M/s Mindtree Ltd., Bangalore V. ACIT, Bangalore

ITA 1328/BANG/2011

• Counselvise Citation: 132821114 RSA 2011
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-03-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 21-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI
• Assessee Lawyers: K K CHAITHANYA
• Keywords: Revenue expenditure; Capital expenditure
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. & ASSESSMENT YEAR APPELLANT RESPONDENT 1328/BANG/2011 2004-05 M/S. MIND T REE CONSULTING LTD., (FORMERLY MINDTREE CONSULTING PVT. LTD.), GLOBAL VILLAGE, RVCE POST, MYLASANDRA, MYSORE ROAD, BANGALORE-560 059 PAN AABCM 8839K ASST. COMMISSIONER OF INCOME TAX, CIRCLE 12(1), BANGALORE. 1347/BANG/2011 2006-07 - DO - - DO - 80/BANG/2012 2004-05 ASST. COMMISSIONER OF INCOME TAX, LTU, BANGALORE. M/S. MIND T REE CONSULTING LTD., (FORMERLY MINDTREE CONSULTING PVT. LTD.), BANGALORE-560 059 222/BANG/2012 2006-07 - DO - - DO - APPELLANT BY : SHRI K.K. CHAITHANYA. RESPONDENT BY : SHRI FARHAT HUSSAIN QURESHI. DATE OF HEARING : 18.10.2012. DATE OF PRONOUNCEMENT : 31.10.2012. O R D E R PER BENCH : THESE FOUR APPEALS ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE FOR THE ASSESSMENT YEARS 2004-05 AND 2006-07 AGAINST THE OR DERS OF COMMISSIONER OF INCOME TAX (APPEALS)-III, BANGALORE. WE FIND THAT EXCEPT FOR THE QUANTUM, THE GROUNDS OF APPEAL RAISED IN ALL THESE APPEALS ARE SAME. FOR THE SAKE OF CONVEN IENCE, THEY ARE HEARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER AND THE CONCISE GROUNDS R AISED FOR ASSESSMENT YEAR 2004-05 ARE TAKEN UP FOR ADJUDICATION, WHICH ARE AS UNDER : 2 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 I. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) IS NOT JUSTIFIED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE. II. AS REGARDS EXCLUSION OF CERTAIN EXPENSES (EXPE NDITURE INCURRED IN FOREIGN CURRENCY & COMMUNICATION EXPENSES) FROM EXPORT TURN OVER : 1. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN UP HOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER OF REDUCING CERTAIN EXPENSES INCU RRED IN FOREIGN CURRENCY AND TELECOMMUNICATION CHARGES FROM 'EXPORT TURNOVER'. 2. THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECI ATE THAT THE PHRASE USED IN THE EXPL. 2(III) TO SECTION 10B IS DOES NOT INCLUDE A ND NOT TO BE REDUCED BY. THE SAID PHRASES HAVE DIFFERENT CONNOTATIONS. THE PHRASE DOES NOT INCLUDE DEALS WITH ITEMS WHICH BY TRADE PRACTICE OR CONTRACTUAL TERMS OR ACC OUNTING TREATMENT ARE CONSIDERED AS COMPONENTS OF 'EXPORT TURNOVER' BUT BY THE AFORE SAID FICTION ARE NOT TO BE SO CONSIDERED. THE PHRASE TO BE REDUCED BY MAY MEAN STATUTORY DEDUCTION IRRESPECTIVE OF THE COMPOSITION OF THE SALE PRICE. 