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2015 (7) TMI 76
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....he Act. 3. On the fact and circumstances of the case, the ld CIT(A) has erred in holding that AO's lack of satisfaction with the claim of appellant was not on any cogent grounds, with regard to the accounts and thereby deleting addition of Rs. 5,070/- made by AO u/s 14A r.w.r. 14A. 4. On the fact and circumstances of the case, the ld CIT(A) has erred in deleting the disallowance of Rs. 90,92,093/- on account of current repair in spite of the facts that the assessee had not furnished certain relevant and crucial information in the requisite prescribed format to enable the AO to ascertain as to whether the expenditure is allowable under current repair as required as per the provisions of Section 142(1) wherein inter alia, the assessee is required to furnish the requisite information/detail etc. in the prescribed manner and in such form." 2. At the outset, Ld. A.R. invited our attention to the order of Tribunal passed on 19.12.2014 in the case of assessee itself for Assessment Year 2008-09 and submitted that first two grounds of appeal were covered in favour of assessee by the above said order. 3. Ld. D.R. though contested the grounds of appeal and relied upon assessment order....
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....tal in nature. We further find that in I.T.A. No. 5536/Del/2013 the Hon'ble Tribunal vide order dated 19.12.2014 has upheld the deletion of similar nature by Ld. CIT(A) by holding that the payments made to parent company of assessee under the agreement was necessary trade mark fees. While agreeing with the Ld. CIT(A), Tribunal has relied upon the order of Hon'ble Jurisdictional High Court in the case of CIT vs G4S Security System India Pvt. Ltd. in I.T.A. No. 1943/Del/2010, 763/Del/2011 and 765/Del/2011. We find that nature of payment in this years is the same and the payment of trade mark fee has been paid to the same parent company which finding are contained in para 7 of the tribunal order and the same are reproduced below: "7. We have heard both the counsel and perused the records. As regards Ground No. 1 is concerned, the Revenue has challenged the impugned Order of the Ld. CIT(A) in deleting the disallowance of Rs. 55,70,045/- on account of trade mark fee by holding that it was a revenue expenditure and without considering that "right to use the trade mark" acquired by the assessee was an intangible asset as defined u/s. 32 of the I.T. Act. After hearing both the par....
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....ed pursuant to the said agreement. Not only that, the assessee was not even entitled to make use of the trade mark name or G4F knowhow and was forthwith to change its' corporate and/or trade names. All rights and knowhow, therefore, continued to vest in G4F and it was only the right to use the knowhow that was made available to the assessee and that too based on its net sales. That means all the royalty paid in the shape of 1% of net sales for the use of trade mark and right to use knowhow could not be considered to be of enduring nature and thus capital expenditure. The expenditure was to be of revenue nature. In the case of Jonas Wood Head and Sons Vs. CIT, 117 ITR 55, it was held that the question regarding capital or revenue expenditure depends on the terms of agreement in each case. In the case of CIT Vs. Gujarat Carbon Ltd., 254 ITR 294, it was held that the payment of revenue under the agreement was directly relatable to services which were in the revenue field and were allowable as revenue expenditure. In the case of Goodyear (I) Ltd. Vs. ITO 73 ITD 189(Delhi), the assessee had not acquired ownership right of technical knowhow but transfer of use of licenses. There was ....
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.... of license fee by holding as under: "7.2 As regards Ground No. 2 is concerned, the Revenue has challenged the impugned Order of the Ld. CIT(A) in deleting the disallowance of license fee of Rs. 3,44,550/- by holding it as revenue expenditure and without considering that the assessee had acquired proportionate rights to use the software, which was an intangible asset as defined u/s. 32 of the I.T. Act. After hearing both the parties on the issue in dispute as well as after going through the orders passed by the Revenue Authorities alongwith order dated 04.11.2011 passed by the Hon'ble Jurisdictional High Court in the case of CIT vs. Asahi India Safety Glass Ltd. in ITA NOS. 1110/2006 & 1111/2006 wherein the Hon'ble High Court has adjudicated the matter as under:- "8. Having heard the learned counsel for the parties, what has emerged on facts as found by the authorities below is as follows: The assessee is in the business of manufacturing safety glass which is used in automobiles. Thus the main source of income of the assessee is from the said activity. The assessee appears to have entered into an agreement with Arthur Anderson & Associates in the financial year 1996-97 (a....
