TMI Blog2017 (5) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... on thereof in impugned AY is not warranted for. Therefore, this issue is restored to Ld. AO for limited purpose of verification of the fact that whether the assessee has offered additional interest in the next AY. Disallowance of foreign travel expenditure being 50% of business related foreign travel - Held that:- Since FBT has been paid on these expenses, disallowance thereof u/s 37(1) was not warranted for. Therefore, we are inclined to delete the said additions subject to verification of payment of FBT on these expenses by Ld. AO. Therefore, the matter is restored back to the file of Ld. AO for limited purpose of verifying the fact that the FBT has been paid on these expenses. Treatment of project advisory services fees paid to an entity - capital v/s revenue - Held that:- We find that the said expenditure were in the nature of upfront consultancy fees to identify the projects which may be taken up by the assessee in future. A perusal of financial statements of the assessee reveals that as at the beginning of the year, the assessee had reserves of more than ₹ 20 Crores. The quantum of the amount or payment thereof has not been doubted by the revenue. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, Ld. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2009-10 assails the order of Ld. Commissioner of Income Tax (Appeals)- 12 [CIT(A)], Mumbai dated 25/02/2013. The assessee has raised as many as fifteen grounds of appeal, which we take up in subsequent paragraphs. 2. Briefly stated the assessee, being resident corporate assessee engaged in the business of manufacturing of glass bottles, commission agent trading, was assessed u/s 143(3) at ₹ 18,84,69,520/- after certain adjustments / disallowances vide Assessing Officer [AO] order dated 22/12/2011 as against returned income of ₹ 17,48,71,250/- filed by assessee on 26/09/2009. 3. In Ground Nos. 1 2, the assessee has agitated the addition of ₹ 6,95,199/- u/s 69C towards payment made to American Express Banking Corporation [AEBC]. Pursuant to receipt of certain AIR information, the assessee was found to have paid ₹ 20,90,702/- to AEBC against credit card payment which was not reflected in the books of accounts and further no response was received by AO against 133(6) notice issued to the AEBC which led to impugned disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that whether the assessee has offered additional interest in the next AY. If so, the impugned additions shall stand deleted. The assessee is also directed to submit necessary evidences in this regard forthwith. This ground of assessee s appeal stands allowed for statistical purposes. 5. By way of Ground Nos. 4 5, the assessee has agitated disallowance of foreign travel expenditure of ₹ 57,65,712/- being 50% of business related foreign travel of ₹ 1,15,31,424/-. During Assessment proceedings, it was noted that the assessee incurred expenditure of ₹ 115.31 Lacs towards foreign travel by directors and related persons which, in the opinion of Ld. AO, could not be properly substantiated / documented by assessee which led to disallowance of 50% against the same. The same was confirmed by Ld. CIT(A) also. The Ld. AR drew our attention to the fact that the assessee earned handsome commission from export and incurred travelling expenses to negotiate the business deals and hence the same was allowable particularly when the assessee has already paid Fringe Benefit Tax [FBT] against those expenses and therefore, adhoc disallowance against the same could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy projects that could be taken up in future. The object of the expenditure was to enable an efficient and profitable utilization of the surplus funds and therefore, allowable u/s 37(1) of the Income Tax Act, 1961. The assessee further contended that it has reflected rental income of ₹ 38.70 crores and therefore, the feasibility study carried out for proposed IT SEZ, being related with the same, was an extension of existing business only and not a new line of business. However, not convinced, Ld. CIT(A) noted that the assessee failed to prove the nexus of new business with the existing business and therefore, the same being, capital in nature, was not allowable. Before us, the Ld. AR has raised similar pleas and drew our attention to the fact that main objective to undertake the feasibility study was to explore opportunities to deploy the excess reserves held by the assessee and therefore, the same were allowable to the assessee. Reliance has been placed on the judgment of Hon ble Andhra Pardesh High Court in CIT Vs. Coromandal Fertilizers [247 ITR 417]. Per contra, Ld. DR placed reliance on the stand of lower authorities and contended that the same being incurred to set up n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the full deduction against software expense is allowable, being revenue in nature as the same was incurred only to ensure smooth / efficient running of assessee s business:- (i) CIT Vs. Geoffrey Manners Co. Ltd. [2014 49 taxmann.com 320 Bombay High Court] (ii) CIT Vs. Raychem RPG Ltd. [2011 346 ITR 138 Bombay High Court] (iii) CIT Vs. Asahi India Safety Glass Ltd. [2011 245 CTR 529 Delhi High Court] The Ld. DR contended that as the assessee acquired benefit of enduring nature, the same was capital in nature and rightly been allowed depreciation against the same as these expenses were intangible rights in nature. 9. We have heard the rival contentions and perused the cited case laws. We note the following observation of jurisdictional Bombay High Court in the case of CIT Vs Geoffrey Manners Co. Ltd. [supra]:- 12. In relation to this the Tribunal in the impugned order observed that there is room for certain flexibility in the views taken from time to time. The Assessee in such cases installs the computers. This technology is now said to be acceptable in changing world. The rapid advancement of research also contributes a small degree of endurabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably; leaving the fixed assets untouched would be an expenditure in the nature of revenue expenditure even though the advantage may last for an indefinite period. Test of enduring benefit or advantage would thus collapse in such like cases. It would in our view be only truer in cases which deal with technology and software application, which do not in any manner supplant the source of income or added to the fixed capital of the assessee. [See Alembic Chemical Works Co. Ltd. vs CIT (1989) 177 ITR 377; CIT vs J.K. Synthetics (2009) 309 ITR 371 at page 412 and CIT Vs. Indian Visit.com (supra)]. 9.1. This is the approach which the Supreme Court has applied even in cases where there is a once for all or a lump sum payment. What is to be seen in the facts of this case, as already noticed by ushereinabove, that the assessing officer as a matter of fact has returned a finding that the expenditure undertaken was for overhauling the accountancy of the assessee and to efficiently train the accounting staff of the assessee. The Tribunal, which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n placed in the paper book which we have perused. We find that the issue requires re-examination at the level of Ld. AO as ledger extracts reveals that the said expenditure has been incurred towards installation of some machineries and hence prima facie, capital in nature. Therefore, this matter is restored back to the file of AO for reexamination in the light of documents placed by the Ld. AR in the paperbook. The assessee is directed to substantiate his claim forthwith before AO and submit necessary information / documents called for by Ld. AO failing which AO shall be at liberty to dispose-off the same on the basis of material available on record. The assessee s ground of appeal stands allowed for statistical purposes. 11. In ground No. 11 12, the assessee is aggrieved by restricting depreciation on UPS to 25% as against higher depreciation of 60% claimed by the assessee treating the same as integral part of computer system. The AO treating the same as plant machinery, allowed depreciation @25% only which was confirmed by Ld. CIT(A). The Ld. AR has placed reliance on the judgment of Hon ble Bombay High Court in CIT Vs. Saraswat Infotech Ltd. [ITA NO. 1243 of 2012 15/01/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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