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TMI Blog2015 (7) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... vance of Rs. 15,91,570 paid for advancement of existing soft ware. (2) The C.I.T.(A) erred in not appreciating in correct perspective the facts of the case and submissions made by the appellant. (3) The C.I.T.(A) erred in considering in Para 2.1 of his order the Ground as "Provision for Bad Debts" instead of "Provision of Bad Advances". (4) The C.I.T.(A) erred in treating expenditure for up gradation of E.R.P. soft ware as Capital expenditure instead of revenue expenditure. (5) The C.I.T.(A) erred in wrongly considering the issue as per the provisions of Sec. 36 of the LT. Act, 1961 instead of Sec. 37 of the I.T. Act, 1961. 2. Alleged Directors' excess Remuneration of Rs. 36,40,038: (1) The learned CIT (A) erred in law as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. During the assessment proceedings, the AO found that the assesse had debited a sum of Rs. 15.91 Lakhs on account of provision for doubtful debts, that the amount in question was given to M/s. Beehives Technoligies(BT) on 04.04.2006. He directed the assessee to furnish the complete details of the transaction. Vide its letter, dated 23.08.10,the assessee stated that the sum was paid to BT for preparing Electronic Reporting Procedure(ERP).The AO was of the opinion that the ERP was a composite software and therefore he asked the assesse as to why the expenditure should not be treated as capital expenditure and should not be disallowed. The assessee claimed that BT could not provide the services so the disputed amount was written off in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Authorised Representative (AR) stated that assessee had made the claim u/s.37 of the Act, that the payment made for ERP was of revenue nature.He relied upon the case of IVM World Trade Corporation(186 ITR 412) delivered by the Hon'ble Bombay High Court. He also referred to the case of Sadan Roadways Ltd. (288 ITR 15)of Hon'ble Madras High Court. Departmental Representative(DR) relied upon the order of the FAA, 5. We have heard the rival submissions and perused the material before us. We find that the assessee had made a claim u/s.37 of the Act stating that expenditure incurred by it on account of upgradation of ERP software was revenue expenditure, that it had advanced a sum of Rs. 15.91 lakhs to BT but the work was not executed to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the consequent loss was a business loss and not a capital loss. Respectfully, following the above judgment, we decide ground no.1 in favour of the assessee. 6. Next ground of appeal is about excess remuneration, amounting to Rs. 36.40 lakhs, paid to Director. During the assessment proceedings, the AO found that the auditor in form no.3CB, vide note no.3,had reported that the assesee had paid Rs. 36,40,038/- in excess of limits prescribed under the Companies Act. He asked the assessee to show cause as to why such excessive remuneration paid in contravention to the provisions of the companies Act should not be disallowed u/s.37(1) of the Act. After considering the submission of the assesse, the AO held that there was no dispute about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emuneration paid, that the excessive remuneration was not allowable u/s. 37(1) of the Act, that it was paid over and above the prescribed limits of the Companies Act.He confirmed the disallowance made by AO. 8.Before us, the AR argued that the Central government had allowed payment of excess remune - ration to the Directors,that sanction letter was made available to the FAA,that provisions of Explanation to section 37(1) were not applicable with regard to the payment.He referred to the page no.38 of the paper book. He also relied upon the order of the Tribunal delivered for the year 2001-02 to 2004-05 wherein alleged excessive remuneration to the Directors disallowed u/s. 40A (2)(b)of the was deleted.DR supported the order of the FAA. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was allowed depreciation. DR left the issue to the discretion of the Bench. We have heard the rival submissions and perused the material before us. In our, opinion if the AO capitalised certain revenue expenditure and allowed depreciation in that year then there is no justification for not allowing the same in subsequent AY.s. In the interest of justice we are remitting back the issue to the file of the AO for fresh adjudication. We want to clarify that file being sent back to the AO to verify the claim made by the assessee of capitalization of revenue expenses in earlier years. If the AO has already allowed depreciation in those years and denied the benefit to the assessee, then he should allow depreciation to the assessee as per the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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