9911796707
TMI Blog2018 (1) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... nd cable services. The return of income for the Asst Year 2010-11 was filed by the assessee on 15.10.2010 declaring total income of Rs. 32,34,578/-. During the course of assessment proceedings, the ld AO observed that the assessee had debited in its Profit and Loss Account Technology Upgradation Expenses of Rs. 19,31,097/- and asked the assessee as to why the same should not be treated as capital expenditure. The assessee replied to the same by enclosing the copy of the bills by stating that the said expenditure is incurred for maintenance of the transmitting system. It was stated that in the Balance Sheet, the assessee had shown Rs. 91,84,203/- as the cost of intelligent electronics devices and Rs. 61,20,167/- under machineries. The assessee has to maintain the machineries / transmitting system. In the process of such maintenance, the assessee has incurred some expenses which are therefore of revenue nature. The ld AO found this reply to be non-satisfactory and treated the same as capital expenditure and accordingly disallowed Rs. 19,31,097/- in the assessment. 2.2. The ld CITA observed that the assessee was engaged in the business of Internet Services (Broadband Services) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue account, even though the advantage may endure for an indefinite future. I find the case of the appellant to be squarely covered by the aforesaid judicial decision. In view of this, the AO is directed to delete the addition made in this regard of Rs. 19,31,097/-." 2.4. Aggrieved, the revenue is in appeal before us on the following ground:- 1. In the facts and circumstances of the case and as per law, the Ld. CIT(A) has erred in deleting the addition of Rs. 19,31,097/- made by the AO treating the technology upgradation expenses as capital expenditure. 2.5. We have heard the rival submissions. The ld DR vehemently relied on the order of the ld AO. We find that the ld DR could not controvert any of the findings recorded by the ld DR before us. The ld AR reiterated the submissions made before the lower authorities. We find that the ld CITA on verification of the bills for these expenditure had come to a conclusion that the cost of spares are less than Rs. 5,000/- and are frequently replaceable which does not accrue any enduring benefit to the assessee. We find that the case laws relied upon by the ld AR on the Hon'ble Madras High Court and Hon'ble Delhi High Court supra squa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,647/- has been treated as capital expenditure and Rs. 35,40,388/- has been allowed depreciation on the same. You are requested to allow depreciation of Rs. 14,16,155/- on the w.d.v. of Rs. 23,60,259/- (Rs. 59,00,647 - Rs. 35,40,388)". The ld AO disallowed the sum of Rs. 10,09,593/- as revenue expenditure, but however, granted depreciation @ 60% on the same in the assessment. 3.2. The ld CITA observed that the expenditure incurred by the assessee was revenue in nature as it was for payment of License Fee which do not bring any capital asset into existence and moreover, the benefit of such expenditure would be consumed by the assessee company over a short period fo time. The assessee pleaded that the ld AO had misinterpreted software expenses as computer software. These expenses are in the nature of application of software licence fees which were payable to the vendor every year. Statemetn of accounts along with bills for licence fees which were enclosed before the ld AO were duly ignored. These expenses representing software were mainly paid towards smooth functioning of business of the assessee and not paid for acquiring any capital assets. The software was used for updating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly." 3.4. Aggrieved, the revenue is in appeal before us on the following ground:- 2. In the facts and circumstances of the case and as per law, the Ld. CIT(A) has erred in deleting the addition of Rs. 10,09,593/- made by the AO treating software expenses as capital expenditure. 3.5. We have heard the rival submissions. The ld DR vehemently relied on the order of the ld AO. We find that the ld DR could not controvert any of the findings recorded by the ld DR before us. The ld AR reiterated the submissions made before the lower authorities. We find that the ld CITA had given a categorical finding on verification of the bills for these expenditure that software expenses were incurred by way of renewal of licence fees to the vendor on an annual bais which does not accrue any enduring benefit to the assessee and that the same were paid towards smooth functioning of business of the assessee and not paid for acquiring any capital assets. These findings were not controverted by the ld DR before us. Hence we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the Ground No. 2 raised by the revenue is dismissed. 4. The last issue to be decided in this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ever. The assessee has the same risk of damage from heavy shower, lightening and from the heavy duty vehicle when passing beneath the optic fiber. Optic fiber laying expenses incurred in the ordinary course of business and such expenses are in the nature of labour charges require to be paid to those who engaged in replacing the damaged portion of the Optical Fiber Cable. Such expenses were incurred not only for replacing damage portion optic fiber but also for other recurring purposes and also in the nature of post-operative expenses. The assessee relied upon the decision taken in the case of Akash Cable Net Work (P) Ltd vs. Department of Income Tax on 31st, March, 2009. 4.3. The ld CITA deleted the disallowance by observing as under:- "8.2. I have considered the submission of the AR of the appellant and perused the assessment order. Material facts available on record are also taken into account in deciding the issue. I find that the appellant is engaged in the business of providing internet services through optic fibre network. As submitted, I find that the nature of expenses incurred in maintaining the fibre cable network in providing uninterrupted internet connection facili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the AO treating optical fibre expenses as capital in nature. 4.5. We have heard the rival submissions. The ld DR vehemently relied on the order of the ld AO and further stated that the optic fibre cables are generally laid only in the underground and hence the assessee's explanation that the same would get damaged by heavy downpour, lightning, heat etc does not hold any water. He argued that the amount incurred towards optic fibre cables are very huge and assessee gets enduring benefit out of the same and hence the same has to be treated as capital expenditure which had been rightly treated by the ld AO. The laying of optical fibre cables cannot be compared with regular cable wires as was the case before the Hyderabad Tribunal which had been relied upon by the ld CITA. In response thereto, the ld AR drew our attention to pages 37 to 83 of paper book containing the various bills for optic fibre cables and its laying wherein he stated that the unit rate of the same ranges from Rs. 9.62 to Rs. 17.30 per meter . He also drew our attention to the list of expenditure towards optic fibre cables wherein the same were replaced on a monthly basis regularly by the assessee. At the out ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
