EMPIRE INDUSTRIES LTD, MUMBAI V. ADDL CIT RG 6(2), MUMBAI

ITA 4065/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0648 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K K VED; N A PATADE LD ARS
• Keywords: Depreciation; Question of law; Revenue expenditure; Capital expenditure
• Section: 69C; 143(3); 115JB; 133(6); 37(1)

Judgement Text

ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 4065/MUM/2013 ( / ASSESSMENT YEAR: 2009-10) EMPIRE INDUSTRIES LIMITED EMPIRE HOUSE 414, SENAPATI BAPAT MARG LOWER PAREL MUMBAI 400 013 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 6(2) AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 ./ ./PAN/GIR NO. AAACE-2757-R ( /APPELLANT ) : ( !' / RESPONDENT ) A SSESSEE BY : K.K.VED & N.A.PATADE, LD. ARS RE VENUE BY : NAVEEN GUPTA , LD. DR / DATE OF HEARING : 03/05/2017 / DATE OF PRONOUNCEMENT : 17 /05/2017 ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009-10 ASSAILS THE ORDER OF LD. COMMISSIONER OF IN COME TAX (APPEALS)- 12 [CIT(A)], MUMBAI DATED 25/02/2013. THE ASSESSEE HAS RAISED AS MANY AS FIFTEEN GROUNDS OF APPEAL, WHICH WE TAKE UP IN SUBSEQUENT PARAGRAPHS. 2. BRIEFLY STATED THE ASSESSEE, BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OF GLASS BOTTLES, COMMISSION AGENT & TRADING , WAS ASSESSED U/S 143(3) AT RS.18,84,69,520/- AFTE R CERTAIN ADJUSTMENTS / DISALLOWANCES VIDE ASSESSING OFFICER [AO] ORDER DATED 22/12/2011 AS AGAINST RETURNED INCOME OF RS.1 7,48,71,250/- FILED BY ASSESSEE ON 26/09/2009. 3. IN GROUND NOS. 1 & 2, THE ASSESSEE HAS AGITATED THE ADDITION OF RS.6,95,199/- U/S 69C TOWARDS PAYMENT MADE TO AMERICAN EXPRESS BANKING CORPORATION [AEBC] . PURSUANT TO RECEIPT OF CERTAIN AIR INFORMATION, THE ASSESSEE WAS FOUND TO HAVE PAID RS .20,90,702/- TO AEBC AGAINST CREDIT CARD PAYMENT WHICH WAS NOT REFLECTE D IN THE BOOKS OF ACCOUNTS AND FURTHER NO RESPONSE WAS RECEIVED BY AO AGAINST 133(6) NOTICE ISSUED TO THE AEBC WHICH LED TO IMPUGNED DISALLOWANCE IN THE HANDS OF THE ASSESSEE. THE ASSESSEE CONTESTED THE S AME BEFORE LD. CIT(A) ON THE PREMISES THAT THE ASSESSEE PAID RS.13 ,95,503/- TO AEBC ON ACCOUNT OF BUSINESS RELATED TRAVELS EXPENSES INC URRED BY ASSESSEE WHICH WAS DULY REFLECTED IN THE BOOKS AND THE BALAN CE DIFFERENCE AROSE ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 3 DUE TO ERRONEOUS REPORTING IN AIR BY AEBC . IN SUPPORT, THE ASSESSEE PRODUCED A CONFIRMATORY LETTER DATED 26/12/2011 FRO M AEBC . THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT , DELETED ADDITIONS TO THE EXTENT OF RS.13,90,003/-, BEING AMOUNTS RECONCILED BY THE ASSESSEE BUT CONFIRMED BALANCE ADDITION OF RS.6,95,199/- IN VIEW OF THE FACT THAT THE ASSESSEE COULD NOT ADDUCE EVIDENCE TO SHOW THAT THE MISTAKE IN