TaxTMI 
TaxTMI 
2017 (7) TMI 1263
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....8,597/- net of depreciation thereon) by holding that the above expenditure was in the nature of capital expenditure. 1.2 The learned Commissioner of Income Tax (Appeals)-13 erred in not appreciating that the Appellant company had not acquired any software license or any benefits of enduring nature. The above expenditure on Prime Project was incurred to improvise the existing process and to explore the existing functionalities of the MOVEX ERP system already capitalized in the books of Appellant Company and the appellant company did not acquire any new system as a result of incurring this expenditure. 1.3 He erred in not appreciating that, the expenditure incurred by the Appellant Company for Prime Project and other software development was to improvise its existing processes and to be more efficient and profitable in carrying out its main business activity of manufacturing and it did not add to the profit earning apparatus of the Appellant Company. 1.4 The learned Commissioner of Income Tax (Appeals)-13 erred in not relying on the following decisions: i. Amway India Enterprises vs. DCIT (2008) 114 TTJ (Del) (SB) 476 ii. CIT vs. G E Capital Servic....
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.... net of depreciation. The Assessing Officer had disallowed the said expenses to be capital in nature. The CIT(A) upheld the order of Assessing Officer. The assessee is in appeal against the same. The issue arising in the present appeal is against the allowability of expenditure on maintenance and upgradation of ERP systems, wherein the assessee was using ERP system and expenditure was incurred on upgradation of the said system, then expenditure is to be allowed as revenue expenditure. We find support from the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. UHDE India P. Ltd. (supra). Similar issue arose before the Tribunal in assessee's own case in assessment year 2009-10 and the Tribunal vide para 27 had directed the Assessing Officer to verify the claim of assessee. Following the same parity of reasoning, we direct the Assessing Officer to verify the claim of assessee in this regard that the expenditure has been incurred on upgradation of ERP system and allow the same in accordance with the ratio laid down by the jurisdictional High Court. Thus, the grounds of appeal raised by the assessee are thus, allowed as indicated above. 8. Now, coming to the appeal filed by ....
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....lared turnover of Rs. 373 crores, wherein it was manufacturing the items in India and was selling the same in the domestic market and also exporting to associated enterprises. The TPO was of the view that because of internal comparables available, CUP method should be applied. The assessee on the other hand, had applied TNNM method as the most appropriate method, wherein as against the margins of assessee at 19.48%, the mean margins of nine concerns selected to be functionally comparable was 10.74%; hence the transaction was held to be at arm's length. The TPO during the course of TP proceedings had also analyzed the functional comparability and other aspects of the concerns selected as comparables by the assessee. The list of the comparables is at page 7 of the TPO's order, which is as under:- Sr No Name of the Company Data Source OM 1 Axtel Industries Ltd. Prowess 9.09% 2 G E I Industrial Systems Ltd Prowess 13.56% 3 Gansons Ltd. Prowess 8.30% 4 Kilburn Engineering Ltd. Prowess 4.66% 5 Thermax Ltd. Prowess 13.92% 6 Walchandnagar Industries Ltd. Prowess 9.60% 7 Anup Engineering Ltd. Ca....
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....held as under:- "12. Similar issue of selection of most appropriate method arose before the Tribunal in assessee's own case in assessment year 2008-09 and the Tribunal held that CPM method should not be applied and TNNM method is to be applied as most appropriate method. Applying the said ratio to the facts of the present case, where the TPO himself had applied TNNM method in all the earlier years starting from assessment years 2002-03 to 2007-08 and the Tribunal had directed the application of TNNM method in assessment year 2008-09, we hold that for benchmarking the international transactions in the equipment division, TNNM method is to be applied. The TPO has already considered the list of comparables selected by the assessee. In respect of comparables at serial Nos.1 and 7 being rejected for non-matching on turnover, we uphold the order of TPO. Similarly, Walchandnagar Industries Ltd. cannot be selected as comparable for different accounting period. In respect of Thermax Ltd. and GMM Pfaudler Ltd., the two concerns are not functionally comparable. Now, looking at the margins of balance four concerns which were selected by the assessee and as pointed out by the learned A....
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.... to the file of Assessing Officer for verification, as per directions of Tribunal in assessment year 2008-09. The grounds of appeal No.2 and 3 raised by the Revenue are allowed for statistical purposes. 20. The ground of appeal No.4 raised by the Revenue is against the order of CIT(A) in deleting the addition under section 14A of the Act. 21. Briefly, in the facts of the case, the assessee for the year under consideration had received dividend income of Rs. 3.46 crores, against which the assessee had computed the disallowance under section 14A of the Act at Rs. 3 lakhs. However, the Assessing Officer in turn, worked out the disallowance as per section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (in short 'the Rules') on account of both interest and expenditure expenses at Rs. 36.65 lakhs. 22. The CIT(A) deleted the said addition accepting the plea of assessee that no satisfaction was recorded by the Assessing Officer before making the aforesaid addition, as per paras 2.6.3 and 2.6.4 at page 38 of the appellate order. The relevant paras read as under:- "2.6.3 I have considered the facts and relevant provisions of the law. I find that the learned ....
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....satisfaction while applying the provisions of section 14A of the Act arose before the Tribunal in Kalyani Steels Ltd. Vs. Addl.CIT (supra), wherein it was held as under:- "10. In the aforesaid background, now, we may examine the facts of the present case. In this case, assessee has earned by way of dividends a sum of Rs. 5,45,58,685/-, which is exempt u/s 10(38) of the Act and thus the same does not form part of the total income under the Act. In the computation of income, assessee having regard to section 14A of the Act, determined the amount of expenditure incurred in relation to such income at Rs. 5,00,000/-. The Assessing Officer has not found it acceptable and has instead determined the amount of expenditure in relation to such income by applying rule 8D of the Rules. Ostensibly, the action of the Assessing Officer cannot be upheld unless he has complied with the pre-requisite of invoking rule 8D of the Rules, namely, recording of an objective satisfaction with regard to the claim of the assessee that an expenditure of Rs. 5,00,000/- has been incurred in relation to the exempt income, is incorrect. In order to examine the aforesaid compliance with the pre-condition, w....