2022 (2) TMI 700

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....y the assessee before Ld. CIT(A) was partly allowed. Aggrieved, the assessee has filed this appeal before us. 3. The first issue relates to disallowance of interest paid on late payment of service tax. The assessee had paid a sum of Rs. 2,66,211/- as interest on delayed payment of service tax. The A.O. noticed that the assessee did not route the service tax collection and payment through profit and loss account. Since the service tax paid is not claimed as expenditure, the A.O. took the view that the interest paid on service tax is also not an expenditure in connection with the business carried on by the assessee. Accordingly, he disallowed the above said claim of the assessee. The Ld. CIT(A) confirmed the addition following the decision rendered by Hon'ble Supreme Court in the case of Bharat Commerce & Industries Ltd. Vs. CIT (1998) 98 taxman 151, where the interest paid under Income tax Act was held to be not allowable as deduction. 3.1 We heard the parties on this issue and perused the record. There is no doubt that the assessee is collecting service tax and remitting the same to the credit of the Government. The view of the AO is that, such collections/remittances not hav....

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....ewal charges for the period Oct 2013 to September 2014 i.e. SAP B1 Professional User/Limited CRM User/Finance User & Logistics User. Amount pertaining to period April to September 2014 has been considered as pre paid expenses. The A.O. treated the above expenditure as capital in nature and accordingly held that it is not allowable as deduction. However, he allowed depreciation @ 25% thereon. Accordingly, he disallowed net balance amount of Rs. 2,49,823/-. 4.1. The Ld. CIT(A) noticed that the amount of Rs. 1,83,097/- paid by the assessee for the software named as "SAP-B1-Professional user" is a license renewal charge. Accordingly, he held it to be a revenue expenditure. However, the Ld. CIT(A) took the view that the above said payment is liable for deduction of tax at source as per the decision rendered by Hon'ble Karnataka High Court in the case of CIT Vs. Samsung Electronics Company Ltd. (2011) 203 taxman 477 (Karn). Accordingly, he directed the A.O. to examine the details of tax deducted at source and disallow the amount u/s 40(a)(i) of the Act, if the assessee had not deducted tax at source. 4.2 With regard to the remaining amount of Rs. 1,50,000/- the Ld. CIT(A) held i....

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....ning. Is it on the capital layout or is it an expenditure necessary for acquisition of property or of rights of a permanent character, possession of which is condition on carrying on trade at all. The assessee in the course of its business acquired certain application software. The amount is paid for application of software and not system software. The application software enables the assessee to carry out his business operation efficiently and smoothly. However, such software itself does not work on stand alone basis. The same has to be fitted to a computer system to work. Such software enhances the efficiency of the operation. It is an aid in manufacturing process rather than the tool itself. Thus, for payment of such application software, though there is an enduring benefit, it does not result into acquisition of any capital asset. The same merely enhances the productivity or efficiency and, hence, to be treated as revenue expenditure. In fact, this court had an occasion to consider whether the software expenses is allowable as revenue expenses or not and held, when the life of a computer or software is less than two years and as such, the right to use it for a limited period, t....

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....scussions made supra. 5. The next issue relates to disallowance of bad debt claimed of Rs. 58,35,144/-. The A.O. noticed that the assessee has claimed bad debts against the amount due from a sister concern named M/s. I-Manage Technology Services Pvt. Ltd. The assessee submitted that the amount of Rs. 58,35,144/- due from the above said company and it consisted of payment due on account of sales made of Rs. 27,12,637/- and payment due on account of advance given of Rs. 31,22,507/-. It was submitted that the assessee has written it as bad in the books of accounts. The A.O. noticed that the above said company is sister concern of the assessee in the sense that there are common directors in assessee's company and in that company. Accordingly, he proposed to disallow the claim since the assessee was aware of the financial capacity of the above said company while making payment. Before A.O., the assessee submitted that the above said company M/s. I-Manage Technology Services Pvt. Ltd. has already declared the above said amount of Rs. 58,35,144/- as its income. However, the A.O. observed that the assessee could not substantiate its claim by properly reconciling the income declared by t....