TMI Blog2023 (6) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the assessee on the ground that the assessee had not produced the bills/invoices for the items it pertains - HELD THAT:- Since the assessee in the instant case has filed all the relevant details along with supporting bills/invoices, during the assessment proceedings itself, therefore, respectfully following the decision of Danfos Industries (P) Ltd ( 2021 (9) TMI 1151 - MADRAS HIGH COURT ), we hold that the CIT (A) NFAC is not justified in confirming the disallowance treating the software expenditure as capital in nature. The order of the CIT (A) NFAC is set aside and the AO is directed to allow the expenditure debited in the P L A/c under the head software purchases. Decided in favour of assessee. - ITA No. 182/Hyd/2022 - - - Dated:- 20-4-2023 - Shri R. K. Panda , Accountant Member And Shri K. Narasimha Chary , Judicial Member For the Assessee : Shri P. Murali Mohan Rao, CA For the Revenue : Shri B. Yadagiri, DR ORDER Per R. K. Panda , A.M This appeal filed by the assessee is directed against the order dated 23/03/2022 of the learned CIT (A)- NFAC, relating to A.Y. 2011-12. 2. The grounds raised by the assessee are as under: 1. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure u/s 37 of the I.T. Act. 10. The Ld. CIT(A) erred in not considering the bills/ invoices which were duly submitted by the assessee during the course of appellate proceedings for the expenditure incurred during the year under consideration. 11. The Ld. CIT(A) erred in initiating penalty proceedings u/s. 271(1)(c) of the Income Tax Act since the appellant has neither concealed any income nor furnished any inaccurate particulars of income. 12. The assessee may add, alter or modify any other points to the grounds of appeal at any time before or at the time of hearing of the appeal. 3. Grounds of appeal No.1 12 being general in nature are dismissed. 4. Grounds 2 to 7 relates to the order of the CIT (A) NFAC in disallowing an amount of Rs.3,60,72,141/- made by the Assessing Officer which was claimed by the assessee as deduction on investment written off. 5. Facts of the case, in brief, are that the assessee company is engaged in the business of I.T. enabled services and BPO service providers has filed its return of income on 29.09.2011 declaring total income of Rs.53,000/- under the normal provisions of the Act and book profit as Rs.3,79,589/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not realize the amounts receivable from their clients and in turn the appellant also did not realize the amounts receivable by it from the subsidiary companies. As per the directions of RBI, the said receivables were capitalized as investments in the said subsidiary companies. It was further submitted that the said receivables from the subsidiary companies were already offered as income by the appellant and its claim for write off of investments is actually the claim for Bad Debts written off which are allowable u/s 36(1)(vii). Moreover, the appellant submitted that the said issue has been decided in its favour for AY 2009-10 by the Hon'ble ITAT Hyderabad. To support its contentions the appellant submitted year-wise details of the receivables by the appellant from the said 2 subsidiary companies, the capitalization of the receivables etc., 5.2.3 The contentions of the appellant have been duly considered. It is noted that this issue had also come up with First Appellate Authority (FAA) for AY 2009-10 and after seeking remand report from the AO, it was held that stipulated conditions for write-off are not being satisfied and the disallowance of write off of investments, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the attention of the Bench to the winding up petition dated 4.5.2010. Referring to page 68 to 73 of the Paper Book, he drew the attention of the Bench to the High Court order dated 15.4.2010 for winding up. Referring to page 74 of the Paper Book, he drew the attention of the Bench to the statement showing the receivables from wholly owned subsidiary, amount capitalized and investments written off in each year from financial year 1990- 2000 to 2013-14. 9. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Colgate Palmolive (India) Ltd reported in 370 ITR 728 (Bom.), he submitted that the Hon'ble High Court observed that where the assessee company made investment in its 100 per cent subsidiary for business purpose, loss on sale of investment was to be treated as business loss of assessee. 