AIR WAS SUBSEQUENTLY BEEN RECTIFIED BY AEBC AS STATED IN THE SAID CONFIRMATORY LETTER. THE LD. COUNSEL FOR ASSESSEE [ AR] PLACED RELIANCE ON THE SAME LETTER ISSUED BY AEBC TO CONTEND THAT THE DIFFERENCE ADDITION IS NOTHING BUT ERRONEOUS REPORTING IN AIR BY AEBC . THE LD. DR PLACED RELIANCE ON THE FINDINGS OF LD. CIT(A). AFTE R HEARING RIVAL CONTENTIONS AND PERUSING THE CONFIRMATORY LETTER IS SUED BY AEBC , WE FIND STRENGTH IN THE ARGUMENT OF LD. AR THAT THE AC TUAL AMOUNT PAID BY THE ASSESSEE WAS RS.13,95,903/- AND THE BALANCE DIF FERENCE AROSE ONLY DUE TO ERRONEOUS REPORTING BY AEBC AS THIS FACT IS CLEARLY MENTIONED BY AEBC IN THE CONFIRMATORY LETTER DATED 26/12/2011. THERE FORE, SINCE THE ASSESSEE HAS DISCHARGE ITS PART OF OBLIGATION, THE BALANCE ADDITION OF RS.6,95,199/- IS NOT JUSTIFIED AND THEREFORE, THE S AME IS DELETED. THIS GROUND OF ASSESSEES APPEAL SUCCEEDS. 4. IN GROUND NO. 3, THE ASSESSEE IS AGGRIEVED BY AD DITION OF RS.21,391/- U/S 69A WHICH IS NOTHING BUT DIFFERENCE IN INTEREST INCOME REFLECTED BY THE ASSESSEE IN HIS ACCOUNTS VIS--VIS INTEREST AMOUNT REPORTED BY THE PAYER BANK. THE ASSESSEE ATTRIBUTED THE DIFFERENCE TO TIME LAG ONLY BUT COULD NOT FIND FAVOR WITH LD. CIT (A) WHO CONFIRMED THE ADDITION. THE LD. AR MADE A SHORT SUBMISSION THAT T HE BALANCE INTEREST AMOUNT HAS BEEN OFFERED TO TAX IN THE SUCCEEDING AY AND THEREFORE, NO ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 4 ADDITION ON THAT ACCOUNT WAS WARRANTED FOR AND THE DIFFERENCE AROSE ONLY DUE TO TIME LAG. WE ARE OF THE OPINION THAT IF THE ASSESSEE HAS OFFERED THE SAME IN SUCCEEDING AY, THE ADDITION THEREOF IN IMPUGNED AY IS NOT WARRANTED FOR. THEREFORE, THIS ISSUE IS RESTORED TO LD. AO FOR LIMITED PURPOSE OF VERIFICATION OF THE FACT THAT WHETHER TH E ASSESSEE HAS OFFERED ADDITIONAL INTEREST IN THE NEXT AY. IF SO, THE IMPU GNED ADDITIONS SHALL STAND DELETED. THE ASSESSEE IS ALSO DIRECTED TO SUB MIT NECESSARY EVIDENCES IN THIS REGARD FORTHWITH. THIS GROUND OF ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. 5. BY WAY OF GROUND NOS. 4 & 5, THE ASSESSEE HAS AG ITATED DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE OF RS.57,65,712/- BEING 50% OF BUSINESS RELATED FOREIGN TRAVEL OF RS.1,15,31,42 4/-. DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THAT THE ASSES SEE INCURRED EXPENDITURE OF RS.115.31 LACS TOWARDS FOREIGN TRAVE L BY DIRECTORS AND RELATED PERSONS WHICH, IN THE OPINION OF LD. AO, CO ULD NOT BE PROPERLY SUBSTANTIATED / DOCUMENTED BY ASSESSEE WHICH LED TO DISALLOWANCE OF 50% AGAINST THE SAME. THE SAME WAS CONFIRMED BY LD. CIT(A) ALSO. THE LD. AR DREW OUR ATTENTION TO THE FACT THAT THE ASSE SSEE EARNED HANDSOME COMMISSION FROM EXPORT AND INCURRED TRAVEL LING EXPENSES