble High Court has held as under:- One of the judgments on which the Tribunal based its decision is of this of this court, i.e.. CIT v. Modi Industries Ltd (No.3)(1993) 200 ITR 341. In that case the assessee-company which was manufacturing various commodities like sugar, vanaspati, soap, paints and varnish, torch and lantern, start ..... X X X X Extracts X X X X X X X X Extracts X X X X
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