TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 256
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....ted for scrutiny assessment and notice under section 143(2) of the Act was issued on August 27, 2009, and duly served on the assessee followed by a notice under section 142(1) of the Act along with detailed questionnaire and served on the assessee. In response to the notice under section 143(2) and section 142(1) of the Act, necessary information was filed along with details. Assessment was completed by the learned Assessing Officer on November 16, 2010, after making certain additions, at an income of Rs. 1,37,57,460. 3. Aggrieved, the assessee went in appeal before the learned Commissioner of Income-tax (Appeals) and the same was dismissed. 4. The assessee is now in appeal before the Tribunal. 5. Ground No. 1 of the appeal reads as under : 1. That, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has grossly erred in sustaining the disallowance of Rs. 15,08,000 out of software expenses as made by the Assessing Officer on the ground that it is pertaining to the earlier year, which is absolutely erroneous and needs to be deleted. During the course of assessment proceedings, the learned Assessing Officer observed that a sum of ....
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.... year under consideration i,.e., financial year 2007-08. Hence, the company issued bill for the same which your appellant received in May, 2007, but the vendor prepared the bill on March 31, 2007. Now, on receipt of the bill and settlement of account was done in May, 2007, hence your appellant debited the same in May, 2007. The learned authorised representative further submitted that instal lation of any equipment or machinery or software is a long procedure and it takes time to be completed and in some situation work is started in one year and gets completed in next year and the same thing has happened in our case as installation of software was started in the financial year 2006-07 and was completed in the financial year 2007-08. Part payment was made in the previous year and on completion of work in April, 2007, payment was completed. Now, the supplier of software raised the bill on March 31, 2007, but issued in May, 2007, and your appellant also received the bill in April, 2007, hence your assessee gave effect in May, 2007, and claimed in the financial year 2007-08, i.e., the assessment year 2008-09 as the liability crystallised, which the Assessing Officer disallowed stating ....
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....td. is dated March 31, 2007, but the learned authorised representative has been submitting since the assessment proceedings that business software which was specifically customised for the year was handed over to the assessee on May 1, 2007, due to some required changes and corrections. Due to this reason that the liability of the expenditure of Rs. 15,08,000 actually crystallised during the financial year 2007-08. We further observe that the company is running business on large scale and gross turnover for the year under appeal was Rs. 62.96 crores and after claiming of depreciation of Rs. 1.83 crores, net profit at Rs. 1.87 crores was declared. There is no finding by the learned Assessing Officer which can doubt the genuineness of the expenditure incurred and also no defect has been pointed out in the books of account regularly maintained and there is no plausible reason which indicates that the assessee has intentionally entered the expenditure for the financial year 2007-08 rather than in the financial year 2006-07. However, we observe that there has been no cross-verification of the expenditure booked by the assessee with the confirmation of the party issuing the bill as to wh....
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....icer and for the year Rs. 1,82,300, which included the expenditure of Rs. 1,56,000, Rs. 1,460, Rs. 11,000, Rs. 5,000 and Rs. 8,840. The learned Assessing Officer has disallowed this total sum of Rs. 1,82,300 by assessing it as capital expenditure whereas in fact these are general software expenditure which are incurred regularly and yearly basis and are of revenue in nature. 14. On the other hand, learned Departmental representative relied on the orders of the lower authorities. 15. We have heard the rival contentions and perused the material on record. Through this ground the assessee is aggrieved with the order of the learned Commissioner of Income-tax (Appeals) for sustaining the action of the Assessing Officer in treating the software expenses of Rs. 1,82,300 as capital expenditure. From going through the paper book we observe that the assessee has incurred certain expenditure under the head "software expenses" at Rs. 16,90,000 out of which Rs. 1,82,300 has assessed as capital expenditure instead of revenue expenditure and the remaining amount of Rs. 15,08,000 was disallowed being the transaction out of the assessment year 2008-09. We will deal with the disallowance of Rs. 1,....
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....der the head "fixed asset" and the remaining amount of Rs. 25,000 was shown as revenue expenditure. Due to this reason the learned Assessing Officer was inclined to believe that Rs. 25,000 also pertained towards the cost of rotary machine which needed to be capitalised and he did so while framing the assessment by disallowing Rs. 25,000 and allowing depreciation as per rates applicable under the law. In appeal before the learned Commissioner of Income-tax (Appeals) the view taken by the learned Assessing Officer was accepted by the learned Commissioner of Income-tax (Appeals) and the ground of the assessee was dismissed. 18. Now, in appeal before us, the learned authorised representative submitted that expenditure of Rs. 25,000 was incurred for factory and forms part of total factory expenses of Rs. 4,51,408 and is of revenue in nature. 19. The learned Departmental representative opposed the submissions of learned authorised representative and supported the orders of the lower authorities. 20. We have heard the rival contentions and perused the material on record. Through this ground the assessee is aggrieved by the order of the learned Commissioner of Income-tax (Appeals) for s....