TO NEGOTIATE THE BUSINESS DEALS AND HENCE THE SAME WAS ALLOWABLE PARTICULARLY WHEN THE ASSESSEE HAS ALREADY PAID FRINGE BENEFIT TAX [FBT] AGAINST THOSE EXPENSES AND THEREFORE, ADHOC DISALLOWANCE AGAINST THE SAME COULD NOT BE SUSTAINED IN VIEW OF VARIOUS JUDGMENT OF MUMBAI TRIBUNAL IN THE FOLLOWING CASES, THE COPIES OF WHIC H HAS BEEN PLACED BEFORE US:- (I) HANSRAJ MATHURDAS VS. ITO [ITA NO. 2379/M/10 OR DER DATED 16/09/2011] ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 5 (II) K.S.JEWELLERY & CO. VS. ACIT [ITA NO. 7495/M/ 2013 ORDER DATED 03/06/2015] (III) OM INTERNATIONAL VS. ACIT [ITA NOS.2310-11/M /2012 ORDER DATED 25/04/2013] (IV) DCIT VS. KAMAL ASSOCIATES [ITA NO. 4326/M/201 4 ORDER DATED 21/07/2016] (V) INDO BEARING TRADERS VS. ACIT [ITA NO.7119/M/2 011 ORDER DATED 10/10/12] A PERUSAL OF THE ABOVE ORDERS OF TRIBUNAL LENDS STR ENGTH TO THE ARGUMENT OF LD. AR THAT SINCE FBT HAS BEEN PAID ON THESE EXP ENSES, DISALLOWANCE THEREOF U/S 37(1) WAS NOT WARRANTED FO R. THEREFORE, WE ARE INCLINED TO DELETE THE SAID ADDITIONS SUBJECT TO VE RIFICATION OF PAYMENT OF FBT ON THESE EXPENSES BY LD. AO. THEREFORE, THE MAT TER IS RESTORED BACK TO THE FILE OF LD. AO FOR LIMITED PURPOSE OF V ERIFYING THE FACT THAT THE FBT HAS BEEN PAID ON THESE EXPENSES. IF SO, THE IMP UGNED ADDITION STANDS DELETED. THE GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN GROUND NOS. 6 & 7, THE ASSESSEE IS AGGRIEVED BY TREATMENT OF PROJECT ADVISORY SERVICES FEES PAID TO AN ENTITY FOR RS.14,60,680/- AS CAPITAL IN NATURE. DURING ASSESSMENT PROCEEDINGS, U PON PERUSAL OF PROFESSIONAL CHARGES PAID BY ASSESSEE, IT WAS NOTED THAT THE ASSESSEE PAID IMPUGNED PAYMENTS TO IL&FS INFRASTRUCTURE DEVELOPMENT CORPORATION [IDC] TOWARDS PROJECT ADVISORY FOR DEVELOPMENT OF IT SEZ IN AMBARNATH THANE AND THE SAME WAS PAID TOWARDS INITIATION, ACTIVATION AND SET UP OF SERVICE TO BE RENDERED IN FUTURE TOWA RDS PROPOSED IT SEZ PROJECT AT AMBARNATH. THE ASSESSEE EXPLAINED THAT THE SAME WAS AN UPFRONT SIGNING FEES PAYABLE TO THE IDC REGARDLESS OF THE FACT WHETHER THE PROJECT MATERIALIZED OR NOT. HOWEVER, NOT CONVI NCED WITH THE EXPLANATION, AO TREATED THE SAME AS CAPITAL EXPENDI TURE AND DISALLOWED THE SAME ON THE PREMISES THAT THE ASSESSEE FAILED T O SUBSTANTIATE THAT ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 6 THE SAME WERE IN RELATION TO EXISTING BUSINESS ONLY AND NOT TOWARDS NEW BUSINESS. AGGRIEVED, THE ASSESSEE CONTESTED THE SAM E BEFORE LD. CIT(A) AND CONTENDED THAT THE ASSESSEE INCURRED THE SAID EXPENDITURE TO EXPLORE OPPORTUNITIES TO DEPLOY EXCESS RESERVES OF MORE THAN RS.30 CRORES PROFITABLY AND EFFICIENTLY AND WAS INCURRED FOR TECHNO-ECONOMIC FEASIBILITY STUDIES TO IDENTIFY PROJECTS THAT COULD BE