TMI Blog2011 (8) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... red in sustaining the disallowance in a sum of RS..1,04,11,829/- made by the Assessing Officer [AO] holding that the assessee had acquired intangible asset giving enduring benefit in acquiring application software. The relevant grounds of appeal read as under: 1. The learned Assessing Officer had erred in disallowing the cost of application software holding that the amount spent on application software is capital in nature and the learned Commissioner of Income-tax(Appeals) has erred in confirming the same. 2. The lower authorities have erred in holding that the appellant has acquired intangible asset giving enduring benefit and disallowed the entire sum of Rs. .1,04,11,829/- as capital expenditure. On proper appreciation of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea of the assessee. According to him, in view of the specific provisions of section 32(1)(ii) it is clearly an asset giving enduring benefit to the assessee. Hence, he disallowed the claim of the assessee and treated the same as capital expenditure. However, he allowed 60% of the amount as depreciation. While doing so, the AO relied on the following decisions: i) CIT vs. Aravali Construction Co. Ltd. (215 ITR 30) (Raj) ii) CIT vs. Electron Engg. Co. Ltd. (166 ITR 66), and iii) CIT vs. Premier Automobiles Ltd. (206 ITR 1) (Bom) 4. Aggrieved, the assessee moved the matter in appeal before the first appellate authority before whom it was contended as under: a) The software was used for day-today functioning of the business, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR (AT) 183. In addition to the above materials, he placed on record copies of certain purchase orders to show that the period of license is for a limited period only. By placing the above material on record, the learned C.A. submitted that the assessee s case is covered by the decision of the Hon ble Karnataka High Court in the case of M/s.Toyota Kirloskar Motors Pvt.Ltd.(supra) and also by the order of the Special Bench (Delhi) of this Tribunal in the case of Amway India Enterprises (supra). He heavily relied on the decision of the jurisdictional High Court and drew our attention to the following observations therein: 3. As rightly pointed out by the authorities, when the life of a computer or software is less than two years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure on computer software gives an enduring benefit to an assessee, the duration of time for which the assessee acquires right to use the software becomes relevant. Having regard to the fact that software becomes obsolete with technological innovation and advancement within a short span of time, it can be said that where the life of the computer software is shorter (say less than 2 years), it may be treated as revenue expenditure. Though we are bound by the decision of the Hon ble jurisdictional High Court and that of the Special Bench, as rightly pointed out by the learned Departmental Representative, neither the assessment order nor the appellate order consists of any discussion regarding the length of the period for which softwar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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