TaxTMI 
TaxTMI 
2016 (4) TMI 1319
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....duty amounting to Rs. 2,94,52,808/-. 3.1 The facts of the case as observed by the Assessing Officer are that on examination of valuation of inventory as on 31/03/2008, it was found that Excise duty of Rs. 22,89,25,889/ - and Rs. 7,81,57, 748/ - respectively have been included on Branch Stock and Factory Stock. In respect of factory stock, it was liability at the year end and in respect of branch stock excise duty had already been paid. In other words, the total sum of Rs. 30, 70,83,637/ - was found to have been included in valuation of year end Closing Stock of finished goods consisting of Branch Stock and Factory Stock. 3.2 In the assessment order for A Y;,2006-07, it has also been discussed that addition was made on this issue in A. Y. 2004-05 which was deleted by the CIT(A) and Tribunal. *But the department has filed an appeal before the Hon'ble High Court of Calcutta which is pending: It has also been mentioned that for A. Y . 2001-02, 02-03, 03-04, the addition on the same issue was confirmed by CIT(AO- XIII, Kolkata vide order dated 23.11.2009 in Appeal No. 103, 104 and 105/ CIT(A)- XIII/ Circle-I/ 08-09 respectively. 3.3 As discussed in the aforesaid paragraphs,....
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....he excise duty element in valuation of closing stock of finished goods. There are two types of closing stock of finished goods: (a) goods which are dispatched to branches/godoums/warehouses [referred to as DEPOT STOCK] and (b) lying in factory. premises not dispatched [referred to as FACTORY STOCK]. ) However, it may be noted that since the excise duty on closing stock of finished goods for the assessment year 2007-08 had been disallowed by the Assessing Officer during the assessment for the assessment year 2007-08 and the assessee in the return filed for the. assessment year 2008-09 having offered the same to tax, the Assessing Officer has made the disallowance on net basis i.e. excise duty on closing stock of finished' goods less excise duty on opening stock of finished goods and the net disallowance stands at Rs. 2, 94,52,808/- . In view of the above, the assessee submitted that the issue in hand, being a settled principle of law, the Assessing Officer may be directed to allow the deduction on closing stock of finished goods for the assessment years 2008-09. The Learned CIT(A) deleted the disallowance of Rs. 2,94,52,808/- on the ground that the said issu....
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....arned CITA. Aggrieved, the revenue is in appeal before us on the following ground:- 2 That the Ld CIT(A) has erred and not justified in deleting the disallowances made on account of shifting expenses amounting to Rs. 62,00,000/- 4.2. The Learned AR stated that this issue has been decided in favour of the assessee by the Special Bench of Kolkata Tribunal in the case of JCIT vs ITC Limited reported in (2008) 112 ITD 57 (KOL)(SB). 4.3. We have heard the Learned AR and perused the materials available on record. We find that the break up of shifting expenses are as below:- Rs in lacs Cost of dismantling some specific machineries at Kanjurmarg, loading and incidental expenses and Reinstalling the machineries at Taloja 40 Transportation cost 5 Consulting charges for dismantling and installation 12 Other installing expenses 5 62 We find that the assessee has not constructed or set up any new factory in replacement of an existing one. It is a case where certain machineries have been shifted from an existing factory to another existing factory when the former had been closed down. In order to achieve a synergy of production line, ....
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...., such expenditure cannot be treated as capital expenditure and in these circumstances, the ld.CIT(A) has rightly deleted the addition. Accordingly, we uphold the order of ld.CIT(A) on this ground and reject the Ground Nos. 7 and 9 raised by the revenue. " Respectfully following the aforesaid judicial precedent, we dismiss ground no.2 raised by the revenue. 5. The next issue to be decided in this appeal is as to whether the Learned CITA is justified in deleting the disallowance made on account of software expenses amounting to Rs. 1,36,32,019/-. 5.1. The brief facts of this issue is that the assessee had installed ERP / SAP / its own website in Asst Years 2000-01 & 2001-02 which were capitalized. Thereafter expenses are incurred for (a) renewal of user licence ; (b) to obtain routine maintenance and support services ; (c ) AMC which are outsourced to the software consultancy firms ; (d) routine upgradation expenses and (e) leaseline charges. The Learned AO treated these expenditure as capital in nature and allowed depreciation @ 60% of the cost which was deleted by the Learned CIT(A). Aggrieved, the revenue is in appeal before us on the following ground:- 3 That t....
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....ional features provided in the new version, while the same in the case of acquisition of new ERP package is full and completely new. Even this benefit is reflected in the price charge, inasmuch as the price charged for upgradation is only marginal equivalent to the incremental benefit available in the new version while it is full in case of acquisition of new ERP package. The upgradation of ERP, in our opinion, therefore, cannot be equated with replacement as contended by the Id. D.R. and the advantage being only incremental to the extent of the additional features in the new version, the same cannot be treated as the replacement of the entire ERP package so as to treat the expenditure incurred on upgradation as capital expenditure. Moreover, the use of any ERP package in the case of manufacturer like the assesese-Company is generally for coordinating and rationalizing its functions and business process in order to ensure that the business is carried on more efficiently and effectively and by applying the functional test, the expenditure incurred on ERP package, in our opinion, cannot be treated as capital expenditure as it does not result in creation of any new asset or advantage ....