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2016 (4) TMI 30 - ITAT MUMBAI

2016 (4) TMI 30 - ITAT MUMBAI - TMI - Disallowance of software development and maintenance expenses - revenue v/s capital expenditure - Held that:- The assessee had demonstrated that the above expenditure was incurred by the assessee for up gradation of existing software for smooth running of online lottery business of the assessee. We, therefore, hold that the said expenditure was rightly claimed by the assessee as revenue expenditure. We, accordingly, hereby, set aside the finding of the Ld. C .....

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the said documents have now been retrieved and the same go to the root of the case, it has been pleaded that the same be admitted as additional evidence in support of the pleadings of the assessee. The Ld. A.R. in this respect has further relied upon an affidavit of one Mr. Sushil M. Waghmare, Director of the assessee company, wherein, the above facts have been explained and it has been submitted that the above documents be taken into consideration for just and proper decision of the case.We ha .....

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sue is accordingly restored to the file of the AO. - Decided in favour of assessee by way of remand

Late deposit of Employees’ Contribution to PF - addition u/s 43B - Held that:- This issue is covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of “CIT vs. Alom Extrusions Ltd.” reported in (2009 (11) TMI 27 - SUPREME COURT ) wherein held that the amendment to section 43B vide Finance Act, 2003 w.e.f. 01.04.2004, whereby, the second proviso to sec .....

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d that the Employees’ Contribution to PF is covered by the said decision and that the applicable date will be on or before the due date of filing of return of income for deposit of the said contribution. Moreover, we find that the assessment year under consideration before us is A.Y. 2005-06 for which the said amendment otherwise is applicable. The findings of the Ld. CIT(A) on this issue are therefore upheld. - Decided in favour of assessee - ITA No.3325/M/2012, ITA No.3803/M/2012 - Dated:- 12- .....

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we take up the appeal of the assessee. The assessee has taken the following grounds of appeal: GROUND I 1. The Commissioner of Income Tax (Appeals) - 14 Mumbai ("CIT(A)"), erred in confirming the action of the A.O. in disallowing a sum of ₹ 17,00,000/- (after considering depreciation) incurred for software development and maintenance on the alleged ground that the same is capital expenditure,. 2. The appellant prays that the said Software Development Expenditure be treated as re .....

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, alter and / or amend the above grounds of appeal. Ground No.1 2. Vide ground No.1, the assessee has agitated the action of the Ld. CIT(A) in confirming the disallowance of a sum of ₹ 17 lakhs holding the same as a capital expenditure as against the claim of the assessee that the same being of revenue in nature. During the year under consideration, the assessee incurred various expenses for software development and maintenance amounting to ₹ 44,34,703/-. The Assessing Officer (herei .....

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22.07.04, the other software expenses incurred by the assessee for maintenance and back up etc. were of revenue in nature. In respect of the expenses of ₹ 17 lakhs incurred on account of software adaptation charges for terminals, he has held that the same were in the nature of operating software and thus capital in nature. He, however, has allowed depreciation on the same as per the rules. The assessee, thus, has come in appeal before us agitating the above action of the Ld. CIT(A). 4. Th .....

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ry business. This software was activated on 22.07.04. The assessee, in this respect, has relied upon the copy of the invoice dated 07.12.04 placed at page 117 of the paper book. The Ld. A.R. has further submitted that all the earlier expenses incurred on operating software had already been capitalized by the assessee, itself, in the earlier year. The expenditure of ₹ 17 lakhs was incurred by the assessee for up-gradation of existing software which in fact contributed towards the smooth run .....

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bunal in the said decision has very elaborately discussed about the nature of the software expenses and has observed that software keep on changing at a very past pace with the growing requirement in the day to day business. Most of the software become obsolete in short span and new and upgraded versions are required for better functioning and that any expenditure on such an up-gradation or buying of software for facilitation and efficient working of operations through computers in day to day bu .....

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s laid down by the courts from time immemorial. In this age of computerization, various softwares are developed for smooth functioning of various business needs that helps business to run effectively, efficiently and profitably. The softwares keep on changing at a very fast pace with the growing requirement in the day-today business. Most of the softwares become obsolete in short span and new and upgraded version are required for better functioning. Unless, it has been brought on record that the .....

