Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s. K.L. Hitech Secure Print Ltd. Versus The Jt. Commissioner of Income Tax

Disallowance of expenditure towards purchase of software - Held that:- AO at least in the case of one of the software, viz., MPC 4 data preparation software has observed that it enhances the technical capacity of the computers. If that is the case, then it cannot be said that it brings in a radical change to the operations of assessee or part of the profit making apparatus. Further, though, AO has observed that software packages are going to give benefit to the assessee in the ensuing years, hen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d exercise, we are inclined to remit the matter back to the file of the AO for deciding afresh keeping in view the decision of the Special Bench of ITAT, Delhi referred to above. Needless to say AO must afford a reasonable opportunity of being heard to the assessee in the matter. - Decided in favour of assessee for statistical purposes.

Disallowance of expenditure incurred on repairs and maintenance - Held that:- On examining the details of expenditure, we are of the view that expendi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ncurred being of enduring nature, it has to be treated as 'Capital Expenditure'. Similarly, the expenditure of ₹ 16,100/- has not been explained by the assessee with proper evidence. Therefore, on over all consideration of facts and materials on record, we direct the AO to allow the expenditure incurred towards replacement of flooring. - Decided partly in favour of assessee.

Disallowance of depreciation on Plant & Machinery due to foreign exchange fluctuation - Held that:- It is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the matter, we do not see any reason to disturb the finding of the Ld.CIT(A). - Decided against assessee.

Disallowance of expenditure towards subscriptions - Held that:- On verifying the details of expenditure incurred, we are of the view that the subscription fees paid on behalf of the Directors cannot be allowed as expenditure at the hands of the assessee-company. However, as far as the amount of ₹ 50,000/- claimed to be towards insurance payment relating to earlier years i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, assessee has claimed that such expenditures were incurred on employees when they were sent out station. However, considering the fact that the expenditures incurred were not supported by any authentic bills/vouchers, some amount of inflation by the assessee while claiming this expenditure cannot be ruled out. In these circumstances, disallowance of 25% of the expenditure claimed in our view is reasonable and need not be interfered with. - Decided against assessee. - I.T.A. No. 47/HYD/2014 - Da .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee has challenged disallowance of expenditure amounting to ₹ 89,47,827/- towards purchase of software. 3. Briefly the facts relating to this issue are, assessee a company is engaged in the business of printing of all High Security Documents and Business Forms. For the assessment year under consideration, assessee filed its return of income on 05-02-2010, declaring total income of ₹ 1,15,60,760/-. During the assessment proceedings, AO while examining the P&L A/c noticed tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ubmissions of assessee and on examining the details furnished, found that assessee had purchased two types of software viz., KMPC 4 Data preparation Software & MPS Data preparation Software from Kodak Versamark. The AO accessing information from the internet found that KMPC 4 data preparation Software is a vector-based processing and onchip memory service to super charge the performance of adhoc reports and query response times by up to 70 times faster with no new equipment. The software hel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ned that as the business activity of the assessee is printing of highly secured documents, Phone Billing Statements, Recharge Voucher Coupons, Digital Variable Data with variable data, scanning, processing etc, the software acquired by the assessee makes a definite value addition to this particular activity, hence it has got enduring value. As far as MPS data preparation software is concerned, AO observed, it is useful for printing the complex VDP jobs like account statements, telephone/mobile b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng of the opinion that the softwares purchased by the assessee are of enduring nature, AO treated the expenditure as 'capital' and disallowed the deduction claimed by the assessee. Being aggrieved of such disallowance, assessee preferred appeal before the Ld.CIT(A). Ld.CIT(A) after considering the submissions of the assessee observed that whether a particular expenditure is 'capital' or 'revenue' has to be decided on the basis of the facts involved in that case. Thereafte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

It gives knowledge and technology to the appellant which was hitherto unavailable. 6.13 From the point of view of functional tests, it is seen that these new software systems change the very core operations of the appellant with a significant change in technology. They also enable the appellant to conduct operations which were hitherto not possible. 6.14 On the other hand, the software systems are not just upgrade, rather they are complete and new solutions in themselves. They are designed to la .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as per law". Being aggrieved, assessee is before us. 4. The Ld. AR more or less reiterating what was stated before the departmental authorities submitted that the software purchased being in nature of application software is allowable as 'Revenue Expenditure'. The Ld. AR submitted even though it was explained before the AO that the software purchased merely enhanced the performance of the work which the AO also has accepted but we still treated it as capital in nature and disallowe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t the software purchased by assessee is part of profit making apparatus as without the software, assessee could not have carried out its activity. The Ld. DR submitted that the software is not the replacement of earlier software but it completely overhauls the system. Hence, in fact it is a new system acquired by the assessee. Thus, the software purchased being of enduring nature, the expenditure incurred on acquiring such software has to be treated as 'Capital Expenditure'. 5. We have c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ll not only depend upon its ownership and enduring nature but also the functionality. The ITAT Delhi Special Bench in case of Amway India Enterprises Vs. DCIT (111 ITD 112) observed, for determining whether expenditure in acquiring software is revenue or capital, the advantage which an assessee derives has to be seen in a commercial sense. If the advantage is in the capital field, then the same would be capital expenditure. If the advantage consists merely in facilitating assessee's trading .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fit making apparatus of assessee's business, it is to be treated as capital. ii. If the software is more expensive and if there are associated capital expenditure like purchase of new computer for manning the software, it is more likely to be a central tool of the business and it will be more enduring in nature adding to the profit earning apparatus. iii. If the acquisition of software radically changes the way operations hitherto was carried on, the expenditure will be capital. iv. If the l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ware packages are going to give benefit to the assessee in the ensuing years, hence are of enduring nature, but he has not examined the exact life span of the software packages. Ld.CIT(A) has also not examined these aspects. In our view, without examining the nature of software purchased by applying the tests laid down by the Special Bench of ITAT, Delhi in case of Amway International Vs. DCIT (supra), it cannot be condusively said that expenditure incurred on software is capital in nature. As t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

