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2016 (10) TMI 548 - BOMBAY HIGH COURT

2016 (10) TMI 548 - BOMBAY HIGH COURT - TMI - Allowability of professional fees paid expenses - whether the Tribunal was right in treating the professional fees paid to its collaborator KSB AG of Germany for implementing the SAP programme as an allowable expenditure when the use of this software enhances the efficiency of the organization which is enduring in nature and as good as the acquisition of an asset? - Held that:- Taking note of rapid technological development, purchase of technology ma .....

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hotra a/w Mr. N.A. Kazi for the appellant Mr. R. Murlidhar a/w Mr. Balasaheb Yewale i/b Rajesh Shah & Co. for the respondent ORDER P. C. 1. The Income Tax Appeal No.777 of 2014 is not on board. Mentioned. Upon mentioning taken up for consideration along with Income Tax Appeal No.728 of 2014, which is on board. 2. Both these appeals filed under Section 260A of the Income Tax Act, 1961 (the Act) challenge a common impugned order dated 8th August, 2013. The impugned order relates to Assessment .....

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diture when the use of this software enhances the efficiency of the organization which is enduring in nature and as good as the acquisition of an asset? 5. M/s. KSB AG Germany (KSB Germany) is an associate of the respondent assessee. During the subject Assessment Years the respondent assessee along with KSB Germany decided to implement SAP programme in respondent assessee company. This to enable synchronisation and integration of business functions, management control / reporting etc. of all the .....

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laiming the same to be revenue expenditure. 6. However, during the assessment proceedings for both the Assessment Years, the Assessing Officer did not accept the respondent assessee's claim that amounts paid as professional services is revenue in nature. This on the ground that the respondent is deemed owner of the SAP Programme. This ownership it holds would lead to a benefit of enduring nature. Moreover, on application of functional test, this expenditure would be capital in nature. 7. Bei .....

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, 2012 rendered a finding of fact that no amount was paid towards purchase of SAP programme. It held that SAP as a software / system which had been acquired (owned) by M/s. KSB Germany. The payments made by the respondent assessee to M/s. KSB Germany were in the nature of professional fees for implementation of the SAP programme in India. Consequently, the CIT(A) allowed the respondent assessee's appeal for 2007-08 holding the same to be revenue in nature. 8. Being aggrieved, the Revenue cha .....

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P Programme which was owned by M/s. KSB Germany. It also held as a fact that the professional expenditure incurred in making payment to M/s. KSB Germany had facilitated the conduct of the respondent assessee's operations in a more efficient manner. This acquisition was not in a nature of a profit making apparatus. Therefore, not in the capital field. Thus, the Revenue's appeal from the order of the CIT(A) for A.Y. 2007-08 and the assessee's appeal from the final order of Assessment o .....

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