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2016 (7) TMI 1052 - ITAT KOLKATA

2016 (7) TMI 1052 - ITAT KOLKATA - TMI - Taxability of interest subsidy received - Held that:- Keeping in view the objects of the West Bengal Incentive Scheme 2000 and various judicial precedents relied upon we hold that the interest subsidy is to be treated as capital receipt. Consequentially the assessee need not reduce the same from the cost of the asset for the purpose of claiming depreciation. - Disallowance made towards lease rental payment - CIT(A) deleted the addition - Held that:- I .....

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gard containing the sample copies of credit card bills and invoices vide pages 26 to 43 of paper book together with the complete details of expenses incurred thereon. From the perusal of the said details and the various arguments advanced by the ld AR, we are convinced that the said expenditures were incurred wholly and exclusively for the purpose of business of the assessee as they are related to staff training expenses, continuing education programme expenses, expenses on technoforecast (inter .....

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software expenses - CIT(A) deleted the addition - Held that:- We find that the ld CIT-A had given categorical findings with regard to each and every disallowance made by the ld AO. We also find from the evidences filed in the paper book, the expenditure incurred are only towards licence fees paid on an annual basis / quarterly basis for specific usage of the software for a certain period of time. Hence we find lot of force in the argument of the ld AR that there is no enduring benefit derived b .....

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Hon’ble Supreme Court in the case of TRF Ltd [2010 (2) TMI 211 - SUPREME COURT ] wherein it was held that post 1.4.1989, the assessee is not required to establish that the debt had indeed become bad and deduction shall be granted on write off of the same subject to fulfillment of condition prescribed in section 36(2) of the Act. - Decided against revenue - Disallowance on account of write off of service tax - Held that:- We find that the assessee had not even claimed the write off of service .....

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account of recruitment expenses - Held that:- We are in complete agreement with the ld AR that no enduring benefit is obtained by the assessee pursuant to incurrence of recruitment expenses paid to recruitment agency for appointing two members for the senior position in the assessee company. The recruitment is an on-going process and does not bring into existence any capital asset. Under these facts and circumstances we do not find any reason to interfere with the order of the ld CITA in this r .....

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a vide appeal No.148/CIT(A)-XX/Circle-2/2011-12/Kol dated 01.02.2013 and the appeal by revenue for Asst Year 2005-06 i.e. ITA No. 1523/K/2013 is arising out of order of CIT(A)-XX, Kolkata vide appeal No. 150/ CIT(A)-XX/Circle-2/2011-12/Kol dated 04.02.2013. Assessments were framed by Addl. CIT, Range-2, Kolkata and DCIT, Cir-2, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AYs 2003-04 and 2005-06 vide his separate orders dated 23.03.2006 and 24.12.2008 .....

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e specialized field of management, finance and tax. The services rendered are classified as Management Consultancy Services (MCS) , Financial Advisory Services (FAS) and Tax and Regulatory Services (TRS). MCS division apart from management consultancy services caters to the software solutions of various clients. FAS provides business advisory services on corporate finance, restructuring and other related services. TRS largely caters to compliance, advice, litigation and planning of various tax a .....

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he Reserve Bank of India for implementation of the approved project, subject to a limit of ₹ 100 lakhs per year depending on the location of the unit. The assessee treated the interest subsidy as a capital receipt by directly crediting it to reserves and surplus in the original return of income. Later on based on the assessment order framed u/s 143(3) of the Act dated 18.3.2003 for the Asst Year 2002-03 , the assessee made a revised claim before the ld AO by crediting the interest subsidy .....

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on the annual interest liability year to year on the loan borrowed by the assessee. He held that any interest payment on loan taken for business purpose is always revenue expenditure. Therefore by following the principle laid down by the Hon ble Supreme Court in the case of Sahney Steel and Press Works Ltd vs CIT reported in (1997) 228 ITR 253 (SC) , the interest subsidy received by the assessee should also be treated as revenue receipt. 2.2. On first appeal, the ld CITA held that the interest .....