penditure incurred on repairs and maintenance. Briefly, the facts relating to the issue are during the assessment proceedings, the AO noticed that assessee has claimed an amount of ₹ 1,05,07,020/- as expenditure towards repairs and maintenance. On verifying the details/informations submitted by the assessee, the AO observed that out of the total expenditure incurred, an amount of ₹ 23,10,434/- is capital in nature. The details of such expenditure is as under: Rs. False ceiling 1,80,0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng our attention to the details of expenditure incurred submitted before us that replacement of flooring cannot be considered to be a 'Capital Expenditure' as no new asset of enduring benefit has come into existence. As far as false ceiling and partition charges is concerned, Ld. AR submitted that they are also of the same nature and cannot be considered to be of any enduring benefit to the assessee. He therefore submitted that assessee's claim should be allowed. The Ld. DR on the ot .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ils of expenditure, we are of the view that expenditure incurred towards replacement of flooring cannot be considered to be a 'Capital Expenditure' as no new asset comes into existence as a result of such expenditure, rather, the expenditures incurred is more in the nature of maintenance of a capital asset. However, as far as false ceiling and partition charges are concerned, admitted fact is these were not existing earlier. Thus, the expenditure incurred by the assessee has brought into .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd No. 4 & 5 relates to disallowance of depreciation on Plant & Machinery due to foreign exchange fluctuation. Briefly, the facts relating to this issue are on verifying the material on record, the AO noticed that during the year, assessee has imported Plant and Machinery worth of ₹ 7,35,66,480/- from M/s. Muller Martini (Singapore) P. Ltd., He observed that assessee has capitalized foreign exchange fluctuation of ₹ 49,07,886/- to the respective machinery as dues payable and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to establish the foreign exchange loss due to fluctuation. The AO therefore disallowed the proportionate depreciation amounting to ₹ 7,36,183/- claimed on the capitalized foreign exchange fluctuation loss of ₹ 49,07,886/-. Similarly, AO observed that assessee has imported computers during the relevant previous year from another foreign company namely M/s. Atlantic Zeiser P. Ltd., for ₹ 33,57,500/-. In respect of this asset also assessee has capitalized an amount of ₹ 87,9 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

disallowances before the First Appellate Authority, Ld.CIT(A) after considering the submissions of the assessee in the light of account standard 11 as well as the provisions of Section 43A held that, as per the statutory provision, the change in the value of the asset can be recognized only at the time of payment and not before that. Thus, he approved the view of the AO that no adjustment to the cost of asset can be made on notional losses or gains. In this context, he relied upon a decision of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ange fluctuations as the assessee has not made any payment during the year. Only when the assessee makes payment any loss or gain on account of foreign exchange fluctuations can be adjusted towards cost of the asset. In that view of the matter, we do not see any reason to disturb the finding of the Ld.CIT(A). 11. In ground No.6, the assessee has challenged the disallowance of expenditure for an amount of ₹ 93,928/-. Briefly, the facts are, the AO in the course of the assessment proceedings .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

de to promote the activities of business. The AO however, was not convinced with the explanation of the assessee. The AO treating the expenditure incurred as the 'personal expenditure' of the Directors, disallowed the same and added back to the income of the assessee. Ld.CIT(A) also confirmed the addition. Ld. AR submitted before us that out of the aforesaid amount claimed as expenditure an amount of ₹ 50,000/- relates to payment of insurance for the earlier years and transferred i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Ld. DR submitted that the assessee never brought this fact to the notice of the departmental authorities. 12. We have heard the parties and perused the materials on record. On verifying the details of expenditure incurred, we are of the view that the subscription fees paid on behalf of the Directors cannot be allowed as expenditure at the hands of the assessee-company. However, as far as the amount of ₹ 50,000/- claimed to be towards insurance payment relating to earlier years is conc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the facts are during the assessment proceedings, the AO found that assessee has claimed an amount of ₹ 20,14,022/- towards miscellaneous expenses. When AO called upon the assessee to explain the nature of expenditure with supporting evidences, the assessee submitted the details of expenditure with supporting vouchers. However, on verification of the information submitted, the AO noticed that expenditure booked under the heads 'business promotion' amounting to ₹ 5,20,815/- a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     Latest Happenings     ↓  

Forum: GST on RCM on rent in a unregistered state

Forum: COMPOSITION SCHEME

Forum: Input Tax Credit - Reg

Forum: GST Invoice

Article: Websites of Government Departments need lot of improvement. We are noticing detoriations in them for example, case of website of ITAT.