3. THE LEARNED CIT (APPEALS) HAS FAILED TO APPREC IATE THE FACT THAT THE APPELLANT HAS NOT CHARGED ITS CUSTOMERS SEPARATELY IN RESPECT OF CERTAIN EXPENSES INCURRED IN FOREIGN CURRENCY AND TELECOMMUNICATION CHARGES INCU RRED BY IT AND HAS NEITHER INCLUDED THE SAID EXPENDITURE IN THE 'EXPORT TURNOV ER' NOR RECOVERED THE SAME FROM ITS CUSTOMERS. THEREFORE, HE IS NOT JUSTIFIED IN E XCLUDING THE EXPENDITURE FROM 'EXPORT TURNOVER'. III. AS REGARDS, EXCLUSION OF EXPENDITURE INCURRED IN FOREIGN CURRENCY (BRANCH OFFICE EXPENSES AND FOREIGN TRAVEL EXPENSES) FROM ' EXPORT TURNOVER' WHEN THE APPELLANT IS ENGAGED IN SOFTWARE DEVELOPMENT. 1. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN U PHOLDING THE EXCLUSION OF SUMS OF RS.5,77,32,129 TOWARDS TRAVEL EXPENSES, OF RS.12,85 ,822 TOWARDS PROFESSIONAL CHARGES, OF RS.51,80,73,605 TOWARDS BRANCH OFFICE E XPENSES AND OF RS. 1,84,29,444 TOWARDS OTHERS EXPENDITURE INCURRED IN FOREIGN CURR ENCY FROM 'EXPORT TURNOVER' FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTI ON 10B OF THE INCOME TAX ACT, 1961. 2. THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECI ATE THAT THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING AFORESAID SUMS FROM 'EXPORT TURNOVER' ON THE BASIS THAT THE SAME WERE INCURRED IN FOREIGN CURREN CY IN PROVIDING THE TECHNICAL SERVICES OUTSIDE INDIA BY REJECTING THE CONTENTION OF THE APPELLANT THAT IT IS NOT ENGAGED IN PROVIDING TECHNICAL SERVICES BUT IS ENGA GED IN DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE. 3. THE LEARNED CIT (APPEALS) HAS FAILED TO APPRECIA TE THAT THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT O F SOFTWARE AND EXPORT OF SOFTWARE OUTSIDE INDIA AND MORE SO QUALIFYING WITHI N THE MEANING OF THE TERM COMPUTER SOFTWARE AS PER EXPLN. 2(I) TO SECTION 1 0B AND THE AFORESAID EXPENDITURE 3 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 OUGHT NOT TO HAVE BEEN REDUCED FROM THE 'EXPORT TUR NOVER', IN DISREGARD TO THE DECISION OF THE JURISDICTIONAL TRIBUNAL. 4. THE LEARNED CIT (APPEALS) HAS FAILED TO CONSIDE R THAT AS THE APPELLANT IS NOT PROVIDING ANY TECHNICAL SERVICES OUTSIDE INDIA, THE RE IS NO QUESTION OF INCURRING ANY EXPENDITURE IN FOREIGN EXCHANGE IN PROVIDING THE TE CHNICAL SERVICES OUTSIDE INDIA AND THEREFORE THE AFORESAID REDUCTION FROM THE 'EXPORT TURNOVER' IS NOT CALLED FOR. 5. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN NOT FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE ITAT, CHENNAI SPECIAL BENCH IN THE CASE OF ZYLOG SYSTEMS LIMITED VS. ITO 2010-TIOL-779-ITAT-MAD-SB/(2011) 135 TTJ 129 ( CHENNAI) AND VARIOUS DECISIONS OF HON'BLE JURISDICTIONAL ITAT, BANGALORE BENCH IN THE CASES OF ACIT VS. M/S. HEWLETT PACKARD GLOBAL SOFT LTD. (DATED SEPT., 19, 2008) 2008-TIOL-504- ITAT-BANG, ACIT VS M/S. KSHEMA TECHNOLOGIES LTD (DA TED MAY 29, 2009) 2009- TIOL-440-ITAT-BANG, SUBEX LIMITED FOR THE ASSESSMEN T YEAR 2002-03 AND 2005- 06, HAS ALLOWED THIS GROUND VIDE ORDER ITA NOS.673 & 674(BANG)/2010 DATED 31.01.2011 AND INFOSYS TECHNOLOGIES LTD VS. JCIT (2 007) 109 TTJ (BANG) 631. IV. AS REGARDS EXCLUSION OF TELECOMMUNICATION CHAR GES OF RS.1,15,64,540 FROM EXPORT TURNOVER AS THE SAME REPRESENT PAYMENT MADE FOR STANDARD FACILITY. 1. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN UP HOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN REDUCING THE TELECOMMUNICATION CHARGES FROM THE 'EXPORT TURNOVER' WHEN SUCH EXPENDITURE IS INCURRED IN RESP ECT OF A STANDARD FACILITY AND THE SAME CANNOT BE WHOLLY ATTRIBUTABLE TO DELIVERY OF C OMPUTER SOFTWARE OUTSIDE INDIA. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CI T (APPEALS) IS NOT JUSTIFIED IN FAILING TO APPRECIATE THAT THE QUESTION OF DEDUCTIO N OF TELECOMMUNICATION CHARGES OF RS.87,25,713 WOULD ARISE ONLY IF THE SAME HAS BEEN INCURRED IN FOREIGN EXCHANGE AND IF THE SAME HAS BEEN INCURRED IN INDIAN RUPEE, THE QUESTION OF DEDUCTION THEREOF DOES NOT ARISE. V. AS REGARDS EXCLUSION OF TELECOMMUNICATION CHARG ES OF RS.28,38,827 TWICE FROM EXPORT TURNOVER. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN UPHO LDING ACTION OF THE LEARNED ASSESSING OFFICER IN REDUCING THE TELECOMMUNICATION CHARGES OF RS.28,38,827 TWICE FROM THE EXPORT TURNOVER. FOR THE ABOVE REASONS AND FOR SUCH OTHER REASONS WH ICH MAY BE ALLOWED BY THE HON'BLE MEMBERS TO BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE AFORESAID APPEAL BE ALLOWED. 2. FROM THE ABOVE GROUNDS OF APPEAL, WE FIND THAT T HE GRIEVANCE OF THE ASSESSEE IS THAT THE TELECOMMUNICATION EXPENSES, INSURANCE CHARGES, TRAV EL EXPENSES, PROFESSIONAL CHARGES, BRANCH OFFICE EXPENSES AND OTHER EXPENSES INCURRED IN FORE IGN EXCHANGE SHOULD NOT BE EXCLUDED FROM 4 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 THE 'EXPORT TURNOVER' FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT '). THE ALTERNATE PLEA OF THE ASSESSEE IS THAT IF THESE EXPENSES ARE TO BE EXCLUDED FROM THE 'EXPORT TURNOVER' THEN THE SAME SHOULD ALSO BE EXCLUDED FROM THE 'TOTAL TURNOVER' FOR THE PURPO SES OF COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REITERA TED THE CONTENTIONS OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW FOR THE NON- EXCLUSION OF THE ABOVE EXPENSES FROM THE 'EXPORT TURNOVER' FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT. HOWEVER, WE FIND THAT THE ALTERNATE PLEA OF THE ASSESSEE THAT T HE SAID EXPENDITURE IF EXCLUDED FROM THE 'EXPORT TURNOVER' SHOULD ALSO BE EXCLUDED FROM THE 'TOTAL TURNOVER' IS COVERED BY THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF TATA ELXSI LTD, THE ITAT BANGALORE IN ITA NO.315/BANG/2006 DT.16.10.2007 WHICH HAS BEEN F OLLOWED BY THE LEARNED CIT (APPEALS) IN GRANTING THE RELIEF TO THE ASSESSEE. IN VIEW OF TH E SAME, WE UPHOLD THE ORDER OF THE LEARNED CIT (APPEALS). HOWEVER, WE ALSO MAKE IT CLEAR THAT IT IS OPEN TO THE ASSESSEE TO AGITATE