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2016 (8) TMI 69 - ITAT CHENNAI

2016 (8) TMI 69 - ITAT CHENNAI - TMI - Non granting 100% depreciation on software purchase - Held that:- In this case, the assessee acquired the software for the purpose of its business and it is a intangible asset under clause (iia) to sec.32(I) of the Act. Thus, outright acquisition of computer software is nothing but acquisition of know-how and relevant expenditure is a capital expenditure. This software falls in the new entry was introduced as Sl. No.iii(5) in Part-A of the Table of rates fo .....

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irmed. - Decided partly in favour of assessee - Disallowance of deferred revenue 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 wholl .....

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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 the judgement of Supreme Court in the case of G.E.India Technology Centre P Ltd Vs. CIT reported in [2010 (9) TMI 7 - SUPREME COURT OF INDIA ].- Decided in favour of assessee - I.T.A.No.1367/Mds./2014, I.T.A.No.1235 & .....

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ment year 2004-05. Another appeal of the Revenue is directed against the order of the Commissioner of Income-tax (Appeals),Large Taxpayer Unit dated 29.01.14 pertaining to assessment year 2007-08. Since issues involved in all these Revenue s appeals as well as assessee s appeal are common in nature, these appeals are clubbed together, heard together, disposed off by this common order for the sake of convenience. ITA No.1367/Mds./12(Assessee s Appeal: 2004-05) 2. In this appeal, only one ground f .....

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of ₹ 4,65,861/- towards software expenses treating it as capital expenditure. The AO treated the expenditure of ₹ 6,65,516/- incurred towards purchase of software as capital in nature and allowed depreciation on it @ 30% since it was acquired during the second half of the relevant previous year as under: Expenditure claimed on software 6,65,516 Less: Depreciation allowable @ 30% 1,99,655 Amount disallowed 4,65,861 Aggrieved with the order of AO, assessee carried the appeal before th .....

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ar 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 ef .....

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dia Safety Glass Ltd. reported in 2011 TIOL 705(Delhi) d) In the case of CIT Vs.Varinder Agro Chemicals Ltd. reported in (2009) 309 ITR 272(P&H) e) In the case of DCIT Vs. Express Airotonics Pvt. Ltd. in ITA No.7105/Mum./2002 f) In the case of FAG Bearing India Ltd. Vs. DCIT reported in (2011) 12 ITR (Tri) 395. g) In the case of ACIT Vs. Motorola India P Ltd reported in 2013 TIOL 684. h) In the case of Amway India Enterprises Vs. DCIT reported in 2008 TIOL 97 ITAT Delhi Special Bench i) In t .....

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ng with computer in the depreciation table for the purpose of claim of depreciation. Hence, ld.D.R endorsed the view of the lower authorities. 6. We have heard both the parties and perused the material on record. In this case, the assessee acquired the software for the purpose of its business and it is a intangible asset under clause (iia) to sec.32(I) of the Act. Thus, outright acquisition of computer software is nothing but acquisition of know-how and relevant expenditure is a capital expendit .....

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see during the second half of the relevant previous year and granted deduction 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 .....

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2-03 53,833 Total 28,12,769 The AO had disallowed the above expenses since they relate to prior period and have no relevance for computing the income during this year. Aggrieved by the order of AO, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) relied on the judgement of M/s.Madras Industrial Investment Corporation Ltd. Vs. CIT (1997) 225 ITR 802 and allowed the claim of assessee observing that it is to be considered as deferred revenue expenditure. Against this, .....

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lly 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. Accordingly, this ground of Revenue is allowed. 11. In the result, the appeal of Revenue in ITA No.1235/Mds./14 stands allowed. ITA No.1342/Mds./14 (Revenue s appeal:A.Y 2007-08) 12. In this appeal, the first ground for our .....

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on the ground that the assessee failed to comply with section 195 r.w.s.9(1)(vi) of the Act. Aggrieved, the assessee carried the appeal before the Ld.CIT(A). On appeal, the CIT(A) observed that the assessee made payment in foreign currency by way of advance payments towards purchase of software was clearly 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 excessiv .....

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)(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 t .....

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have deducted tax at applicable rates. 15. On the other hand, ld.A.R submitted that when the goods are purchased, there is no income arising which is chargeable under the provisions of the Act and none of the ingredients set out in section 9 of the Act has been met and therefore, there is no income accruing or arising in India in the case of purchase of goods. Further, foreign company does not have a permanent establishment in India and in the absence of income accruing in India, s.195 has no ap .....

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