TaxTMI 
TaxTMI 
2016 (7) TMI 758
X X X X Extracts X X X X
X X X X Extracts X X X X
....curity software development and filed its return of income for the assessment year 2007-08 on 14.11.2007 declaring income of Rs..2,06,690/-. The return filed by the assessee was processed under section 143(1) of the Act on 18.02.2009. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued on 24.07.2008. In response thereto, the assessee filed all the details. After considering the details furnished by the assessee, the Assessing Officer has completed the assessment under section 143(3) of the Act on 30.11.2009 by assessing total taxable income of the assessee at Rs..73,46,265/- after making various disallowances. 3. The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) partly allowed the appeal of the assessee. 4. On being aggrieved, the Revenue has filed an appeal before the Tribunal, whereas, the assessee has preferred Cross Objection. 5. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The ld. DR has submitted that the ld. CIT(A) has erred in deleting the disallowance made under section 40(a)(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her directly or indirectly through or from any business connections in India. The case under consideration does not relate to income contained in Section 9(1)(i), but technical services covered under 9(1)(vii). In case of technical services, the existence of PE or otherwise, in India, is not a decisive factor on taxation. The assessee claimed that the services provided by the three concerns in USA and one in Israel are not in the nature of technical services and pure business transactions. However, we find that the authorities below have not checked with the invoices submitted by the assessee as to whether the services rendered by the non-residents are in the nature of fee for technical services or pure business transactions. Under the above facts and circumstances, we set aside the order passed by the ld. CIT(A) and remit the matter to the file of the Assessing Officer to verify the nature of services rendered by the non-residents and decide the issue afresh in accordance with law after allowing opportunity of hearing to the assessee. Thus, the ground raised by the Revenue is allowed for statistical purposes. 7. Coming to the Cross Objection filed by the assessee, the C.O. of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecord and gone through the orders of authorities below. The point at issue for adjudication is whether the expenditure incurred by the assessee on software purchases is revenue expenditure or capital expenditure. On similar issue, the Hon'ble Delhi High Court in the case of CIT v. Asahi India Safety Glass Ltd. [2012] 346 ITR 329 has held 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 (assessment year 1997-98) for installation of a software application for assistance in areas related to financial accounting, inventory and purchase. It has emerged that an offer was made in respect of such a software application by Arthur Anderson & Associates, which find a reflection in a letter dated 25.06.1996. The said agreement between the assessee and Arthur Anderson & Associates also required the assessee to enter into a ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 officer as a matter of fact has returned a finding that the expenditure undertaken was for overhauling the accountancy of the assessee and to efficiently train the accounting staff of the assessee. The Tribunal, which is decidedly the final fact finding authority has after noticing the material on record observed that the expenditure was incurred under various sub-heads, which included licence fee, annual technical support fee, pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....othing 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 would show that what the assessee acquired through Arthur Anderson and Associates was an application software which, enabled it to execute tasks in the field of accounting, purchases and inventory maintenance. The fact that the application software would have to be updated from time to time based on the requirements of the assessee in the context of the advancement of its business and/or its diversification, if any; the changes brought ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the assessee strongly contended that the Coordinate Benches of the Tribunal is consistently allowing depreciation at 60% for UPS including in the case of DCIT v. Indian Bank in I.T.A. Nos. 1910 & 1911/Mds/2015 vide order dated 22.01.2016 and pleaded that the same should be followed. 9.3 On the other hand, the ld. DR strongly supported the order of the ld. CIT(A) and relied on the decision decision of the Delhi Benches of ITAT in the case of Nestle India Ltd. v. DCIT 111 TTJ 498. 9.4 We have heard both sides, perused the materials on record. On an identical issue in similar facts and circumstances, the Coordinate Bench of the Tribunal in the case of DCIT v. Indian Bank (supra) decided the issue against the Revenue, wherein the Tribunal has observed as under: 13. After hearing both sides, we find that similar issue on identical facts has been considered in the Revenue's appeals in I.T.A. No. 2124 & 2125/Mds/2014 for the assessment years 2005-06 and 2007-08 in assessee's own case by the Coordinate Bench of the Tribunal vide its common order dated 30.11.2015, wherein the Tribunal has observed as under: "20. We have heard both sides, perused the materials on record and gone t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....012 dated 18.06.2014, has also allowed depreciation on UPS at the rate of 60%. Accordingly, in view of the above decisions of the Coordinate Benches of Tribunal, we are of the firm view that the ld. CIT(Appeals) has rightly directed the Assessing Officer to allow depreciation on UPS @ 60% and we find no infirmity in the order passed by the ld. CIT(Appeals) on this issue. Accordingly, ground raised in both the appeals of the Revenue for the assessment year 2005-06 and 2007-08 is dismissed." 14. Before us, the Revenue could not controvert the above findings of the Tribunal or filed any higher Court decision having modified or reversed the above decision of the Tribunal. Respectfully following the above decision of the Tribunal in assessee's own case for earlier assessment years vide its common order dated 30.11.2015, we confirm the order passed by the ld. CIT(Appeals) on this issue and dismiss the ground raised by the Revenue for both the assessment years 2006-07 and 2008-09. 9.5 Respectfully following the above ratio of the Coordinate Bench of this Tribunal, we direct the Assessing Officer to allow 60% depreciation on UPS. Accordingly, the ground raised by the assessee is allowe....