TAKEN UP IN FUT URE. THE OBJECT OF THE EXPENDITURE WAS TO ENABLE AN EFFICIEN T AND PROFITABLE UTILIZATION OF THE SURPLUS FUNDS AND THEREFORE, ALL OWABLE U/S 37(1) OF THE INCOME TAX ACT, 1961. THE ASSESSEE FURTHER CONTENDE D THAT IT HAS REFLECTED RENTAL INCOME OF RS.38.70 CRORES AND THER EFORE, THE FEASIBILITY STUDY CARRIED OUT FOR PROPOSED IT SEZ, BEING RELATED WITH THE SAME, WAS AN EXTENSION OF EXISTING BUSINESS ONLY AND NOT A NE W LINE OF BUSINESS. HOWEVER, NOT CONVINCED, LD. CIT(A) NOTED THAT THE A SSESSEE FAILED TO PROVE THE NEXUS OF NEW BUSINESS WITH THE EXISTING B USINESS AND THEREFORE, THE SAME BEING, CAPITAL IN NATURE, WAS N OT ALLOWABLE. BEFORE US, THE LD. AR HAS RAISED SIMILAR PLEAS AND DREW OU R ATTENTION TO THE FACT THAT MAIN OBJECTIVE TO UNDERTAKE THE FEASIBILITY ST UDY WAS TO EXPLORE OPPORTUNITIES TO DEPLOY THE EXCESS RESERVES HELD BY THE ASSESSEE AND THEREFORE, THE SAME WERE ALLOWABLE TO THE ASSESSEE. RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HONBLE ANDHRA PARDESH HI GH COURT IN CIT VS. COROMANDAL FERTILIZERS [247 ITR 417]. PER CONTRA, LD. DR PLACED RELIANCE ON THE STAND OF LOWER AUTHORITIES AND CONT ENDED THAT THE SAME BEING INCURRED TO SET UP NEW BUSINESS AND THEREFORE , NOT ALLOWABLE. 7. AFTER HEARING RIVAL CONTENTIONS AND PERUSING REL EVANT MATERIAL ON RECORD, WE FIND THAT THE SAID EXPENDITURE WERE IN T HE NATURE OF UPFRONT CONSULTANCY FEES TO IDENTIFY THE PROJECTS WHICH MAY BE TAKEN UP BY THE ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 7 ASSESSEE IN FUTURE. A PERUSAL OF FINANCIAL STATEMEN TS OF THE ASSESSEE REVEALS THAT AS AT THE BEGINNING OF THE YEAR, THE A SSESSEE HAD RESERVES OF MORE THAN RS.20 CRORES. THE QUANTUM OF THE AMOUN T OR PAYMENT THEREOF HAS NOT BEEN DOUBTED BY THE REVENUE. THE A SSESSEE HAS REFLECTED INCOME FROM HOUSE PROPERTY. THEREFORE, ON THE TOTALITY OF THESE FACTORS, WE FIND STRENGTH IN THE ARGUMENTS OF LD. A R THAT THE SAID EXPENDITURE WAS NOTHING BUT IN THE NATURE OF REVENU E EXPENSES BEING PAID TO EXPLORE THE NEW BUSINESS OPPORTUNITIES SO A S TO DEPLOY THE EXCESS RESOURCES MORE PROFITABLY AND EFFICIENTLY AN D PAYABLE IRRESPECTIVE OF THE FACT WHETHER THE PROJECT MATERIALIZED OR NOT . FURTHER BY INCURRING THE SAME, THE ASSESSEE HAS NOT OBTAINED ANY BENEFIT OF ENDURING IN NATURE AND THEREFORE, THE SAME WERE ALLOWABLE AS RE VENUE EXPENDITURE. WE HOLD SO AND ALLOW THIS GROUND OF ASSESSEES APPE AL. 8. IN GROUND NO.8, THE ASSESSEE IS AGGRIEVED BY TRE ATMENT OF SOFTWARE EXPENDITURE OF RS.35,36,682/- AS CAPITAL E XPENDITURE. THE LD. AO NOTED THAT THE ASSESSEE ACQUIRED CERTAIN LICENSE S TO USE THE SAP SOFTWARE AND MADE PAYMENTS TOWARDS LICENSING, INSTA LLATION AND TESTING OF SOFTWARE, TRAINING EXPENSE ETC. DURING THE YEAR WHICH AS PER THE CONTENTION OF ASSESSEE, WERE INCURRED TO ENSURE SMO OTH CONDUCT OF THE BUSINESS AND IMPROVE OPERATIONAL EFFICIENCY. FURTHE R, THE AMOUNT WAS PAID MERELY FOR THE RIGHT TO USE THE SOFTWARE AND N OT THE OUTRIGHT PURCHASE THEREFORE, AND THEREFORE REVENUE IN NATURE AND FULLY ALLOWABLE. HOWEVER, NOT CONVINCED WITH THE ARGUMENTS OF THE AS SESSEE, LD. AO CONCLUDE THE SAME TO BE ENDURING BENEFIT AVAILED BY ASSESSEE AND THEREFORE CAPITAL IN NATURE AGAINST WHICH THE ASSES SEE WAS ENTITLED FOR DEPRECIATION @60%. AGGRIEVED, THE ASSESSEE CONTESTE D THE SAME WITH ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 8 PARTIAL SUCCESS BEFORE LD. CIT(A) WHO CONCLUDED THA T THE ASSESSEE WAS ENTITLED FOR FULL DEDUCTION AGAINST RS.3,08,840/- BEING ANNUAL EXPENSES IN NATURE AND 60% DEPRECIATION ON THE BALANCE AMOUN T, BEING CAPITAL IN NATURE. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR PLACED RELIANCE ON THE FOLLOWING JUDGMENT IN SUPPOR T OF THE CLAIM THAT THE FULL DEDUCTION AGAINST SOFTWARE EXPENSE IS ALLOWABL E, BEING REVENUE IN NATURE AS THE SAME WAS INCURRED ONLY TO ENSURE SMOO TH / EFFICIENT RUNNING OF ASSESSEES BUSINESS:- (I) CIT VS. GEOFFREY MANNERS & CO. LTD. [2014 49 TA XMANN.COM 320 BOMBAY HIGH COURT] (II) CIT VS. RAYCHEM RPG LTD. [2011 346 ITR 138 BOM BAY HIGH COURT] (III) CIT VS. ASAHI INDIA SAFETY GLASS LTD. [2011 2 45 CTR 529 DELHI HIGH COURT] THE LD. DR CONTENDED THAT AS THE ASSESSEE ACQUIRED BENEFIT OF ENDURING NATURE, THE SAME WAS CAPITAL IN NATURE AND RIGHTLY BEEN ALLOWED DEPRECIATION AGAINST THE SAME AS THESE EXPENSES WER E INTANGIBLE RIGHTS IN NATURE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE CITED CASE LAWS. WE NOTE THE FOLLOWING OBSERVATION OF JURISDIC TIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS GEOFFREY MANNERS & CO. LTD . [SUPRA]:- 12. IN RELATION TO THIS THE TRIBUNAL IN THE IMPUGNED O RDER OBSERVED THAT THERE IS ROOM FOR CERTAIN FLEXIBILITY IN THE VIEWS TAKEN FRO M TIME TO TIME. THE ASSESSEE IN SUCH CASES INSTALLS THE COMPUTERS. THIS TECHNOLOGY IS NO W SAID TO BE ACCEPTABLE IN CHANGING WORLD. THE RAPID ADVANCEMENT OF RESEARCH A LSO CONTRIBUTES A SMALL DEGREE OF ENDURABILITY, BUT THAT BY ITSELF DOES NOT MEAN T HAT THE EXPENSES INCURRED CANNOT BE REVENUE IN NATURE. SINCE TECHNOLOGY ADVANCEMENT IS AN ASPECT WHICH MUST BE TAKEN JUDICIAL NOTE OF, SO ALSO, MACHINERY BECOMING OBSOLETE THAT THERE IS NECESSITY OF ACQUIRING FURTHER TECHNOLOGY. THIS IS TO MEET TH E GROWING COMPETITION AND CONSIDERING TRENDS IN THE MARKET. THEREFORE, SUCH E XPENDITURE WILL HAVE TO BE TREATED AS REVENUE EXPENDITURE. THIS DECISION OF THE TRIBUN AL FOR THE PRESENT ASSESSMENT YEARS ALSO IS IN ACCORD WITH ITS EARLIER DECISIONS WHICH ARE REFERRED TO IN PARAGRAPH 14 OF THE ORDER UNDER CHALLENGE. ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 9 13. FURTHER, IN THE CASE OF CIT V. RAYCHEM RPG LTD. [2 012] 346 ITR 138/21 TAXMANN.COM 507, A DIVISION BENCH OF THIS COURT HEL D THAT SIMILAR VIEW OF THE TRIBUNAL IN THE CASE OF THAT ASSESSEE CANNOT BE SAI D TO BE PERVERSE OR VITIATED BY ANY ERROR OF LAW APPARENT ON THE FACE OF RECORD. TH IS COURT APPROVED THE FINDINGS OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE-RAYCHEM RPG LIMITED. THE EXPENDITURE REFERRED TO BY THE DIVISION BENCH IS IDENTICAL. THE VIEW TAKEN, THEREFORE, IN THE CASE OF THE PRESENT ASSESSEE IS IN ACCORD WITH THE SETTL ED PRINCIPLES AND ADVANCEMENT IN TECHNOLOGY AND JUDICIAL NOTICE OF WHICH HAS BEEN TA KEN BY THIS COURT. 14. FOR THE REASONS AFORE-STATED EVEN THE THIRD QUESTI ON CANNOT BE SAID TO BE A SUBSTANTIAL QUESTION OF LAW. FURTHER, HONBLE DELHI HIGH COURT IN CIT VS. ASAHI INDIA SAFETY GLASS LTD. [SUPRA] HAS OBSERVED AS UNDER:- 9. THE REVENUE IN SUPPORT OF ITS STAND HAS TAKEN R ECOURSE TO THE TEST OF ENDURING BENEFIT. IT IS IN OUR VIEW NOW SOMEWHAT TRITE TO SA Y THAT THE TEST OF ENDURING BENEFIT IS NOT A CERTAIN OR A CONCLUSIVE TEST WHICH THE COURTS CAN APPLY ALMOST BY ROTE. WHAT IS REQUIRED TO BE SEEN IS THE REAL INTENT AND PURPOSE OF THE EXPENDITURE AND WHETHER THE EXPENDITURE RESULTS IN CREATION OF FIXED CAPITA L FOR THE ASSESSEE. IT IS IMPORTANT TO BEAR IN MIND THAT WHAT IS REQUIRED TO BE SEEN IS NO T WHETHER THE ADVANTAGE OBTAINED LASTS FOREVER BUT WHETHER THE EXPENSE INCURRED DOES AWAY WITH A RECURRING EXPENSE(S) DEFRAYED TOWARDS RUNNING A BUSINESS AS A GAINST AN EXPENSE UNDERTAKEN FOR THE BENEFIT OF THE BUSINESS AS A WHOLE. IN OTHE R WORDS, THE EXPENDITURE WHICH IS INCURRED, WHICH ENABLES THE PROFIT MAKING STRUCTURE TO WORK MORE EFFICIENTLY LEAVING THE SOURCE OF THE PROFIT MAKING STRUCTURE UNTOUCHED , WOULD IN OUR VIEW BE AN EXPENSE IN THE NATURE OF REVENUE EXPENDITURE. FINE TUNING BUSINESS OPERATIONS TO ENABLE THE MANAGEMENT TO RUN ITS BUSINESS EFFECTIVE LY, EFFICIENTLY AND PROFITABLY; LEAVING THE FIXED ASSETS UNTOUCHED WOULD BE AN EXPE NDITURE IN THE NATURE OF REVENUE EXPENDITURE EVEN THOUGH THE ADVANTAGE MAY LAST FOR AN INDEFINITE PERIOD. TEST OF ENDURING BENEFIT OR ADVANTAGE WOULD THUS COLLAPSE I N SUCH LIKE CASES. IT WOULD IN OUR VIEW BE ONLY TRUER IN CASES WHICH DEAL WITH TECHNOL OGY AND SOFTWARE APPLICATION, WHICH DO NOT IN ANY MANNER SUPPLANT THE SOURCE OF I NCOME OR ADDED TO THE FIXED CAPITAL OF THE ASSESSEE. [SEE ALEMBIC CHEMICAL WORK S CO. LTD. VS CIT (1989) 177 ITR 377; CIT VS J.K. SYNTHETICS (2009) 309 ITR 371 AT PAGE 412 AND CIT VS. INDIAN VISIT.COM (SUPRA)]. 