10. Referring to the decision of the Hon'ble Karnataka High Court in the case of ACE Designers Ltd vs. Addl. CIT in ITA No.184 of 2013 order dated 9.9.2020, he submitted that the Hon'ble Karnataka High Court, following the decision of the Hon'ble Bombay High Court in the case of CIT vs. Colgate Palmolive (India) Ltd (Supra) held that when the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter is restored to the file of the Assessing Officer with similar direction given by the Tribunal in assessee s own case for the A.Y 2009-10. 15. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case disallowed an amount of Rs. 3,60,72,141/- debited by the assessee in the P L A/c towards investment written off on the ground that such investment was made with an intention of getting enduring benefit thereof and therefore, has to be treated as a capital loss. We find the learned CIT (A) upheld the action of the Assessing Officer the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned Counsel for the assessee that all the details of investment in the subsidiary company and how it was written off has already been produced before the lower authorities, therefore, in view of the binding decision of the Hon'ble Supreme Court and various High Courts, the written off investment has to be allowed as a rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is also restored to the file of AO and Ground No.4 is accordingly considered allowed for statistical purposes. 16. Even though the Assessing Officer, as mentioned by the learned Counsel for the assessee, has not passed any order till date, however, following the judicial precedents, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to decide the issue for the present year in the light of the direction of the Tribunal for A.Y 2009-10 at the earliest. While doing so, the Assessing Officer shall keep in mind the various decisions relied on by the learned Counsel for the assessee including that of the Hon'ble Supreme Court in the case of Patnaik Co. vs. CIT (Supra). The Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The first issue raised by the assessee in the ground of appeal is treated as allowed for statistical purposes. 17. The second issue as per ground of appeal Nos. 8 to 10 relate to the disallowance of purchase of software amounting to Rs.9,02,037/- by the Assessing Officer and upheld by the learned CIT (A) NFAC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tware for non-submission of the supporting evidence in the form of bills/vouchers. Accordingly, Grounds of Appeal Nos.7 to 9, are also dismissed. 20. Aggrieved with such order of the learned CIT (A) NFAC, the assessee is in appeal before the Tribunal. 21. The learned Counsel for the assessee referring to page 84 to 93 of the paper book drew the attention of the Bench to the copy of the letter addressed to the Assessing Officer wherein the details of the software purchases amounting to Rs.9,02,037/- were enclosed. He submitted that the remarks given by the Assessing Officer is contrary to the facts since the assessee has produced all the details and therefore, the Assessing Officer is not justified in stating that the assessee did not produce the relevant bills and vouchers and the learned CIT (A) is not justified in upholding the wrong order of the Assessing Officer. 22. Referring to the decision of the Hon'ble Delhi High Court in the case of New Delhi Television Ltd vs. ACIT reported in (2020) 117 Taxmann.com 212, he submitted that in the said decision, the Hon'ble Delhi High Court has held that the expenditure on software such as software upgradation licence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66 (Mad.), while adjudicating an identical issue has observed as under: 11. With regard to the license fee, which was for acquiring a software license of shelf life of less than two years was held to be as allowable as revenue expenditure in CIT V. Toyota Kirloskar Motors (P) Lid. (2013] 30 taxmann.com 294/213 Taxman 49 (Mag.M[2012) 349 ITR 65 (Kar) In CIT V, Robert Bosch India Ltd. 2014] 50 taxmann.com 275 (Kar.) the amount paid by the assessee for purchase of software was held to be revenue expenditure even when the same was used in course of business of assessee not only during the assessment year under Consideration, but also during the subsequent year. In Oriental Bank of Commerce v. Addl. CIT (2018] 93 taxmann.com 432 (Delhi) the expenditure incurred by the assessee on acquiring license to use software which did not confer any enduring benefit on assessee was allowed as a deduction under section 37(1) of the Act, wherein the decision of the Hon'ble Supreme Court in Alembic Chemical Works Co. Ltd. v. CIT [1989) 43 Taxman 312/177 ITR 377 was followed. In CIT v. Lakshmi Vilas bank Ltd. [2018] 97 taxmann.com 105/258 Taxman 193 (Mad.) expenditure incurred by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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