TMI Blog2013 (9) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal order, the same was kept for taking further action by the company. I state Mr Venkatesan, then Asst Vice president, who was handling the tax matters of TAKE Solution, was transferred to Singapore, no action was taken on the Appellate order since the replacement was not made by the company immediately by that time for Mr. Venkatesan. After that Mr. Sastri was appointed for that Post. While he was securitizing the old records, correspondences and papers who found that no steps has been taken against the CIT(A) order. He suggested that appeal ought to have been filed against the order of CIT(Appeals), and hence we sent the order to our Counsel for preparation of grounds and the same is being filed today. 3. The ld. Counsel for the assessee has submitted that the delay occurred was due to change of the Vice-President of the assessee company from place to another place and subsequently, nobody was appointed in the his place immediately. When one Mr. Sastri was appointed, he scrutinized with old records and noticed that no appeals have been filed. Therefore, the delay is neither wilful nor deliberate and he prayed for condoning the delay for all the assessment years. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s what is product development expense. 8. The assessee has explained before the Assessing Officer that it is in-house engineers and technicians do develop certain computer packages which in turn will be put into use as per the needs and requirements of various clients and customers, and a normal practice of the assessee, taking into consideration the nature of business of the assessee, which indulges in supply chain management and business process outsourcing/software services. This expenditure being part of normal routine, the same has to be allowed as revenue expenditure. But, the Assessing Officer, after considering the explanation of the assessee has observed that the assessee is in the practice of creating new software packages so as to cater to the needs of the different clientele and by doing so, the assessee s marketing revenue also progressively increases. Even if it is considered for a minute that it is a sort of acquisition of technical know-how, but still relying on the Hon ble Rajasthan High Court judgement in the case of CIT v. Arawali Construction Co. Pvt. Ltd. [259 ITR 30], in which the Hon ble High Court has observed that even acquiring of technical know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issue involved in this appeal is whether the expenditure i.e. product development expenses incurred by the assessee is a capital expenditure or revenue expenditure. The Assessing Officer, after examining the entire facts of the case and by considering the decision of the Hon ble Rajasthan High Court in the case of Aravali Construction Co. Pvt. Ltd. (supra) and also by the decision of the Hon ble Supreme Court 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 has submitted that the facts are entirely different in this assessment year, but he has not pointed any fact, which is different from earlier assessment year. In the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 part of profit making apparatus of the assessee s business. In the case in hand the assessee got developed the software with TAKE Hub which is a warehouse management software against payment of ₹ 1 core. By doing so the assessee has acquired the absolute ownership and other rights regarding software. Apart from this the assessee also purchased a division that developed product blue yantra, a software from Istartweb Limited Co. and also purchased a division that developed product i-point from 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 rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on computer software satisfies the test of ownership enduring benefit of utility to the business of the assessee. Thus, in our view the expenditure incurred by the assessee in the present case for acquiring different softwares and divisions having facility to develop the software is a capital expenditure. Accordingly the order of the Commissioner (A) is set aside and order of the Assessing Officer 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. 17. In the result, the appeal filed by the assessee is dismissed. I.T.A. Nos. 458 and 459/Mds/2013 [A.Y. 2007-08 2008-09] 18. In so far as assessment years 2007- 08 and 2008-09 are concerned, the facts and issue involved in these assessment years are similar to the assessment year 2006-07. In view of our decision for the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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