2011 (8) TMI 1235

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....on is whether the CIT(A) had erred in sustaining the disallowance in a sum of RS..1,04,11,829/- made by the Assessing Officer [AO] holding that the assessee had acquired intangible asset giving enduring benefit in acquiring application software. The relevant grounds of appeal read as under: "1. The learned Assessing Officer had erred in disallowing the cost of application software holding that the amount spent on application software is capital in nature and the learned Commissioner of Income-tax(Appeals) has erred in confirming the same. 2. The lower authorities have erred in holding that the appellant has acquired intangible asset giving enduring benefit and disallowed the entire sum of Rs. .1,04,11,829/- as capital expenditure. On p....

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....f the assessee and treated the same as capital expenditure. However, he allowed 60% of the amount as depreciation. While doing so, the AO relied on the following decisions: i) CIT vs. Aravali Construction Co. Ltd. (215 ITR 30) (Raj) ii) CIT vs. Electron Engg. Co. Ltd. (166 ITR 66), and iii) CIT vs. Premier Automobiles Ltd. (206 ITR 1) (Bom) 4. Aggrieved, the assessee moved the matter in appeal before the first appellate authority before whom it was contended as under: a) The software was used for day-today functioning of the business, b) The amount was paid as license fee for the use of software for a limited period of one year, c) Being a license fee for a short period, neither capital asset came into existence nor was there a....

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...., the learned C.A. submitted that the assessee's case is covered by the decision of the Hon'ble Karnataka High Court in the case of M/s.Toyota Kirloskar Motors Pvt.Ltd.(supra) and also by the order of the Special Bench (Delhi) of this Tribunal in the case of Amway India Enterprises (supra). He heavily relied on the decision of the jurisdictional High Court and drew our attention to the following observations therein: "3. As rightly pointed out by the authorities, when the life of a computer or software is less than two years and as such, the right to use it is for a limited period, the fee paid for acquisition of the said right is allowable as revenue expenditure and these soft-wares if they are licensed for a particular period, for utili....