2010 (1) TMI 664

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....e-tax (Appeals) erred in deleting penalty levied by the Assessing Officer under section 271(1)(c) amounting to Rs. 4,76,238." 2. To adjudicate on this grievance, only a few relevant material facts need to be taken note of. The assessee is engaged in consultancy business. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed deductions in respect of expenditure of Rs. 11,28,993 towards computer software. The Assessing Officer was of the view that expenditure on software is a capital expenditure, and he, accordingly, disallowed the deduction. He, however, allowed depreciation on software at 25 per cent. The Assessing Officer further noted that the expenditure on reimbursement of meal expense....

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.... fact that in later years, the entire disallowance was wholly deleted. It is further submitted that the claim of software expenses as revenue expenses is supported by judicial pronouncements notably of the Chennai High Court in the case of CIT v. Southern Roadways Ltd. [2008] 304 ITR 84, wherein it has been held that expenses incurred on installation of software packages in the present computer world, enables the assessee to carry on its business operations effectively, efficiently and smoothly and hence, considering the facts that such software does not work on a stand alone basis, expenditure on software does not bring into existence an asset of enduring benefit, and hence, is to be held as revenue expenditure. A copy of this reported ....

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...., we are not inclined to interfere in the matter. As learned counsel for the assessee rightly points out, there are a number of decisions of co-ordinate Benches holding that expenses on purchase of software are eligible for deduction as revenue expenditure, such as in the cases of GE Capital Services India v. Dy. CIT [2007] 106 TTJ (Delhi) 65, Sumitomo Corpn. India (P.) Ltd. v. Addl. CIT [2005] 1 SOT 91 (Delhi), TIL Ltd. v. Asstt. CIT [2007] 16 SOT 33 (Kol.), IBM India Ltd. v. CIT (Appeals) [2007] 105 ITD 1 (Bang.) and Bank of Punjab Ltd. v. Jt. CIT [2004] 91 TTJ (Chd.) 422. The Hon'ble Madras High Court has, in the case of CIT v. Southern Roadways Ltd. [2008] 304 ITR 84/[2009] 183 Taxman 234 held that (page 90) "the payment for such applic....