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DCIT, Circle-2, Ranchi Versus M/s Mecon Ltd.

2016 (1) TMI 452 - ITAT RANCHI

Disallowance of software expenses - revenue v/s capital expenditure - AO treated the same as capital expenditure and allowed depreciation to the income of the assessee whereas CIT(A) treated as revenue expenditure - Held that:- Commissioner of Income Tax (Appeals) observed that the Hon'ble Delhi High Court in the case of CIT Vs. G.E. Capital Services Ltd. [2007 (7) TMI 185 - DELHI HIGH COURT] has held that expenditure incurred by the company on computer software, which was not customized softwar .....

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also observed that in assessee's own case, in assessment year 2007-08 has held that if the expenditure has been incurred by the assessee for up-gradation of the software, the expenditure has to be allowed as a revenue expenditure and if the expenditure has been incurred for the first time for acquiring this software, the expenditure is to be treated as capital expenditure, therefore, he deleted the disallowance made by the Assessing Officer. - Decided against revenue

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ch is after considering the entire facts of the case of the assessee. Hence, we confirm the order of the Commissioner of Income Tax (Appeals) - Decided against revenue - ITA No. 216/RAN/2014 - Dated:- 2-11-2015 - N. S. Saini, AM And George Mathan, JM For the Appellant : Shri S K Poddar, Adv For the Respondent : Shri Deepak Raoushan, Sr. SC ORDER Per N. S. Saini, Accountant Member This is an appeal filed by the Revenue against the order of Commissioner of Income Tax (Appeals), Ranchi, dated 26/03 .....

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Assessing Officer treated the same as capital expenditure and allowed depreciation to the income of the assessee. 4. On appeal, Commissioner of Income Tax (Appeals) observed that the Hon'ble Delhi High Court in the case of CIT Vs. G.E. Capital Services Ltd. [164 Taxman 46 (Delhi)] has held that expenditure incurred by the company on computer software, which was not customized software and said software required frequent up-gradation and hence, it was held as revenue expenditure. The Commiss .....

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& ITA No.05/RAN/2013 has held that if the expenditure has been incurred by the assessee for up-gradation of the software, the expenditure has to be allowed as a revenue expenditure and if the expenditure has been incurred for the first time for acquiring this software, the expenditure is to be treated as capital expenditure, therefore, he deleted the disallowance made by the Assessing Officer. 5. Authorized Representative of the assessee submitted before us that the appeals filed by the Reve .....

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ative of the assessee. 7. In view of the above facts and circumstances of the case, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) which is inconformity with the order of the Hon'ble Jurisdictional High Court and hence, the ground of appeal of the Revenue is dismissed in the year under consideration. 8. Ground No.2 of the appeal is directed against the order of the Commissioner of Income Tax (Appeals) deleting the excess interest of ₹ 46,12,758/- made by .....

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at 3.93% on ₹ 1173.73 Lac and made the addition of ₹ 46,12,758/- to the income of the assessee on account of excess interest claimed towards non-business utilization and diversion of funds. 10. On appeal, Commissioner of Income Tax (Appeals) observed that the assessee company was availing loan and overdraft facility from banks and financial institutions for working capital requirement for running the business. For implementing VRS in the company, the assessee had taken loan from ban .....

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erest subsidy from the Government of India on Government of India guaranteed VRS loan. It is seen from the accounts of the financial year 2005-06 that the assessee earned interest on deposits with banks ₹ 3.96 crores, interest from Income-tax Department ₹ 8.42 crores and interest on advance to employees ₹ 0.07 crores. The assessee has utilized the loan funds for the specific purpose, for which loan was obtained as and when required for the purpose of working capital for running .....

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