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86,90,000/- received by the appellant towards interest on loan taken for procurement of capital asset as revenue receipt. 2. That even after allowing the alternate ground of the appellant to reduce the interest subsidy from written down value (WDV) of the assets, the Ld. CIT(A) erred in confirming the order of the assessing officer to treat the same as revenue receipt. 3. That the Ld. CIT(A) erred in noting that interest subsidy was added in the WDV, whereas actually the interest was initially a .....

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ed had set up an unit in Salt Lake Electronic Complex XI - 7, Block -EP, Sector -V, Salt Lake City, Kolkata - 700091 for setting up of a computer software (expansion) project. The Eligibility Certificate for Incentives under W.B. Incentive Scheme, 2000 was issued by the West Bengal Industrial Development Corporation Ltd vide Proceedings No. INC-2000(8)/General/3626 dated 16.10.2001 confirming the setting up of the unit by the assessee and its eligibility to receive incentives under the WB Incent .....

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urther appeal to this tribunal, it was held that in the event the interest expense was charged to profit and loss account, the corresponding subsidy would be treated as revenue. Treatment of Interest Subsidy in Asst Year 2003-04 The assessee treated the interest subsidy of ₹ 86,90,000/- as a capital receipt by directly crediting it to reserves and surplus in the original return of income. Later on based on the assessment order framed u/s 143(3) of the Act dated 18.3.2003 for the Asst Year .....

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profit and loss account during the financial year 2002-03 relevant to Asst Year 2003-04 for which he referred to the interest details given in page 32 & 33 of the paper book explaining that the assessee had debited its capital account with the interest on loan taken from Exim Bank for the purpose of the new project at Salt Lake (i.e Interest was capitalized). The ld AR stated that the interest on Exim Bank Loan were allocated against the various capital additions expended in the said project .....

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of the smallness of the amount involved in the Asst Year 2002-03 chose not to prefer further appeal to the Hon ble Calcutta High Court against the order of tribunal. Effectively , he argued that the interest paid on borrowings from Exim Bank for the purpose of setting up of the project has been capitalized by the assessee upto the date of commencement of project which was in Nov 2001 and the interest payments made thereon from that date till 18.12.2001 was alone charged off to profit and loss a .....

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) 306 ITR 392 (SC) CIT vs Rasoi Ltd reported in (2011) 335 ITR 438 (Cal) Shree Balaji Alloys vs CIT reported in (2011) 333 ITR 335 (J & K) - This was later affirmed by the Hon ble Supreme Court in CIT vs Shree Balaji Alloys in Civil Appeal No. 10061 of 2011 dated 19.4.2016. Without prejudice to the aforesaid argument, he argued that in any case, the interest subsidy may kindly be directed to be credited to the cost of the assets and consequential reduced depreciation may kindly be granted to .....

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ence, the same is reproduced hereunder:- Whereas in pursuance of a National Policy the sales tax related incentives have been withdrawn from the 1st January, 2000. And Whereas the State Govt. have considered it necessary and expedient to extend new types of incentives for promotion of industries in the State from the same date. Now, therefore, the Governor is pleased hereby, in supersession of the West Bengal Incentive Scheme 1999 sanctioned under Commerce & Industries Department s Notificat .....

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he State. 9. Interest Subsidy: 9.1. An eligible Industrial unit for its approved project will be entitled to Interest Subsidy to the extent of 50% of the annual interest liability on the loan borrowed from a Commercial Bank/Financial institution /NBFC approved by Reserve Bank of India, for implementation of the approved project, subject to a limit of ₹ 100.00 lakhs per year depending on the location of the unit as follows: i) Group B area : 5 years; ii) Group C area: 7 years. 9.2. The Inte .....