9.1. THIS IS THE APPROACH WHICH THE SUPREME COURT H AS APPLIED EVEN IN CASES WHERE THERE IS A ONCE FOR ALL OR A LUMP SUM PAYMENT. WHAT IS TO BE SEEN IN THE FACTS OF THIS CASE, AS ALREADY NOTICED BY USHEREINABOVE, THAT THE ASSESSING OFFICER AS A MATTER OF FACT HAS RETURNED A FINDING THAT THE EXPENDITURE UN DERTAKEN WAS FOR OVERHAULING THE ACCOUNTANCY OF THE ASSESSEE AND TO EFFICIENTLY TRAI N THE ACCOUNTING STAFF OF THE ASSESSEE. THE TRIBUNAL, WHICH IS DECIDEDLY THE FINA L FACT FINDING AUTHORITY HAS AFTER NOTICING THE MATERIAL ON RECORD OBSERVED THAT THE E XPENDITURE WAS INCURRED UNDER VARIOUS SUB-HEADS, WHICH INCLUDED LICENCE FEE, ANNU AL TECHNICAL SUPPORT FEE, PROFESSIONAL CHARGES, DATA ENTRY OPERATOR CHARGES, TRAINING CHARGES AND TRAVELLING EXPENSES. THE FINAL FIGURE WAS A CONSOLIDATION OF E XPENSES INCURRED UNDER THESE ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 10 SUB-HEADS. THE TRIBUNAL, IN OUR VIEW, AND RIGHTLY S O, CAME TO THE CONCLUSION THAT NONE OF THESE RESULTED IN EITHER CREATION OF A NEW ASSET OR BROUGHT FORTH A NEW SOURCE OF INCOME FOR THE ASSESSEE. THE TRIBUNAL CLA SSIFIED THE SAID EXPENSES AS BEING RECURRING IN NATURE TO UPGRADE AND/OR TO RUN THE SYSTEM. THEREFORE, HONBLE HIGH COURTS HAVE TAKEN A CONSIST ENT VIEW FAVORABLE TO THE ASSESSEE THAT EVEN IF THE SOFTWARE EXPENSES INC URRED BY THE ASSESSEE RESULTS INTO ENDURING BENEFIT TO ASSESSEE, THE SAME COULD NOT BE TREATED AS CAPITAL EXPENDITURE AND REAL INTENT A ND PURPOSE OF THE SAME HAS TO BE LOOKED INTO. A PERUSAL OF IMPUGNED E XPENSES SHOWS THAT THE SAME WERE IN THE NATURE OF OBTAINING LICENSE, I MPLEMENTATION, SET-UP FEES, AMC CHARGES ETC. THEREFORE, WE ACCEPT THE STA ND OF LD. AR THAT THE IMPUGNED EXPENSES WERE INCURRED TO ENSURE SMOOT H CONDUCT OF THE BUSINESS AND IMPROVE OPERATIONAL EFFICIENCY AND THE REFORE, BEING REVENUE IN NATURE, WERE ALLOWABLE TO FULL EXTENT IN VIEW OF THE JUDGMENT OF SUPERIOR COURT. RESULTANTLY, BY HOLDING THAT THE AS SESSEE SHALL BE ENTITLED FOR FULL DEDUCTION OF SOFTWARE EXPENSES, WE ALLOW A SSESSEES THIS GROUND OF APPEAL. 10. IN GROUND NOS. 9 & 10, THE ASSESSEE HAS CHALLEN GED DISALLOWANCE OF RS. 24 LACS PAID AS SERVICE CHARGES TO FOUR PART IES TO WHOM NOTICES U/S 133(6) WERE ISSUED BY THE AO AND PHYSICAL INSPE CTION WAS CARRIED OUT AT THEIR PREMISES BY THE INSPECTOR, HOWEVER, TH E SAME DID NOT YIELDED ANY RESULT WHICH LED THE AO TO DOUBT THE GENUINENES S OF THE SAME AND FINALLY ADDED TO THE INCOME OF THE ASSESSEE. THE SA ME WAS ALSO CONFIRMED BY THE LD. CIT(A) BEING REMAINING UNSUBST ANTIATED. BEFORE US, THE LD. AR CONTENDED THAT THE SAID SERVICE CHARGES WERE PAID BY THE ASSESSEE TO FOUR PARTIES AGAINST INVOICES AND ALL T HE PAYMENT WERE ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 11 THROUGH BANKING CHANNELS AFTER