TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 68
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....e 12(1), New Delhi, on account of license fees, connectivity charges and co-ordination charges for the use of Vision plus software by treating the same as capital expenditure. The Ld. CIT(A) has further erred in alleging that the Appellate was the owner of the Vision plus software. 2. Without prejudice to the above, the Ld. CIT(A) has erred in not allowing depreciation @ 25% on above-mentioned payments of Rs. 2,19,60,467 under section 32 of the Act." Grounds raised by Revenue (A.Y. 2008-09): "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the aggregate disallowance of Rs. 2,42,58,933/- on account of License fee, connectivity charges and co-ordination charges paid to a US based company M/s. GE Capital Corporation for use of 'vision plus' software holding the same as revenue in nature and allowable u/s. 37 of the Act. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not following the decision of his predecessor CIT(A) for the immediately preceding assessment year 2007-08, who had held the same as capital expenditure. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) h....
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....the name of license fee. He further considering certain terms & Conditions of agreement, found that the assessee had obtained a distinct right of exclusive use of software in the territory of India and even the foreign collaboration is excluded from operating the same in this territory; that the agreement provides enduring benefit to the assessee; that the consideration is in respect of grant of license and that the information was not only in relation to use of license but co-ordination and connectivity services provided by GECC(USA). The AO, therefore, relying upon the decisions of Hon'ble Supreme Court in the case of Jonas Woodhead and Sons (India) Ltd. vs. CIT, 224 ITR 342 and Southern Switch Gear Ltd. vs. CIT, 232 ITR 359, concluded that acquisition of license granted by the licensor in itself is a capital asset being "intangible asset" and the payment made for acquisition of this license having long validity is of capital nature. The AO finally disallowed the deduction of Rs. 2,19,60,467/- claimed as revenue expenditure, and added the same to the total income of assessee as capital expenditure vide order dated 30.11.2009. 4. The assessee also claimed depreciation @ 60%....
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.... SLP(C)CC No. 10108/2012 CIT vs. M/s. Asahi Safety Glass Ltd. (iii). Empire Jute Company vs. CIT, 124 ITR 1 (SC) (iv). CIT vs. Amway India Enterprises, 346 ITR 341 (Del.) (v). CIT vs. IAEC (Pumps) Ltd., 232 ITR 316 (SC) (vi). DCIT vs. Eicher Motors Ltd., 53 Taxman 317 (Delhi Tri.) (vii). CIT vs. Modi Revlon (P) Ltd., 26 Taxman.com 133 (Del.) (viii). CIT vs. G4S Securities System (India) Ltd., 338 ITR 46 (Del) He also contended that the learned CIT(A) in the subsequent assessment years 2008-09, 2010-11 and 2011-12 has decided the issue on the basis of same end-user license agreement in favour of the assessee holding the expenditure of revenue nature. The decisions cited by the Assessing Officer are not applicable being based on different set of facts. He, therefore, urged for allowance of appeal. 6. The learned DR, on the other hand, relied on the order of authorities below. He also submitted that in the case of Empire Jute Company Ltd. vs. CIT, 124 ITR 1(SC), the Hon'ble Court observed that there have been numerous decisions where the vexed question whether a particular expenditure incurred by the assessee is of a capital or revenue nature, has been debated, but it is....
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.... to the assessee; that the consideration is in respect of grant of license and that the information was not only in relation to use of license, but co-ordination and connectivity services were also provided by GECC(USA). He, therefore, held that the acquisition of license granted by the licensor in itself is a capita asset, being "intangible asset", which having long validity is capital in nature. We have gone through the End-User license agreement dated 07.07.2000 and we do not find substance in the conclusion arrived at by the ld. Authorities below. It is notable that in terms of clause 2.2 and 2.3, the assessee company is specifically restricted to make copies of the software and make it available to any other period. There is also a bar on the assessee for use of software for the purpose other than that mentioned in clause 2.2 of the agreement. In terms of clause 2.3, the assessee does possess no right either to sell it or alienate in any other manner. The relevant clauses No. 2.2 and 2.3 of the license agreement are reproduced as under : "2.2. GECC shall provide the Licensed Program, any revisions to the Licensed Program and any updates to the Licensed Program to GECBPMS for....
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....s group entities for its business and it does not have any right to commercially exploit the software. The assessee is vested with limited right to use the licensed program during the currency of license agreement. The agreement nowhere provides any exclusive right to the assessee, but the assessee was vested with the right to use the licensed program for facilitating its business operations enabling the assessee day-to-day management of business and to work with more efficiency. In view of all these terms of agreement and the facts & circumstances attending to the case, we are of the considered opinion that end user license agreement in the instance case does not have the effect of any enduring benefit for holding the same as capital in nature. The ld. DR has failed to rebut the contention of the assessee that the impugned software is an application software and is being used for accounting purposes. Such software are used by various banks and financial institutions. Moreover, the ld. CIT(A) in succeeding assessment years 2008-09, 2010-11 and 2011-12 has categorically gave finding of fact that the software is a application software which is routine in nature and used for accountin....