TMI Blog2016 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... nue expenditure written off - Held that:- The expenditure is not relating to the assessment year under consideration and it was incurred prior to the commencement of the assessee’s business and it is prior period expenditure and the assessee placed reliance in the judgement of M/s.Madras Industrial Investment Corporation Ltd. Vs. CIT (1997 (4) TMI 5 - SUPREME Court ) have no relevance. Since the expenditure is wholly and exclusively laid out for the purpose of marketing of the business of the assessee in earlier assessment year, it cannot be allowed as revenue expenditure during the assessment year under consideration as this expenditure is not related to the assessment year 2004-05.- Decided in favour of revenue TDS u/s 195 - disallowance u/s.40(a)(ia) in respect of amounts paid by the assessee to in foreign currency towards advance for purchase of software, without deduction of tax at source - Held that:- Since we have already held the purchase of software is an intangible asset and the assessee is entitled for depreciation in the assessment year 2004-05, applying the same ratio we are of the opinion that being the purchase of software, it cannot be liable for TDS in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On appeal, the Ld.CIT(A) observed that from assessment year 2003-04, software has also been included along with computer in the depreciation table for the purpose of claim of depreciation and also the Act itself clearly recognizes that expenditure on software is a capital expenditure by including the same in the Schedule specifying the depreciation rates. Further, CIT(A) observed that since computer software has been specifically included in the depreciation table from assessment year 2003-04, there is no need to give it a different treatment. Hence, the CIT(A) sustained the additions made by the AO. Against this, the assessee is in appeal before us. 4. The Ld.A.R submitted that the software purchased by the assessee is accounting software namely Pharma Protocol, which is application software and accounting software namely TALLY, which was replaced by new Application software. Further, ld.A.R submitted that application of software is used to enhance the productivity and efficiency of presenting the data and is not asset. ld.A.R submitted that since software needs regular up-gradations and also does not have enduring benefits, therefore, it is in the nature of revenue expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction at 30% and the same is confirmed. This ground is dismissed. 7. In the result, the appeal of assessee in ITA No.1367/Mds./14 stands dismissed. ITA No.1235/Mds./14 (Revenue s appeal:A.Y 2004-05) 8. In this appeal, only one ground for our consideration is with regard to deletion of disallowance of deferred revenue expenditure written off to the tune of ₹ 28,12,769/-. 9. The facts of the issue relate to disallowance of deferred revenue expenditure written off. The AO found from the profit and loss account that the assessee has debited under the head Other Expenses as deferred revenue expenditure written off. When the AO asked the break-up of the expenditure of ₹ 28,12,769/-, the assessee furnished the details as under:- Details F.Y incurred Amount (Rs.) Factory Inauguration expenses 2001-02 16,82,597 Clinical Trials 2001-02 4,12,614 New Product Development 2001-02 6,63,724 New Product Development 2002-03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly stated in the assessment order. Further, he observed that if the payment is towards purchase, then it will not fall under the subject of TDs, therefore, disallowance made by the AO is excessive and also observed that as submitted by ld.A.R, the other conditions like PE, provisions of the section 9 etc. are also in favour of the assessee. Hence, Ld.CIT(A) deleted the addition made u/s.40(a)(ia) by the AO. Aggrieved, the Revenue is in appeal before us. 14. Before us, ld.D.R submitted that the payment was made in foreign currency as advance for purchase of software, without deduction of tax at source and obtaining certificate u/s.195(2), would clearly fall under Explanation 2 to u/s.9(1)(vi) of the Act. Further, ld.D.R placed reliance in the case of Gracemac Corpn. Vs. ACIT reported in 134 TTJ 257 wherein it was held that consideration received will be in the nature of Royalty if it is in respect of transfer of all or any right (including grant of licence) in respect of same, under Clause (v) of Explanation 2 of Sec.9(1)(vi). Further, ld.D.R submitted that the purpose behind making such payment is for the purpose of utilizing the same in India and shall be considered only as th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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