Court allows stay of demand for Assessment Year 2017-2018 with payment terms, clarifies observations, grants relief.

The Court modified the order for stay of demand, allowing a stay of &8377; 2,31,79,894 for the Assessment Year 2017-2018 subject to specific payment terms. The Court clarified that the observations made should not be treated as findings on merits, providing relief to the petitioner regarding the treatment of software licensing fee as revenue expenditure.

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Issues:
Challenge to order for stay of demand based on software licensing fee as revenue expenditure.

Analysis:
The petitioner, engaged in providing Engineering Procurement and Construction Management services to Oil and Gas Companies, challenged an order dated 11.03.2020 by the Principal Commissioner of Income Tax. The order required the petitioner to pay 10% of the disputed amount by 16.03.2020 and the remaining in two installments. The total income was determined at &8377; 8,38,67,334 with a demand of &8377; 2,31,79,894. The petitioner argued that the software licensing fee should be treated as revenue expenditure. The petitioner relied on past judgments where similar expenditures were treated as revenue. The Revenue contended that a similar issue was pending and referred to guidelines for officers. The Court noted previous judgments treating such expenditure as revenue and modified the order for stay, setting aside the previous orders and allowing a stay of demand subject to payment terms.

The petitioner argued that the software licensing fee should be treated as revenue expenditure based on the terms of the commercial agreement. The Court referenced past judgments where similar software licensing fees were treated as revenue expenditure. The Revenue highlighted guidelines for officers but the Court emphasized the discretion available to the Assessing Officer based on the strength of the case. The Court modified the order for stay, setting aside previous orders and allowing a stay of demand subject to specific payment terms.

In conclusion, the Court modified the order for stay of demand, setting aside previous orders and allowing a stay of &8377; 2,31,79,894 for the Assessment Year 2017-2018 subject to specific payment terms. The Court clarified that the observations made should not be treated as findings on merits. The petition was accordingly disposed of, providing relief to the petitioner regarding the treatment of software licensing fee as revenue expenditure.

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