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further ceiling of ₹ 20.00 lakhs. The total interest subsidy will be available for an additional period of 2 years in all such cases. 2.5.1. It is not in dispute that the West Bengal Industrial Development Corporation Ltd had acknowledged the fact of assessee setting up a new unit for the software development at Salt Lake Electronic Complex XI - 7, Block -EP, Sector -V, Salt Lake City, Kolkata - 700091. The Eligibility Certificate for Incentives under W.B. Incentive Scheme, 2000 was issue .....

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ld that where subsidy was given to offset the cost of an asset, such payment would fall within the expression met , whereas the subsidy received merely to accelerate the industrial development of the state cannot be considered as payments made specifically to meet a portion of the cost of the asset. A careful perusal of the West Bengal Incentive Scheme 2000 shows that the scheme was intended to accelerate industrial development of the state and the incentive was given for setting up of industrie .....

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ove discussion, we are of the view that for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset. 2.5.3. We also find that the Hon ble Apex Court in the case of CIT vs Ponni Sugars & Chemicals Ltd & Ors reported in (2008) 306 ITR 392 (SC) had held as under:- 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this court in the case of Sahney Steel and .....

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sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this court by way of a special leave petition. It was held by this court on the facts of that case and on the basis of the analyses of the scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of .....

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he assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly, the matter was decided against the assessee. The importance of the judgment of this court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the charact .....

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ent of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, .....

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times for some years. The Dock Co. had undertaken the work of extension of its docks. The extended dock was for relieving the unemployment. The main purpose was relief from unemployment. Therefore, the House of Lords held that the financial assistance given to the company for dock extension cannot be regarded as a trade receipt. It was found by the House of Lords that the assistance had nothing to do with the trading of the company because the work undertaken was dock extension. According to the .....

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penditure met out of loans. Even though the payment was equivalent to half the interest amount payable on the loan (interest subsidy) still the House of Lords held that money received by the company was not in the course of trade but was of capital nature. The judgment of the House of Lords shows that the source of payment or the form in which the subsidy is paid or the mechanism through which it is paid is immaterial and that what is relevant is the purpose for payment of assistance. Ordinarily .....

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below : "3. Entitlement to the industrial promotion assistance.-Where a registered dealer manufactures in his unit goods specified in Schedule A or manufactures in his SSI unit goods specified in Schedule B and sells such goods in the State-intra-State or in the course of inter-State trade or commerce within the meaning of section 3 of the Central Sales tax Act, 1956 (Act No. 74 of 1956), from any place in the State, such dealer shall be entitled to a payment of a sum equal to ninety per c .....

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ment year we are concerned with. 14A. From the objects and the reasons of the aforesaid scheme as well as the entitlement as indicated in section 3 mentioned above, it is clear that the Government has decided to grant the subsidy by way of financial assistance to tide over the period of crisis for promotion of the industries mentioned in the scheme which have the manufacturing units in West Bengal and which are in need of financial assistance for expansion of their capacities, modernization, and .....

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in the case of CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC), relied upon by Mr. Poddar in the following terms (page 399) : "In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this court in Sahney Steel and Press Works Ltd. [1997] 228 ITR 253. In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10 per cent. of the capital investment calculated on the basis of the quantum of invest men .....

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come to this court by way of a special leave petition. It was held by this court on the facts of that case and on the basis of the analyses of the scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for pro duction of .....

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as anything but a revenue receipt. Accordingly, the matter was decided against the assessee." (emphasis supplied by us.) In the aforesaid case, it was held that if the object of the subsidy scheme was to enable the assessee to run the business more profitably the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit the receipt of the subsidy was on capital ac .....

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per cent. of the sales tax paid by the beneficiary does not imply that the same was in the form of refund of sales tax paid. As pointed out by the Supreme Court in the case of Senairam Doongarmall v. CIT reported in [1961] 42 ITR 392 (SC) ; AIR 1961 SC 1579, it is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure, and makes it fall within capital or revenue. Thus, in the case before us, the amount paid as subsidy was rea .....

