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Take Solutions Limited Versus The Assistant Commissioner of Income-tax, Corporate Circle-3 (1) , Chennai.

2016 (8) TMI 20 - ITAT CHENNAI

Disallowance of product development expenditure - revenue OR capital expenditure - Held that:- The product development expenditure is to be considered as capital expenditure and the assessee is entitled for depreciation at 15% on its capital asset as held for the assessment year 2006-07. - Disallowance u/s.14A r.w.Rule 8D(2)(iii) - Held that:- As per sec.14A r.w. Rule 8D(2)(iii) is applicable and the assessee is not able to show as to how, it is not applicable to the assessee’s case. Hence, .....

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s) dated 21.01.2016 for the assessment years 2009-10 and 2010-11. 2. The first common ground in these appeals is with regard to confirming the disallowance of product development expenditure as capital expenditure. 3. Similar issue came for consideration before the Tribunal in assessee s own case in ITA Nos. 457, 458 and 459/Mds/2013 for the assessment years 2006-07, 2007-08 and 2008-09. The Tribunal after elaborate discussion vide order dated 30.09.2013 held as under : 14. We have heard both si .....

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urt in the case of Tata Consultancy Services v. State of Andhra Pradesh (supra), held that the expenditure incurred by the assessee is capital expenditure and allowed 15% depreciation. In the assessment order, he has also observed that the assessee is gaining enduring benefit. On appeal, the ld. CIT(Appeals), by following the decision of the Tribunal in assessee s own case for the assessment year 2003-04 sustained the order of the Assessing Officer. Before us, the ld. Counsel for the assessee ha .....

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expenditure relying on Hon ble Rajasthan High Court judgement in the case of CIT vs. Arawali Constructions Co. (P.) Ltd. (259 ITR 30) in which the Hon ble High Court has observed that the payment was made for outright sale of computer software which is used as technique in mining operations. In the Lordships view the acquiring of technical know-how is of capital nature and therefore the Assessing Officer has rightly treated the expenditure on acquiring the computer software as capital expenditu .....

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functional tests and the test of enduring benefit. An advantage is to be considered as of enduring benefit if the benefit accruing is not of a transient nature but is of such durability as to justify it being treated as a capital asset. The expression enduring benefit has been explained by the Hon ble Supreme Court in the case of Assam Bengal Cement Co. Ltd. (supra) to mean enduring in the way that fixed capital endures. As held by Hon ble Supreme Court in the case of Empire Jute Co. Ltd. (supr .....

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enefit and such benefit should accrue to the assessee in the capital field. What exactly is meant by accrual of benefit in the capital field is that the said benefit should form part of the profit making apparatus of the assessee s business. 7. From the above, it is clear that in order to treat any expenditure as capital expenditure it should result in acquisition of advantage of enduring benefit and such benefit should accrue to the assessee in the capital field and the said benefit should form .....

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rom Metalogics Systems India Pvt. Ltd. In all three acquisitions of software the assessee has become absolute owner of the product as well as also acquired the intellectual property rights other property rights relating to the product and divisions so purchased. Since the assessee is engaged in the business of software development, the acquisition of these softwares by the assessee is either for using the software and the facilities purchased for developing other softwares as per specific demand .....

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of software and the expenditure incurred on development and acquisition of these softwares along with the division which is a facility for developing the software is a capital expenditure. Our view is also supported by the decision of the Hon ble Supreme Court in the case of Tata Consultancy Services vs. State of Andhra Pradesh (271 ITR 401) wherein it was held that software contained a distinct tangible property by itself. The use by the assessee of such software in its business is enough to al .....

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le deciding an appeal in the case of M/s SQL Star International Ltd., it was held that the assessee company is engaged in the business of software development as well as running a training centre to impart specialized training to the students in software technology. If the software were used in such business to impart training to the students, then the same would be part of the profit making, apparatus of the assessee and consequently expenditure on software is capital in expenditure. In view of .....

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fficer is restored. 15. Respectfully following the above decision of the Tribunal in assessee s own case for the assessment year 2003-04, we dismiss the appeal filed by the assessee. 16. In so far as the alternative ground raised by the assessee is concerned, in the assessment year 2003-04, the depreciation allowed was only 15% and therefore, by following the same, the alternatively ground raised by the assessee is rejected. In view of the above, we are inclined to hold that the product developm .....

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