TMI Blog2017 (12) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... ees - revenue or capital - Held that:- The assessee had paid software license fees and maintenance fees to M/s.Aspen Tech for the systems which is used by the refinery for making decision support solutions for optimizing production. These payments are made on yearly basis and towards maintenance of the software. The expenditure is in nature of recurring one - Decided in favour of assessee. - ITA No. 687/Mds/2013, ITA No. 853/Mds/2013 - - - Dated:- 7-12-2017 - Shri Abraham P. George, Accountant Member And Shri George Mathan, Judicial Member Assessee by : Mr.R.Vijayaraghavan, Adv Department by : Mr.Prabhu Mukunth Arun Kumar, Jr. Standing Counsel ORDER Per George Mathan, Judicial Member ITA No.687/Mds/2013 is an appeal filed by the assessee ITA No.853/Mds/2013 is an appeal filed by the Revenue against the Order of the Commissioner of Income Tax (Appeals), LTU, Chennai, in ITA No.66/11-12/LTU(A) dated 08.01.2013 for the AY 2006-07. 2. Shri Prabhu Mukunth Arun Kumar, Jr. Standing Counsel, represented on behalf of the Revenue and Shri R.Vijayaraghavan, Adv., represented on behalf of the assessee. ITA No.687/Mds/2013 Assessee s appeal: 3. In the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ues to M/sHEPI and not the entire payment, i.e. the entire revenue to M/s.HEPI. 4. The Appellant craves leave to file additional grounds at the time of hearing. 3.1 Ground Nos.1 4 are general in nature. 3.2 At the time of hearing, the Ld.AR did not wish to press the grounds against the re-opening of the assessment and consequently Ground Nos.2, 2.1 2.2 of the assessee s appeal stands dismissed as not pressed. 3.3 In regard to Ground Nos.3 to 3.5, it was submitted by the Ld.AR that the issues were against the action of the Ld.CIT(A) in confirming the disallowance made by the AO in respect of the purchase of crude oil by invoking the provisions of Sec.40(a)(i) of the Act on account of the nondeduction of TDS in respect of the payments made to M/s.Hardy Exploration Production India (in short M/s.HEPI ) u/s.195. It was a submission that in the course of the assessment, the AO following the decision of the Hon ble Supreme Court in the case of M/s.Transmission Corporation of AP Ltd., reported in 239 ITR 587 had held that the assessee was liable to deduct TDS u/s.195(1) in respect of the purchase price of crude oil purchased from M/s.HEPI. It was a submission that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of the assessment, the assessee had been completed on 30.11.2011 and on the said date, the copy of the Assessment Order in the case of M/s.HEPI was not available. It was also a submission that a perusal of the assessment in the case of M/s.HEPI clearly shows that M/s.HEPI was assessed at a positive income for the relevant Assessment Year but the same was set off against the carry forward business losses. He vehemently supported the order of the AO the Ld.CIT(A) on this issue. It was a submission that the assessee having not taken the necessary Certificate u/s.195(2), the assessee was duty bound to deduct the TDS which it has failed to deduct and consequently, the disallowance was liable to be upheld. 3.6 We have considered the rival submissions. A perusal of the decision of the Hon ble Supreme Court in the case of M/s.GE India Technology Cen. (P) Ltd., shows that it is only when the remittances made to a nonresident is chargeable under the act, then the requirement to deduct TDS will arise. The provisions of Sec.195(2) gets attracted to cases only where the payments made is a composite payment, in which certain portion of the payment has an element of income chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Southern Roadways is distinguishable on facts, as the same was rendered in connection with Asst. Year 1996-97 to 1997-98 which is prior to the Asst.Year 2003-04 and hence not applicable to the facts of the present case. 2.3 The CIT(A) ought to have appreciated that with effect from Asst.Year 2003-04, computer software was also made eligible for depreciation 60% along with computers and ought to have held that the expenditure on software is capital in nature for the year under consideration. 2.4 It is submitted that the relied upon order of the CIT(A) in ITA No.543/2004-5/A-III dated 20/09/05 in assessee s own case has not been accepted by the Department and an appeal to ITAT has been preferred against the same. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored. 4.1 It was submitted by the Ld.DR that the issues in the Revenue s appeal was against the action of the Ld.CIT(A) in holding that the expenditure incurred by the assessee towards purchase of software was Revenue in nature. The Ld.DR submitted that the soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid software license fees and maintenance fees to M/s.Aspen Tech for the systems which is used by the refinery for making decision support solutions for optimizing production. These payments are made on yearly basis and towards maintenance of the software. The expenditure is in nature of recurring one. A perusal of the decision of the Hon ble Jurisdictional High Court in the case of M/s.Southern Roadways Ltd., referred to supra, shows that the Hon ble Jurisdictional High Court has held as follows: that expenditure incurred on software packages was revenue expenditure and that such software enhances the efficiency of the operation and was not an aid in the manufacturing process and therefore there is no enduring benefit or acquisition of any capital asset by an assessee. The concept of enduring benefit must respond to the changing economic realities of the business. The expenses incurred by installation of software packages in the present computer world, which revolves on the modem communication technology, enables the assessee to carry on its business operations effectively, efficiently, smoothly and profitably. However, such software itself does not work on a stand alone ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