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The appeals are, therefore dismissed. No costs. 2.5.6 We also hold that this tribunal while rendering the decision in assessee s own case for the Asst Year 2002-03 on the impugned issue, did not have the benefit of the aforesaid Supreme Court judgments and Jurisdictional High Court decision. We find that much water had flown on this issue and more clarity has been reached on the same. In this regard, we place reliance on the decision of the Hon ble Apex Court in the case of CIT vs Brij Lal Lohia .....

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bunal reached during those proceedings does not operate as res judicata. As seen earlier there was a great deal more evidence before the Tribunal during the present proceedings, relating to those gift deeds. In the result these appeals fail and the same are dismissed with costs. One hearing fee. 2.5.7. In view of the facts and circumstances of the case, keeping in view the objects of the West Bengal Incentive Scheme 2000 and various judicial precedents relied upon hereinabove, we hold that the i .....

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ded in the appeal of the revenue is as to whether the ld CITA is justified in deleting the disallowance made towards lease rental payment of ₹ 38,24,645/- in the facts and circumstances of the case. 4.1. The brief facts of this issue is that the ld AO observed that depreciation on leased cars amounting to ₹ 49,78,576/- was claimed by the assessee and assessee was asked to explain as to why the depreciation should be allowed on the cars which are not owned by it. In response to this, .....

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inance lease. As per the terms of the agreement, all obligations to maintain the cars lies with assessee i.e the Hirer and the terminal option to procure the asset lies with assessee under separate letter dated 12.8.2002. The assessee even has an option to sell the asset at the end of the lease term. It was argued that by obtaining the right to sell the vehicles within 3 months from the end of the lease period, the assessee has the right to purchase the vehicle at 1% of the value or has the righ .....

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d of lease. In doing so, the cost of the assets alone is treated as the addition, whereas the interest element payable is not considered. It was stated that this treatment was in line with the CBDT s Circular No. 9 dated 23.3.1943 as well as the Accounting Standard 19 prescribed by the Institute of Chartered Accountants of India. The ld AO was of the view that since the complete ownership of the vehicle is not transferred to the lessee during the lease term, such agreement would not tantamount t .....

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o be allowed as a deduction in the assessment (i.e interest element); and b) Payment on account of purchase to be treated as capital outlay, depreciation being allowed to the lessee on the initial value (i.e. the amount for which the hired subject would have been sold for cash at the date of agreement - i.e. the purchase price) 4.2. The ld CITA observed in his order as below:- 8.2. I have perused the assessment order and considered the submission of the appellant. The fact of the case is that th .....

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ed, the A.O. was justified in disallowing the depreciation thereon. So far the judgment cited by the appellant in the case of Indus Ind Bank Ltd. Vs. Addl. CIT reported in 19 Taxmann.com 173 (Mum)(SB), the facts of both the cases are not identical. However, the A.O is directed to allow depreciation on appellant's owned vehicles. Further, the alternative argument of the appellant that if the depreciation on leased vehicles is disallowed than they would be eligible to get the lease rental (net .....

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in the return of income. He vehemently relied on the order of the ld AO. In response to this, the ld AR argued that the ld AO had allowed the lease premium in the next succeeding asst year 2004-05 in section 143(3) proceedings for which he placed a copy of the assessment order dated 28.12.2006. 4.5. We have heard the rival submissions and perused the materials available on record. In the facts and circumstances of the case, we find that the ld CITA had rightly appreciated the alternative argume .....

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sue is that the ld AO observed that the assessee had made certain credit card payments and gifts purchased as below:- Amex Card Payment NV Sivakumar 4243.00 Sanjeev Malhotra gift for Staff Training 4450.00 Provision for expenses for 02-03 2200.00 Gifts purchased 3060.00 Paid to Uralia Entertainment 23,012.00 Cost of Mont Blanc Pen 11,340.00 Gift wrapping paper 580.00 Citibank Credit Card payment 10,395.50 Citibank Credit card payment 430.21 Payment towards Amex Card 14,426.59 Total 74,137.30 The .....

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ssessee. Such momentoes are given as a token of appreciation and express the gratitude of the assessee towards such speakers who have enlightened the participants by sharing his experience and knowledge. It was submitted that M/s Urila Entertainment was engaged to arrange for some programmes during the intervening period of the Continuing Education Programme to entertain the participants who were going through a residential training programme. Similarly payment towards purchase of Mont Blanc Pen .....

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usiness analysis prepared by the assessee. Thereafter the industry wise analysis is posted for publication . In order to conduct such survey and such business meetings, the assessee has to undertake various expenses. Some of the expenses were directly met from the credit card of senior executives, which are then reimbursed to them. Accordingly it was submitted that reimbursement of credit cards represent expenses incurred by the senior executives while attending such seminars and expenses incurr .....

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7; 74,137/- incurred through Credit Card although these were not incurred wholly & exclusively for the purpose of the business? 5.3. The ld DR argued that the assessee had not proved the business purpose of incurring of these expenses and accordingly argued that the ld AO had rightly made the disallowance. In response to this, the ld AR vehemently relied on the order of the ld CITA and also stated that the reimbursements were made to senior executives who had incurred expenses on behalf of t .....

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curred wholly and exclusively for the purpose of business of the assessee as they are related to staff training expenses, continuing education programme expenses, expenses on technoforecast (international journals) and recruitment expenses and accordingly dismiss Ground No. 3 raised by the revenue. 6. The last ground to be decided in this appeal of the revenue is as to whether the ld CITA is justified in deleting the disallowance made on account of foreign currency loss of ₹ 4,33,760/- in .....

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the Associated Enterprises to whom reimbursements were made and accordingly disallowed the same in the assessment. The assessee stated that the aforesaid amount represents the foreign currency loss arising from the restatement of out of pocket expenses receivable in US dollars from foreign clients. The loss has been booked by restating the foreign debtors in view in the fall in the exchange rate as per the existing Accounting Standard 11, which prescribes that in order to reflect the true and f .....

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llant. The fact of the case is that the A.O. noted that the expenses claimed by the appellant towards foreign currency loss was to be borne by the Associated Enterprises. There was no contractual obligation on the appellant to bear such expense. However, the appellant argued that the loss was booked by restating the foreign debtors in view in the fall in the exchange rate as per the existing accounting standard -11. They relied on the judgments of the Hon'ble Supreme Court in the case of Dha .....

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T(A)-XX, Kolkata has erred in directing to allow foreign currency loss of ₹ 4,33,760/- though the assessee had no contractual obligation to bear this loss? 6.3. We have heard the rival submissions and perused the materials available on record. We find that the facts stated hereinabove are not controverted by the revenue before us. We find that the issue is squarely covered by the decision of the Hon ble Supreme Court in the case of Woodward Governor of India P Ltd vs CIT reported in 312 IT .....

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appeal of the revenue is as to whether the ld CITA is justified in deleting the disallowance made on account of software expenses in the sum of ₹ 48,28,899/- in the facts and circumstances of the case. 8.1. The brief facts of this issue is that the ld AO observed that assessee had debited a sum of ₹ 1,34,90,366/- to the profit and loss account and disallowed a sum of ₹ 13,35,562/- as capital costs. The ld AO directed the assessee to explain why the remaining sum of ₹ 1,21 .....

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ils of ₹ 96,90,173/- extensively, wherein , he observed that the following expenses were not attributable to annual or quarterly renewals and were in fact capital in nature :- Application user perpetual-full use -software updates (from oracle) - 2,62,108 Lotus Communications user CEO - 21,02,163 Accordingly, he proceeded to disallow a total sum of ₹ 48,28,899/- (24,64,628 + 2,62,108+ 21,02,163) in the assessee as capital in nature but however granted depreciation @ 60% on the same in .....