ON THE MERITS OF THE ABOVE GROUNDS BEFORE THE APPROPRIATE AUTHORITY AS AND WHEN NEED ARISES, IF ANY. IN THE RESULT, THE ASSESSEE'S APPEALS ARE DISMISSE D. 5. COMING TO THE REVENUES APPEALS, WE FIND THAT TH E GROUNDS RAISED BY THE REVENUE ARE AGAINST THE ORDER BY THE LEARNED CIT (APPEALS) IN D IRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF PROVISION FOR DISCOUNT, PROVISION F OR WARRANTY AND TO TREAT THE SOFTWARE PURCHASED AS REVENUE IN NATURE. THE OTHER GROUND I S RELATING TO THE DIRECTION BY THE LEARNED CIT (APPEALS) TO THE ASSESSING OFFICER TO EXCLUDE T RAVEL EXPENSES, PROFESSIONAL CHARGES, BRANCH 5 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 OFFICE EXPENSES AND OTHER EXPENSES FROM BOTH THE 'E XPORT TURNOVER' AS WELL AS THE 'TOTAL TURNOVER'. WE FIND THAT THE LAST GROUND RELATING T O THE EXCLUSION OF CERTAIN EXPENSES FROM BOTH THE 'EXPORT TURNOVER' AS WELL AS THE 'TOTAL TURNOVE R' IS COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF TATA ELXSI LTD (SUPRA) WHICH HAS BEEN FOLLOWED BY THE LEARNED CIT (APPEALS) IN GIVING THE ABOVE DIRECTION . IN VIEW OF THE SAME, WE DO NOT INTERFERE WITH THE SAME. THIS GROUND OF REVENUE IS ACCORDING LY REJECTED. 6. AS REGARDS THE DISALLOWANCE OF PROVISION FOR DIS COUNT IS CONCERNED, BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY, DEALING WITH SO FTWARE DEVELOPMENT, CONSULTANCY SERVICES AND PROVIDING INTERNET ENABLING TECHNOLOGY HAD MADE A PROVISISION FOR DISCOUNT OF RS.30,51,239 FOR ASSESSMENT YEAR 2004-05 AND CHARGED IT TO THE PROFIT AND LOSS ACCOUNT. ON A QUERY FROM THE ASSESSING OFFICER AS TO WHY IT SHOULD NOT BE TR EATED AS CONTINGENT LIABILITY, THE ASSESSEE SUBMITTED THAT THE PROVISION IS MADE TO MEET A CONT RACTUAL LIABILITY SCIENTIFIC AND THEREFORE IS ALLOWABLE. THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND TREATED IT AS CONTINGENT LIABILITY HOL DING THAT THE PROVISION IS MADE ONLY ON ADHOC BASIS AND IS NOT ALLOWABLE IN THE YEAR UNDER CONSID ERATION. HE THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE. 7. AGGRIEVED THE ASSESSEE PREFERRED THE APPEAL BEFO RE THE LEARNED CIT (APPEALS). THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE ASSESSING OFFICER. THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE ASS ESSEE'S SUBMISSIONS AT LENGTH OBSERVED THAT THE ASSESSEE HAS CREATED THE PROVISION FOR DISCOUN T BASED UPON THE ACTUAL BUSINESS VOLUME ACHIEVED AND NOT ON THE WHOLE OF THE TARGETED VOLUM E OF SALE AND THAT DURING THE SUBSEQUENT 6 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 YEAR UPON ACHIEVING THE TARGETED VOLUMES, THE DISCO UNT WAS ACTUALLY PAID BY THE APPELLANT CUSTOMER. HE, THEREFORE, HELD THAT THE PROVISION CANNOT BE TREATE D AS CONTINGENT ONLY, SINCE IT WAS CREATED ON A SYSTEMATIC AND CONSISTENT BASIS. HE FURTHER OBSERV ED THAT THE ASSESSING OFFICER HIMSELF HAS ALLOWED SUCH PROVISION FOR DISCOUNT IN THE ASSESS MENTS FOR SUBSEQUENT ASSESSMENT YEARS 2005- 06 TO 2007-08 AND ALSO THAT THE ASSESSEE HAS DISCHA RGED THE SAID PROVISION FULLY IN THE SUBSEQUENT YEARS. BY FOLLOWING THE DECISION OF TH E HON'BLE SUPREME COURT IN THE CASE OF BEML VS. CIT (2000) 245 ITR 428 (SC), THE LEARNED CIT (A PPEALS) GRANTED RELIEF TO THE ASSESSEE. