TMI Blog2016 (6) TMI 1407X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of the decision of Hon'ble jurisdictional High Court in the case of Talisma Corporation Pvt. Ltd. [ 2013 (12) TMI 1419 - KARNATAKA HIGH COURT] . Needless to say the assessee shall be afforded an opportunity of hearing. Nature of expenses - software application - revenue or capital expenditure - CIT- A allowed claim - HELD THAT:- There is no dispute that the assessee claimed the said expenditure was incurred for acquiring the application software to enable carrying on its business more efficiently and smoothly.The finding of the learned CIT (Appeals) is contrary to the claim of the assessee and further the learned CIT (Appeals) has not referred any specific evidence or record on the basis on which he has come to the conclusion that the application software in question is a stock in trade and was actually exported to the clients. In view of the above facts and circumstances, we set aside this issue to the record of the learned CIT (Appeals) for proper verification of the record and giving a specific finding on this issue. Needless to say the assessee be afforded an opportunity of hearing. Deduction under Section 10A - DR submitted that when the assessee di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as itself ammortised the expenditure over a period of 4 years in its books of account treating it as capital expenditure and is again claiming it as revenue expenditure by wrongly invoking provisions of s e c t io n 35( 1) ( iv). 3. On the facts and in the circumstances of the case the learned CIT(A) erred in holding. that the software applications purchased by the assessee are stock in trade of the assessee for its client in Jordan and has to be allowed as revenue expenditure without appreciating the fact that the assessee itself contended before the AO that the expense were incurred towards acquiring the software applications to canyon its own business effectively. 4. On the facts and in the circumstances of the case the learned CIT(A) erred in holding that the assessee was eligible for withdrawing its declaration u/s IOA(8) without appreciating the fact that there is no such provision under the Incometax Act 1961 and the reliance placed by the CIT(A) on the order of Hon'ble High Court of Karnataka in the case of Infosys Technologies Pvt Ltd (349 ITR 598) wherein the issue was of allowance of deduction U/S lOA for the income originally claimed as Capital Gains, is mispl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the learned CIT (Appeals) has allowed the claim of the assessee by accepting the submissions of the assessee without giving the finding of fact that the entire expenditure in question has been incurred in respect of R D activity of the assessee. The learned Departmental Representative has referred to the finding of the learned CIT (Appeals) and submitted that the learned CIT (Appeals) has presumed the fact as submitted by the assessee without proper verification and examination or giving the finding on the nature of the activity on which the expenditure has been incurred by the assessee. Thus the learned Departmental Representative has submitted that the learned CIT (Appeals) has committed an error in allowing the claim under Section 35(1)(iv) of the Act without examination of the issue on the point where the said expenditure has been incurred by the assessee on R D activity so as to eligible for claim under Section 35(1)(iv) of the Act. 6. On the other hand, the learned Authorised Representative has submitted that the learned CIT (Appeals) has followed the decision of this Tribunal on this issue and further the issue is now covered by the judgement of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in case of TCIL Bellsouth Ltd., since reported in (2004) 89 TTJ 851, to contend that even revenue expenditure incurred for development of software package amounts to expenditure on scientific research, eligible for deduction under Section 35(1)(iv). Detailed discussion has been made in paras 13, 16-18 and 21 of the Tribunal s order to come to the conclusion. Facts of that case are similar to that of the appellant, both being engaged in the development and export of software product / package. Respectfully following the decision of the Hon'ble ITAT, it is held that the expenditure claimed on software product development would be eligible for deduction under Section 35(1)(iv), irrespective of whether it actually resulted in the software product coming into existence as an asset, during the year or not. 9.8 To conclude, the expenditure incurred by the assessee for the software product development is held to be capital expenditure to be allowed as deduction under Section 35(1)(iv) of the Income Tax Act. Ground No.1 of the assessee is allowed. It is clear from the finding of the learned CIT (Appeals) that it has not gone into the factual issue whether this expenditure pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) has deleted this addition made by the Assessing Officer by holding that the purchase of software are not for use in the assessee's business but it was merely a stock-in-trade. 11. Before us, the learned Departmental Representative has submitted that the learned CIT (Appeals) has given a finding which is contrary to the stand taken by the assessee before the Assessing Officer that the software was purchased for the business use of the assessee which had enabled the assessee to carry on its business more efficiently and smoothly whereas the learned CIT (Appeals) has held that it is not used in the business of the assessee but it is stock-in-trade. 12. On the other hand, the learned Authorised Representative has submitted that the assessee produced relevant record before the learned CIT (Appeals) in support of the claim that it was a stock in trade. He has supported the order of the learned CIT (Appeals). 13. We have heard the rival submissions as well as considered the relevant material on record. There is no dispute that the assessee claimed the said expenditure was incurred for acquiring the application software to enable carrying on its business more efficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade and was actually exported to the clients. In view of the above facts and circumstances, we set aside this issue to the record of the learned CIT (Appeals) for proper verification of the record and giving a specific finding on this issue. Needless to say the assessee be afforded an opportunity of hearing. 14. Ground No.4 is regarding allowing the deduction under Section 10A of the Act. The assessee filed the return declaring loss and therefore did not claim deduction under Section 10A by filing a declaration under Section 10A(8) of the Act. In the course of assessment proceeding, the Assessing Officer proposed to make certain additions as well as to compute book profit for MAT. The assessee contended before the Assessing Officer that the assessee withdraws the declaration under Section 10A and claimed the deduction under Section 10A of the Act. The Assessing Officer disallowed the claim of the assessee on the ground that there is a limitation of filing the declaration under Section 10A(8) being due date of filing of return under Section 139 of the Act. Accordingly, the Assessing Officer rejected the claim of the assessee. 15. On appeal, the learned CIT (Appeals) has allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. We find that there are precedents on this issue and the Delhi Bench of the Tribunal in the case of Moser Baer India Ltd. (2007) 110 TTJ (Del) 807 held that the time limit provided under Section 10A(8) is only directory if the claim made during the assessment proceedings is legally admissible then the same cannot be denied merely because it was not made in the return of income. The learned CIT (Appeals) has allowed the claim of the assessee in para 11.2 as under : 11.2 It is a settled law that deductions and exemptions allowable to an assessee cannot be denied on superficial, technical and venial breach. Hon'ble High Court of Karnataka in case of Infosys Technologies Ltd. (2012) 349 ITR 598 (Karn) have held tht the fact that the assessee did not claim exemption under Section 10A while filling the return cannot come in the way of holding that assessee is entitled to benefit of s. 10A since it was alternatively argued both before the Assessing Officer and the appellate authority that if the income is treated as trading receipt, exemption under Section10A may be granted. In the instant case, the assessee's software export unit is registered with the STP, Bangalore. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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