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basis was unjust and not legally tenable. (ii) Secondly, on perusal of the documents substantiating such expenses, the Assessing Officer disallowed a sum of ₹ 2,62,l08/- which was incurred on charges payable to Oracle India Private Limited on the ground that such amount was not an annual renewal charge and correspondingly allowed depreciation @ 60%. Rebuttal In this connection, it is most humbly submitted that the invoice, which has been scrutinised by the Assessing Officer, clearly indic .....

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nual renewal charge and correspondingly allowed depreciation @ 60%. Rebuttal It may please be noted that the appellant had actually charged ₹ 18,05,052/- to its profit & loss account for the FY 2004-05 (as apparent from the list showing break-up of software expenses) and not 21,02,163/- towards Lotus Communication. Although the invoice raised by the vendor claimed an amount of ₹ 21,02,163/-, it was finally settled at ₹ 18,05,052/- and charged to the profit & loss accord .....

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32 of the LT. Act, it is clear that the assessee would be entitled to depreciation only when the assessee acquires the license. Incidentally such acquisition of licenses deals with outright purchase of software along with its copyrights, which would enable the assessee to exploit the rights to such software commercially. In other words, if the assessee would have acquired the right to tile software in a manner to have been able to reproduce the software by copying the same and thereafter selling .....

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e submission of the appellant. The fact of the case is that the appellant claimed a sum of Rs.l,34,90,366/- towards software expenses as revenue expenditure. However, the A.O. observed that the payment made to IBM/Wipro and Oracle was not of the nature of annual renewals but of the nature of upgradation and accordingly ₹ 48,28,899/- was disallowed treating the same as capital expenditure, however, depreciation on the same was allowed. The appellant argued that a detailed list of software e .....

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iod of one year. The Software or the copyright of the software was never acquired by the appellant. The aforesaid expenditure was incurred on account of annual/quarterly renewal charges for a mere right to use certain software or technical assistance in connection with such software but the appellant did not acquire any software or copyright for the same. After careful consideration of the facts of the case, I find that A.O. had not brought any material on record which could establish that the s .....

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asset. 8.5. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR made specific arguments by making reference to the relevant pages of the paper book containing the details of expenses and the evidences in support of the same. He argued that the ld AO made ad hoc disallowance of ₹ 24,24,628/- without making any specific reference to the bills and details filed before him and the sum of ₹ 24,24,628/- could never be traced from the total details filed by .....

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that the assessee did not derive any enduring benefit in the capital field and accordingly prayed for confirmation of the order of the ld CITA in this regard. 8.6. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee in this regard. We find that the ld CITA had given categorical findings with regard to each and every disallowance made by the ld AO. We also find from the evidences filed in the paper book, the expenditure .....

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i) dated 4.11.2011 wherein the facts before the Hon ble Delhi High Court were as under :- The captioned appeals pertain to the years 2001-02 and 2002-03. The said appeals involve two issues: The first issue being: the treatment to be accorded to expenditure incurred by the assessee on purchase of software applications. These applications being: MS Office Software, Anti Virus software, Lotus Notes Software and Message Exchange applications. The assessee in respect of these applications acquired a .....

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preciation at the rate of 60%. This resulted in both the assessee and the revenue being aggrieved. Consequently, cross appeals were filed by both the assessee and the revenue. It was held that - the first issue, in our opinion, has been considered and decided against the revenue in a judgment delivered by us passed in CIT Vs. Asahi India safety Glass ltd. (2011) 203 Taxman 277/15 taxmann.com 382 (Delhi) In view of the aforesaid facts and findings and evidences in the paper book and respectfully .....