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE SU PPORTING THE ORDER OF THE ASSESSING OFFICER, SUBMITTED THAT THE ASSESSEE IS FOLLOWING M ERCANTILE SYSTEM OF ACCOUNTING AND THERE IS NO SCIENTIFIC OR SYSTEMATIC METHOD FOLLOWED BY THE ASSESSEE FOR MAKING THE PROVISION FOR DISCOUNT, THE SAME CANNOT BE ALLOWED. HE SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED SUCH EXPENDITURE DURING THE YEAR UNDER CONSIDERATION AND THEREFORE THE PROVISION CREATED IS VERY MUCH A CONTINGENT LIABILITY AND NOT ALLOWABLE UNDER THE ACT. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUPPORTED THE ORDER OF THE LEARNED CIT (APPEALS) AND SUBMITTED THAT THE ASSESS EE GIVES DISCOUNT TO THE CUSTOMERS BASED UPON THE VOLUME OF THE SALE AND AFTER REACHING A S PECIFIED TARGET. HE SUBMITTED THAT BY FOLLOWING THE MATCHING PRINCIPLE OF REVENUE, THE AS SESSEE HAS TO MAKE A PROVISION FOR DISCOUNT TO BE PAID TO THE CUSTOMER AFTER THE TARGET IS ACHIEVE D. HE SUBMITTED THAT SINCE THE REVENUE IS EARNED DURING THE RELEVANT ASSESSMENT YEAR BUT THE DISCOUNT IS PAID OFTEN AFTER THE TARGET IS ACHIEVED, IN SOME CASES, AFTER THE END OF THE FINAN CIAL YEAR, THE ASSESSEE IS MAKING A PROVISON 7 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 FOR DISCOUNT AND AS OBSERVED BY THE LEARNED CIT (AP PEALS), THESE PROVISIONS HAVE BEEN DISCHARGED FULLY IN SUBSEQUENT YEARS WHICH SHOWS TH AT THE ASSESSEE IS MAKING THE PROVISION ON A SCIENTIFIC AND SPECIFIC METHOD. HE ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS HIMSELF ALLOWED SUCH PROVISION FOR DISCOUNT IN THE ASSESSME NT YEARS SUBSEQUENT TO A.Y. 2004-05. 10. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE IS GIVING DISCOUNT TO ITS CUSTOMERS DE PENDING UPON THE VOLUME OF SALES OVER A SPECIFIED LIMIT AND THAT THE DISCOUNTS ARE PAID ONL Y AFTER THE TARGET IS ACHIEVED AND THESE DISCOUNTS ARE USUALLY PAID IN THE SUBSEQUENT FINANC IAL YEAR WHEN THE TARGET IS REACHED. THEREFORE, WE ARE IN AGREEMENT WITH THE CONTENTION S OF THE ASSESSEE THAT FOLLOWING THE MATCHING PRINCIPLE, EXPENSES RELATING TO DISCOUNT A CCRUING DURING THE YEAR HAVE TO BE PROVIDED FOR IN THE RELEVANT FINANCIAL YEAR ITSELF. THE LEA RNED CIT (APPEALS) HAS OBSERVED THAT THE PROVISION HAS BEEN FULLY DISCHARGED IN SUBSEQUENT Y EARS WHICH SHOWS THAT THE METHOD ADOPTED BY THE ASSESSEE FOR MAKING THE PROVISION IS SCIENTIFIC AND BASED ON THE MATERIAL. FURTHER, THE ASSESSING OFFICER HAS HIMSELF HAS ALLOWED SUCH PRO VISION FOR DISCOUNT IN THE SUBSEQUENT ASSESSMENT YEARS. IN VIEW OF THE FOREGOING, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE FINDING OF THE LEARNED CIT (APPEALS). 