Highlight: Levy of additions tax u/s 115O on distribution of dividend - shares of its profits declared as distributable among the shareholders is not impressed with the character of the profit from which it reaches the hands of the shareholder - not to be bifurcated as agriculture and non-agriculture dividend - SC

Highlight: Rate of GST on old and scrap buses - 28% or 18% - at such initial tender process initiated by the Respondents-KSRTC, the present petitions filed by the petitioners are premature and misconceived and do not require any interference by this Court at this stage. - HC

Forum: Rent a cab operator

Highlight: In view of amendment made u/s 132A of the Income Tax Act, 1961 by Finance Act of 2017, the 'reason to believe' or 'reason to suspect', as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal, SC dismissed the appeal of the assessee

Highlight: Validity of Assessment Order - period of limitation u/s 153 (2A) is applicable even if the entire order was not set aside but matter was remanded back for for limited aspects with directions - HC

News: Note ban was a shake-up, achieved its main objectives

Notification: Amendments in the notification No.5/2017- Integrated Tax (Rate) dated the 28th June, 2017.

Highlight: Levying interest u/s 234C - interest is to be charged on the returned income and not on assessed income.

Highlight: Accrual of income - sale of right to develop and sell incentive FSI under LOI - till the conditions of LOI are fulfilled transfer is not complete and income does not accrue to the assessee

Highlight: TPA - determination of ALP - TP adjustment by applying Bright Line Test (BLT) is not sustainable on protective basis having no statutory mandate.

Highlight: Safeguard Duty - Advance License Scheme - as there is no exemption from safeguard duty leviable under Section 8C, which is imposed on the goods imported from China, the importer has to pay safeguard duty

Highlight: Manufacture - process of cutting of waste plastic container - Such plastic containers before and after cutting are nothing but waste / scrap - Not a manufacturing activity as no new product emerges.

News: NITI Aayog and Govt. of Assam organizes workshop on health sector reforms in Guwahati; launches SATH- Sustainable Action for Transforming Human Capital

Notification: Seeks to amend notification no. 5/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding restriction of refund on corduroy fabrics

Notification: Seeks to amend notification no. 2/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst exemptions

Forum: GSTR 3B Rectification

Notification: seeks to exempt Skimmed milk powder, or concentrated milk

Notification: Seeks to amend notification no. 2/2017- integrated tax(rate) dated 28.06.2017 to give effect to GST council decisions regarding GST exemptions.

Notification: Seeks to amend notification no. 1/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates

Notification: Seeks to amend notification no. 1/2017- integrated tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates.

News: Notification Issued For GST Actionable Claim On Branded Food Products

Highlight: Classification printed computer stationary/manifold Business Forms - to be classified under Chapter Heading 4820.00 or under Chapter Heading 4901.90 - items like A4 sheets, advertisement and job card to be classified under Chapter 49

Article: RCM Applicability to persons not liable to get registered us 23(1)

Article: Credit of unsold stock [Section 140(3)] - Actual Credit as well as Notional Credit - Part-I - GST Transitional provisions

News: GST Refund - Blockage of Working Capital of Exporters - earlier also there was a normal blockage of funds for a period of 5-6 months at least

News: Clarification about Transition Credit - ₹ 1.27 lakh crore of credit of Central Excise and Service Tax was lying as closing balance as on 30th June, 2017 - claim of credit of ₹ 65,000 crore is not unexpected

Article: 20 Things You must know about E Way Bills in GST Law

Article: MISTAKES IN DRAFTING

Highlight: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. - Circular

Highlight: The definition of "subsidiary company" or "subsidiary" u/s 2(87) of the Companies Act, 2013 shall come into force w.e.f. 20-9-2017

Highlight: Central Government notified the All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 - Notification

Notification: All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017

Circular: Investment by Foreign Portfolio Investors in Corporate Debt Securities Review

Notification: Exemptions on supply of services under UTGST Act

Notification: Rates for supply of services under UTGST Act

Notification: Exemptions on supply of services under IGST Act

Notification: Rates for supply of services under IGST Act

Notification: List of Exempted supply of services under the CGST Act

Notification: Rates for supply of services under CGST Act

Highlight: Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended

Notification: Rate of exchange of conversion of the foreign currency with effect from 8th September, 2017

News: Tax Payers Advised To Confirm Identities Of Income Tax Search Authorities

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012

Notification: The Customs and Central Excise Duties Drawback Rules, 2017

Circular: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg.



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version