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.... In other words, the expenditure which is incurred, which enables the profit making structure to work more efficiently leaving the source of the profit making structure untouched, would in our view be an expense in the nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably; leaving the fixed assets untouched would be an expenditure in the nature of revenue expenditure even though the advantage may last for an indefinite period. Test of enduring benefit or advantage would thus collapse in such like cases. It would in our view be only truer in cases which deal with technology and software application, which do not in any manner supplant the source of income or added to the fixed capital of the assessee. [See Alembic Chemical Works Co. Ltd. vs CIT (1989) 177 ITR 377; CIT vs J.K. Synthetics (2009) 309 ITR 371 at page 412 and CIT Vs. Indian Visit.com (supra)]. 9.1. This is the approach which the Supreme Court has applied even in cases where there is a once for all or a lump sum payment. What is to be seen in the facts of this case, as already noticed by us hereinabove, that the assessing office....
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.... sum of Rs. 49 lacs was incurred to modify, customize and upgrade the software installed, while the balance expenditure was used for development and implementation - it returned a finding that the expenses were incurred to upgrade and run the system. In view of these findings we are of the opinion that assessing officer discovered an erroneous principle on the basis of which he denied the exemption to the assessee. 11. Software is nothing but another word for computer programmes, i.e., instructions, that make the hardware work. Software is broadly of two types, i.e., the systems software, which is also known as the operating system which controls the working of the computer; while the other being applications such as word processing programs, spread sheets and data base which perform the tasks for which people use computers. Besides these there are two other categories of software, these being: network software and language software. The network software enables groups of computers to communicate with each other, while language software provides with tools required to write programmes. (See Microsoft Computer Dictionary, 5th Edition "Software" at page 489). 12. The aforesaid woul....
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....ether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of accounts be decisive or conclusive in the matter"..... 13.2 Therefore, the aforesaid contention is of no avail to the revenue. 14. For the foregoing reasons, we are of the view that the questions of law for each of the aforementioned assessment years have to be answered in the affirmative and in favour of the assessee. Resultantly, the aforementioned appeals are dismissed." 7.3 In view of above, we are of the considered view that above issue is exactly the similar to the issue involved in the present appeal and covered by the aforesaid decision. Hence, respectfully following the above precedent, we decide the issue in dispute in favor of the Assessee and against the Revenue." 8. We find that similar payment has been made in the present year also therefore, respectfully following the earlier order on similar addition we dismiss ground No.2 of Revenue's appeal. 9. As regards ground No.3 in respect of addition u/s 14A and Ld. CIT(A) delete....
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....IT(A)'s finding are exhaustive and detailed and we do not find any infirmity in the same. 11. As regards ground No.4, Ld. CIT(A) has dealt the issue in detail and has decided the issue in favour of assessee by holding as under: "7.4 Regarding the Ground No.4 relating to repair and maintenance expenditure, I find that out of an amount of Rs. 1.02 Crores disallowed by the AO, an amount of Rs. 37,83,139/- pertains to repair and labour charges and further an amount of Rs. 64,88,659/- pertains to replacement of spare parts. The contention of the appellant that the appellant had already capitalized Rs. 11.87 Crores is also evident by the Tax Audit Report, which was placed on record during the proceedings. I observe that the AO desired further information regarding repair and replacement expenditure in a format spanning 26 columns. In response to this, the appellant had furnished necessary details except that 1-2 columns were not filled up on the ground that such information is not maintained. The appellant had also furnished relevant Bills/Invoices. However, the AO took an adverse view of the fact of appellant not having provided information on 1-2 columns. In my view the AD could ....