11. IN THE RESULT, THIS GROUND OF APPEAL BY THE REV ENUE IS DISMISSED. 12. AS REGARDS, THE DISALLOWANCE OF PROVISION OF WARRANTY IS CONCERNED, THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER AND LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DEC ISION OF THE LEARNED CIT (APPEALS). 8 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 13. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ISSUE UNDER CONSIDERATION IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF BEML VS.CIT (CITED SUPRA) WHICH HAS BEEN FOLLOWED BY THE LEARNED CIT (APPEALS) IN ALLOWING THE ASSESSEE'S APPEAL. IN VIEW OF THE SAME, WE DO NOT S EE ANY REASON TO INTERFERE WITH THE FINDING OF LEARNED CIT (APPEALS) AND THIS GROUND OF APPEAL OF REVENUE IS ALSO REJECTED. 14. AS REGARDS THE DISALLOWANCE OF THE SOFTWARE EXP ENSES AS REVENUE EXPENDITURE AND HOLDING IT TO BE CAPITAL EXPENDITURE, WE FIND THAT THE ASSESSEE HAS PURCHASED OPERATING SOFTWARE AND CLAIMED IT AS REVENUE EXPENDITURE. THE ASSESSI NG OFFICER DISALLOWED THE SAME HOLDING IT TO BE CAPITAL EXPENDITURE AGAINST WHICH THE ASSESSEE P REFERRED APPEAL BEFORE THE LEARNED CIT (APPEALS). THE LEARNED CIT (APPEALS) OBSERVED THAT THESE OPERATING SOFTWARE DOES NOT GIVE ANY ENDURING BENEFIT AND IS IN THE NATURE OF APPLICATI ON SOFTWARE AND THAT THE LICENSES ARE FOR A PERIOD OF TWELVE MONTHS ONLY. HE THUS HELD IT TO B E REVENUE EXPENDITURE. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. BOTH THE PARTIES RELIED UPON THE DECISIONS OF THE ASSESSING OFFICER AS WELL AS LEARNED CIT (APPEALS) RESPECTIVELY. 15. AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH E SPECIAL BENCH OF THE TRIBUNAL AT DELHI IN THE CASE OF AMWAY INDIA ENTERPRISES REPORTED IN 201 1-TIOL-710-HC-DEL-IT HAS LAID DOWN THE TESTS / GUIDELINES FOR CONSIDERING THE NATURE OF E XPENSES ON COMPUTER SOFTWARE. WE FIND THAT THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE ASS ESSEE'S CONTENTIONS HAS OBSERVED THAT THE EXPENSES ON SOFTWARE IS BASICALLY APPLICATION SOFT WARE AND THAT TOO FOR A PERIOD OF 12 MONTHS ONLY. THE LEARNED CIT (APPEALS) HAS ALSO CONSIDERE D THE ABOVE DECISIONS TO HOLD THAT EXPENSES OF OPERATING SOFTWARE IS REVENUE IN NATURE. AS T HE LEARNED CIT (APPEALS) HAS RIGHTLY ALLOWED 9 ITA NOS.1328 & 1347/BANG/11 AND 80 & 222/BANG/2012 THE RELIEF TO THE ASSESSEE, WE DO NOT SEE ANY REASO N TO INTERFERE WITH THE ORDER OF LEARNED CIT (APPEALS) ON THIS ISSUE. THIS GROUND OF APPEAL BY THE REVENUE IS REJECTED. IN THE RESULT, BOTH THE ASSESSEE'S AS WELL AS RE VENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2012. SD/- SD/- (JASON P BOAZ) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL M EMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE