TMI Blog2016 (5) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of ₹ 21.26 lacs is to be written off as a one-time corrective action to match the balances of member wise records, it rectified the same. We also find that this excess amount was reconciled with the accounts of the members and one-time payment was made to them after finding the reconciliation. For this we have gone through the reconciliation statement filed wherein he has reconciled the entire figure. In view of the above we find that the assessee made this claim u/s 41(1) of the Act. As explained by Ld. counsel for the assessee, in view of these facts, that this is neither a claim of expenditure nor remission of liability u/s. 41(1) of the Act. Ld. counsel for the assessee stated that this is clearly a business loss allowable u/s. 28 of the Act being differential liability on account of mismatch with assessee and NCSS system, And this reinstatement of liability by the assessee being payable to members is allowable as a business loss u/s. 28 of the Act. We are of the view that this differential liability in the debit balances of the assessee has occurred in the normal course of carrying on business and is incidental to the business and this has a direct and proximat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to purchase of various software licences. Following are the details of such licences purchased and debited as revenue expenditure: MFI Explorer user License Fees content charges Rs.13,787 Renewal of existing Symantec Antivirus Desktop License Rs.1,50,430 Renewal of existing Symantec Antivirus Desktop License Rs.1,11,828 Renewal of Lotus Notes License Rs.1,54,937 Subscription advantage for Citrix mainframe XPA starter Rs.21,000 system (20 user License) 3 yr. software subs for security suite product Rs.46,361 Telerate 8 equities package Rs.26,787 Rs.5,25,130 According to AO, as the assessee himself has claimed capitalization of software expenses partly and partly it has claimed as revenue expenditure, it is double standard. According to AO, these are capital expenditure and he disallowed the claim of assessee amounting to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. These software equipments has short life span having no enduring benefit and it requires often change and in such circumstances, the expenditure incurred for purchase of these software is called as revenue expenditure and not capital in nature. This issue is covered by the decision of Hon ble Bombay High Court in the case of CIT Vs. Raychem RPG Ltd. (2012) 346 ITR 138 (Bom), wherein it has been held as under: Held, (i) that the Tribunal in the assessee s own case for the assessment year 2001-02 had allowed the software expenditure as revenue expenditure finding that software did not form part of the profit-making apparatus of the assessee. Further, it held that the business of the assessee was that of manufacturing of telecommunication and power cable accessories and trading in oil retracing system and other products and the software was an enterprise resource planning package and, hence, it facilitated the assessee's trading operations or enabled the management to conduct the assessee's business more efficiently or more profitably but it was not in the nature of profit-making apparatus. Therefore, the expenditure was to be allowed. In view of the above and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated amount in the form of interest free security deposits and security deposits are as a part of their admission condition. The daily margins not made by additional base capital nevertheless that less deposits cannot be part and parcel of revenue account but is of capital account. The claim that this liability was more in NCSS systems hence same is being payable to the member is allowable expenditure, is untenable because that is not business expenditure of the appellant. Such differential liability is not accrued to the appellant in respect of day to day business activity and same cannot be presumed to be revenue in nature. The Auditor has mention in Form No.3CD, Annexure 'H' that this is profit chargeable to tax u/s.41 but the fact reveals that such security deposits are not taxable income hence differences cannot be presumed to be cessation of liability or taxable income or allowable expenditure. Therefore, in the light of the above discussion, I find force in the arguments of the Assessing Officer. The various case laws referred to and relied upon by the appellant in written submission are not applicable to the peculiar facts of the appellant. In the case of CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stem has been automated and made seamless to ensure that the output from the NCSS automatically creates an entry for the accounting system without any manual intervention. Accordingly, there was some old differences between the accounting records and member wise records maintained by NCSS with respect to earlier years when the interface was manual. He explained that the assessee in its board meeting finally, after reconciliation of facts and figures came to know that as on 31.03.2007 an amount of ₹ 21.26 lacs is to be written off as a one-time corrective action to match the balances of member wise records. Ld. counsel for the assessee explained that this excess amount was reconciled with the accounts of the members and one-time payment was made to them after finding the reconciliation. Ld. counsel for the assessee drew our attention to the reconciliation statement filed at pages 97 and 98 of assessee s paper book wherein he has reconciled the entire figure. Ld. counsel for the assessee in view of these facts stated that this is neither a claim of expenditure nor remission of liability u/s. 41(1) of the Act. Ld. counsel for the assessee stated that this is clearly a business l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annually or monthly basis which was later on being made on daily basis. In subsequent years the interface system has been automated and made seamless to ensure that the output from the NCSS automatically creates an entry for the accounting system without any manual intervention. Accordingly, there was some old differences between the accounting records and member wise records maintained by NCSS with respect to earlier years when the interface was manual. As explained by Ld. Counsel, the assessee in its board meeting finally, after reconciliation of facts and figures came to know that as on 31.03.2007 an amount of ₹ 21.26 lacs is to be written off as a one-time corrective action to match the balances of member wise records, it rectified the same. We also find that this excess amount was reconciled with the accounts of the members and one-time payment was made to them after finding the reconciliation. For this we have gone through the reconciliation statement filed at pages 97 and 98 of assessee s paper book wherein he has reconciled the entire figure. In view of the above we find that the assessee made this claim u/s 41(1) of the Act. As explained by Ld. counsel for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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