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on changing periodically and thus any expenditure on such an upgradation or buying of software is revenue expenditure only. The decisions as relied upon by the learned Counsel also supports our view. Even though the Rules have provided rate of depreciation on computer software, but that does not lead to any kind of drawing legal inference that all the softwares have to be characterised as capital asset. Thus, the grounds raised by the assessee in the cross objection are treated as allowed. 5. T .....

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n this issue and delete the disallowance so made by the lower authorities on this issue and direct the AO to treat the said software expenses of ₹ 17 lakhs as revenue in nature. Ground No.2 6. Vide ground No.2, the assessee has agitated the action of the Ld. CIT(A) in upholding the action of the AO in treating the loan of ₹ 1,25,01,689/- as unexplained credit and taxable under section 68 of the Act. The assessee has further agitated the action of the CIT(A) in further enhancing the i .....

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. (in short M & B) and the balance of ₹ 54,25,689/- to Modi Entertainment Ltd. (in short Modi) (a related company). The amount belonging to Modi, represented excess amount received during the current assessment year against the advance given by the assessee in earlier years. That during the year under consideration, an amount of ₹ 1,34,37,000/- had been received by the assessee from M & B. The AO treated the loans of ₹ 1,25,01,689/- as unexplained credit in the books of .....

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O. After considering the submissions of the assessee, the Ld. CIT(A) called for a remand report from the AO. In the remand report, the AO stated that the assessee had taken loan from various parties and that many of these loans were squared up during the year under consideration. However, entries, in respect of these loans, had remained unexplained. He therefore added the total loan amounting to ₹ 1,25,01,689/- into the income of the assessee under section 68 of the Act. The AO also pointe .....

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assessee had failed to prove the genuineness of transactions and furnish the confirmations from the parties. Only the confirmation from one party i.e. M & B was furnished. He accordingly held that the additions in respect of loan from parties mentioned at Sl. No.1 to 141 of the auditor s report were liable to be confirmed. While holding so, he, also observed that the AO had not made additions in respect of loans taken from M & B or from Modi, which were sister concerns of the assessee. .....

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ords. At the outset, the Ld. A.R. of the assessee, before us, has submitted that the amounts in question credited into the accounts of the assessee were, in fact, not the loans. These, in fact, were the security deposits received by the assessee from the retailers. The Ld. A.R. has brought our attention to the application dated 17.07.14 moved for admission of additional evidence wherein it has been stated that the assessee was in possession of various documents such as retailer application forms .....

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the accounts of the assessee. It has been explained that these documents pertained to a 10 year old period and the assessee was making all out effort to trace the same, however, despite best efforts the same could not be produced before the lower authorities. Since the said documents have now been retrieved and the same go to the root of the case, it has been pleaded that the same be admitted as additional evidence in support of the pleadings of the assessee. The Ld. A.R. in this respect has fur .....

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fore, allow the application of the assessee for additional evidence and direct the AO to admit the documents relied upon and sought to be produced by the assessee and after considering the said documents/evidence, decide the issue afresh in accordance with law. This issue is accordingly restored to the file of the AO. Ground No.3 10. Ground No.3 taken by the assessee is general in nature and does not require any adjudication. 11. Now we come to the appeal of the Revenue i.e. ITA No.3325/M/2012. .....

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hen payment of Employees' contribution to P.F. was made beyond the due date prescribed under the P.F. Act as per requirements of Section 36(va) of the Act, without appreciating that the employees contribution to P.F is not covered by Section 43B of the Act and therefore payment beyond due date prescribed under P.F.Act as per section 36(va) of the l.T.Act but before filing of return would not mitigate the violations of Section 36(va) of I.T.Act.4. 3. The appellant prays that the order of CIT( .....

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om the retailers and that the same was used for the purpose of business of the assessee. 14. The Ld. D.R., in this respect, has submitted that the finding of the Ld. CIT(A) are virtually not based on any concrete evidence on the file in this respect. 15. After going through the order of the Ld. CIT(A) on this issue and considering the submissions of the Ld. Representatives of the parties, we think it proper to restore this issue also to the file of the AO in the light of our observations made ab .....

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