TMI Blog2015 (6) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... e acquired the license only to use the same. The license fee was not paid for obtaining any right qua the transfer of the software. Then, obsolescence also does not prove any enduring benefit to the assessee. It is not the case of the Department that the longevity of the software is any more than two years. Rather, it has not been disputed that all but one of the items of expenditure have a life much less than two years. Apropos the functionality test, the Department again does not refute the fact that the software license was acquired by the assessee to carry out its routine operations in a more efficient manner. Further, the fixed capital of the assessee has not been shown to have undergone any change as a consequence of the acquisition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this appeal, the assessee is challenging the action of the ld. CIT(A) in allowing the expenses of ₹ 63,92,692/-, incurred on account of acquisition of software license, as revenue expenditure. 2. The assessee company is engaged in the business of pre-employment screening on behalf of the employers. During the year, it claimed deduction of ₹ 69,59,572/- on account of software license fees. The assessee maintained that as per its accounting policy, these fees were treated as deferred revenue expenditure in the assessee s books. During the year, the assessee had incurred software license expenses of ₹ 67,04,692/-. Out of this, ₹ 22,64,231/- were actually debited in the books as software license fees and thus they w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12] 346 ITR 138 (Bom). 5. We have heard the parties and have perused the material available on record. The details of the expenses claimed during the year are as follows:- Sr. No. Particulars of the party (M/s) Amount(Rs) TDS deducted and paid (Rs) Coverage Details 1 First Advantage Corporation 2,89,841 December 2008 to March 2009 Software for protecting Microsoft email server from spam viruses. 2 First Advantage Corporation 70,648 April 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Software liucense for getting access to salesforce.com, a website used by the sales team to procure new clients business 10 First Advantage Corporation 42,39,265 July 2009 to October 2010 Support Maintenance charges for Microsoft licenses. 11 Spectrum Business Support Ltd. 10,000 - July 2009 to June 2010 Annual license renewal fees for database used for operational purposes. 12 Centre for Monitoring Indian Economy Pvt. Ltd. 1,10,000 12,133 November 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- Total ₹ 69,59,572/- 7. During the year, the assessee had incurred total software license expenses of ₹ 67,04,692/-. A part of this amount, totaling ₹ 22,64,231/- was debited in the books of account as software license fees and this was included in the total amount of ₹ 69,59,572/-. The balance amount was debited in the books of account in the subsequent years. The total amount of ₹ 67,04,692/- was claimed as expenditure. There is no dispute that such accounting method has been followed by the assessee consistently. The A.O., however, held the expenditure to be a capital expenditure and made addition of ₹ 69,59,572/- twice and no deduction of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing TDS return or payments for support service for maintenance of firewalls, maintenance charges of Microsoft licenses, annual hosting fees, etc. Therefore, the nature of the software acquired is that of a revenue expense, the ld. CIT(A) has rightly held it to be so. 9. It is pertinent to note that the ld. CIT(A) capitalized the expense for software for indexing operations documents. In fact, this expenditure of ₹ 3,12,000/-, paid to M/s First Indian Corporation was a one-time cost, expended for the use of the software to over two years, fetching an enduring benefit to the assessee. The ld. CIT(A) added back this amount of ₹ 3,12,000/- as a capital expenditure while granting depreciation thereon. The assessee has not challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X
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