2020 (9) TMI 321

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....ementation charges. 3. The assessee in the present case is a company which is engaged in the business of manufacturing of Hi-tech Equipments. The return of income for the year under consideration was filed by it on 30.11.2012 declaring a total income of Rs. 4,52,75,720/-. In the Profit and Loss Account filed along with the said return, a sum of Rs. 4.36 crores was debited by the assessee on account of expenditure incurred on SAP Implementation. In the assessment completed u/s 143(3) r.w.s 92CA / 144C of the Income Tax Act, 1961 vide order dated 14.03.2016, the Assessing Officer disallowed the said expenditure claimed by the assessee by treating the same as capital in nature. On appeal, the ld. CIT(Appeals) deleted the said disallowance m....

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....he appellant further contended that such expenditure on the assets of the company were necessary for the purpose of preserving and maintaining of already existing assets and under no circumstances such expenditure brought into existence any new asset nor did it give the Appellant any new or different advantage or an enduring benefit. Further contended that such expenditure was not incurred by the appellant on "once and for all basis" but for maintaining and preserving the assets of the company on continuous basis for its effective and efficient day-to-day working. The appellant reiterated that such expenditure was necessary for the efficient functioning of the assets of the company and hence was in the nature of revenue expenditure. The app....

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....ore deleted. Ground no. I raised by the appellant is accordingly allowed." 4. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As argued by the ld. representatives of both the sides, this issue relating to the assessee's claim for expenditure incurred on SAP implementation is squarely covered in favour of the assessee inter-alia by the decision of Hon'ble Bombay High Court in the case of CIT Vs. M/s. KSB Pumps Ltd. (ITA No.728 of 2014 with ITA No.777 of 2014 dt.05.10.2016) wherein a similar issue was decided in favour of the assessee vide Para Nos.9 to 13 of the Judgment of the Lordship which are extracted below : "9. The grievance of the Revenue before us is....

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....so also, machinery becoming obsolete that there is necessity of acquiring further technology. This is to meet the growing competition and considering trends in the market. Therefore, such expenditure will have to be treated as revenue expenditure." 13. Therefore, in view of the Court taking note of rapid technological development, purchase of technology may not lead to any enduring benefit as the same may have to be upgraded very soon. In any case, the finding of fact in this case is that there is no purchase of technology by the respondent assessee." 5. Respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s. KSB Pumps Ltd. (supra), we uphold the impugned order of ld. CIT(Appeals)....

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....the assessee on SAP implementation / package by treating the same of revenue in nature, depreciation on the same cannot be allowed to the assessee. We therefore reverse the decision of the ld. CIT(Appeals) on this issue and allow ground No.2 of the Revenue's appeal. 9. The issues raised in ground Nos. 3 and 4 of the Revenue's appeal relate to the deletion by the ld. CIT(Appeals) of the disallowance of Rs. 27,02,616/- and Rs. 38,11,924/- made by the Assessing Officer on account of provision for warranty expenses and provision for after sales cost respectively. 10. The deductions claimed by the assessee on account of provision for warranty and provision for after sales cost were disallowed by the Assessing Officer in the assessment comp....

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....nt Pg. of PB Remarks 1998-99 2790/M/03 Para 5/Page No.2   No appeal filed by the Department against the said 1999-00 5047/M/04 Para 2/ Page No.1   disallowance before the Hon'ble Bombay High 2000-01 3677/M/04 Para Court. 21/Page No.6     2001-02 8219/M/04 Para 36/Page No.10     2002-03 N.A N.A    Allowed by AO in Assessment. 2003-04 2871/M/07 Para 11/ Page No.4   No appeal filed by Department against the said disallowance before the Hon'ble Bombay High Court. 2004-05 6135/M/07 Para 12/Page No.11      2005-06 3366/M/10 Para 14/Page No.13     ....