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7; 1,36,38,982/- as bad debts in the return. The ld AO observed that the assessee had written off the debts due from the following parties:- 1. Calcutta Municipal Corporation 2. Chhatisgarh Satate Electricity Board 3. Bengal Chamber of Commerce and Industry 4. Eicher Motors Ltd. 5. Essar Power Ltd. 6. ONGC Ltd. 7. Kotak Mahindra Bank 8. Jindal Steel Limited 9. Tata Motors Ltd. 10. Tata Tea Ltd. 11. TISCO The ld AO observed that these concerns are credit worthy companies and some are governmental .....

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hat the debt had become bad and had merely written off in the books to reduce its tax burden. 9.2. The assessee explained before the ld CITA that these are regular debts appearing in the normal course of business and assessee had duly offered to tax as income in the earlier years and had written off the same as irrecoverable in its books of accounts and there is no need to establish that the debt had indeed become bad post 1.4.1989 due to the amendment brought in section 36(1)(vii) of the Act. T .....

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2016 dated 30.5.2016 wherein the CBDT had directed the revenue to even withdraw the ground of disallowance of bad debts as the issue is well settled by the decision of the Hon ble Apex Court in the case of TRF Ltd reported in 323 ITR 397 (SC). 9.4. We have heard the rival submissions. We find that the revenue had not disputed the fact that the debts were offered to tax as income in the earlier years and some portion of the same debts were treated as irrecoverable and were written off in the book .....

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elow:- 3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. In CA Nos. 5292 to 5294 of 2003 vid .....

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ssible under section 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub-section 36(2) of the Act. We hold that the Circulars issued by the CBDT are binding on the revenue. In view of the aforesaid facts and respectfully following the apex court decision and the CBDT Circular, we find no infirmity in the order of the ld CITA in this regard. Accordingly, the .....

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to discharge its primary onus of explaining its book entries on account of service tax written off and since the write off of service tax of the related debts itself has been disallowed, the related service tax also is liable to be disallowed. On first appeal, the ld CITA observed as under:- 10.2. I have perused the assessment order and considered the submission of the appellant. The fact of the case is that the appellant identified few debtors as irrecoverable and wrote them in the balance she .....

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is in appeal before us on the following ground:- 3. On the facts and the circumstances of the case the Ld. CIT(A)-XX, Kolkata has erred in directing to allow write off service tax of ₹ 5,96,525/-. 10.3. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR vehemently relied on the order of the ld CITA. 10.4. We have heard the rival submissions. We find that the assessee had initially credited the service tax portion on the bills raised by it as a liability a .....

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n. We find that there is no basis for the ld AO for making this addition as the profit and loss account is not at all hit by the said write off of service tax portion. Hence we hold that the ld CITA had rightly deleted the addition. Accordingly, the ground no. 3 raised by the revenue is dismissed. 11. The last issue to be decided in this appeal of the revenue is as to whether the ld CITA is justified in deleting the disallowance on account of recruitment expenses in the sum of ₹ 20,51,000/ .....

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₹ 15,00,000/- and ₹ 5,51,000/- were seen to be paid as fees to recruitment agencies in connection with the recruitment of Shri Jairaj Purandare and Shri Mohnish Sinha who went on to occupy very high positions in the hierarchy of the assessee. The ld AO observed that recruitment of a highly skilled professional results in the acquisition of an enduring human resource asset. Fees paid in connection with the same is thus a onetime cost related to the acquisition of such an enduring asse .....

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g decisions :- Assam Bengal Cement Co. Ltd vs CIT reported in 27 ITR 34 (SC) Empire Jute Co. Ltd vs CIT reported in 124 ITR 1 (SC) Hindustan Commercial Bank Ltd in RE reported in 21 ITR 353 (All HC) U.M. Cables Ltd vs ITO in ITA No. 2442/Kol/2007 rendered by Kolkata Tribunal The ld CITA taking into account the aforesaid submissions and by placing reliance on the aforesaid decisions deleted the disallowance made by the ld AO. Aggrieved, the revenue is in appeal before us on the following ground:- .....

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