TaxTMI 
TaxTMI 
2013 (7) TMI 738
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....apital expenditure?" 2. Issue pertains to expenditure of Rs. 1.02 crores (rounded off) expended by the assessee and whether the same should be treated as capital or revenue expenditure. For the assessment year 2008-09 the Assessing Officer noticed that the assessee had debited in the profit and loss account, amount of Rs. 1.02 crores (rounded off) towards software support and maintenance charges. Out of which, a sum of Rs. 97.75 lakhs pertained to software development and upgradation charges. The Assessing Officer was of the opinion that software development and upgradation would give the assessee an enduring benefit and such expenditure therefore, should be treated as capital in nature. After hearing the assessee on the issue, he disall....
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....e charges of Rs. 1,02,83,705/- is capital expenditure in nature and is not allowable as revenue expenditure, the same is disallowed and added to the total income of the assessee. However, the depreciation as applicable shall be allowed on the said amount. Penalty proceedings under Section 271(1)(c) of the IT. Act are being initiated for furnishing inaccurate particulars and concealment of income." 3. Issue was carried in appeal by the assessee. CIT(Appeals) reversed the decision of the Assessing Officer accepting the assessee's contention that the expenditure was revenue in nature. 4. Revenue, thereupon, approached the Tribunal. The Tribunal by impugned judgment rejected the Revenue's appeal making following observations:- &n....
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....sed by Ld. CIT(A). This ground of Revenue's appeal is dismissed." 5. Having heard learned counsel Mr. Manav Mehta for the appellant and having perused the document on record, we notice that the assessee had expended the said sum, towards software support and maintenance charges. The assessee had entered into contract with one Finlogic Technologies (India) Pvt. Ltd., which had agreed to provide certain services of the following type:- "(i) Data administration services, for example maintenance of huge data base of the company, fine tuning of the data, avoiding the crashing of system, logical segregation of data, back up services, monitoring of data etc. etc. (ii) Data centre managemen....
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....over India of the company, services provided for sharing of data with the branches as per the direction of the company, maintenance of websites for the clients, etc. (viii) Web hosting services, for example services provided for domain management and management of space, internet and internet Protocol address management etc." 6. These services, thus essentially were in the nature of maintenance and support services providing essentially backup to the assessee, who had procured software for its purpose. These services, thus essentially did not give any fresh or new benefit in the nature of a software to be used by the assessee in the course of the business but were more in the nature of technical support and ma....