DEDUCTION OF TDS THE REUPON. IN SUPPORT, THE RELEVANT DOCUMENTS IN SUPPORT OF THE SAME VIZ. INVOICES ISSUED BY THE SERVICE PROVIDER, LEDGER EXTRACTS, BANK STATEME NTS, INCOME TAX RETURNS ETC. HAS BEEN PLACED IN THE PAPER BOOK WHIC H WE HAVE PERUSED. WE FIND THAT THE ISSUE REQUIRES RE-EXAMINATION AT T HE LEVEL OF LD. AO AS LEDGER EXTRACTS REVEALS THAT THE SAID EXPENDITURE H AS BEEN INCURRED TOWARDS INSTALLATION OF SOME MACHINERIES AND HENCE PRIMA FACIE, CAPITAL IN NATURE. THEREFORE, THIS MATTER IS RESTORED BACK TO THE FILE OF AO FOR RE- EXAMINATION IN THE LIGHT OF DOCUMENTS PLACED BY THE LD. AR IN THE PAPER- BOOK. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE HIS CLAIM FORTHWITH BEFORE AO AND SUBMIT NECESSARY INFORMATION / DOCUMENTS CAL LED FOR BY LD. AO FAILING WHICH AO SHALL BE AT LIBERTY TO DISPOSE-OFF THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE ASSESSEES GRO UND OF APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. 11. IN GROUND NO. 11 & 12, THE ASSESSEE IS AGGRIEV ED BY RESTRICTING DEPRECIATION ON UPS TO 25% AS AGAINST HIGHER DEPREC IATION OF 60% CLAIMED BY THE ASSESSEE TREATING THE SAME AS INTEGR AL PART OF COMPUTER SYSTEM. THE AO TREATING THE SAME AS PLANT & MACHINE RY, ALLOWED DEPRECIATION @25% ONLY WHICH WAS CONFIRMED BY LD. C IT(A). THE LD. AR HAS PLACED RELIANCE ON THE JUDGMENT OF HONBLE BOMB AY HIGH COURT IN CIT VS. SARASWAT INFOTECH LTD. [ITA NO. 1243 OF 201 2 15/01/2013] TO CONTEND THAT UPS BEING INTEGRAL PART OF COMPUTER SY STEM WAS ENTITLED FOR HIGHER DEDUCTION OF 60% AS APPLICABLE TO COMPUTER S YSTEM. AFTER PERUSING THE CITED JUDGMENT, WE FIND STRENGTH IN TH E ARGUMENTS OF LD. AR AND THEREFORE, FOLLOWING THE JURISDICTIONAL HIGH CO URT, WE HOLD THAT UPS BEING INTEGRAL PART OF COMPUTER SYSTEM BEING INSTAL LED TO REGULATE THE ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 12 FLOW OF THE POWER TO AVOID ANY KIND OF DAMAGE TO TH E COMPUTER NETWORK DUE TO FLUCTUATION IN POWER SUPPLY WHICH COULD LEAD TO LOSS OF VALUABLE DATA AND HENCE, ENTITLED FOR SAME RATE OF DEPRECIAT ION AS APPLICABLE TO COMPUTER SYSTEM. THIS GROUND OF ASSESSEES APPEAL S UCCEEDS. 12. IN GROUND NO.13, THE ASSESSEE IS AGGRIEVED BY N ON-GRANT OF INTEREST U/S 244A. THE SAME BEING ALLOWABLE TO ASSE SSEE AS PER RELEVANT STATUTORY PROVISIONS AND HENCE DO NOT REQUIRE OUR I NTERFERENCE AT THIS STAGE AND ACCORDINGLY DISMISSED. 13. GROUND NOS. 14 IS RELATED WITH INITIATION OF PE NALTY PROCEEDINGS U/S 271(1)(C). THE SAME BEING PREMATURE AT THIS STAGE, ALSO DO NOT REQUIRE OUR INTERFERENCE AT THIS STAGE AND HENCE DISMISSED. 14. GROUND NO. 15 IS GENERAL IN NATURE. 15. THE AO IS DIRECTED TO RE-COMPUTE BOOK PROFIT U/ S 115JB AND ALSO RE-WORK CARRY FORWARD / SET-OFF OF LOSSES ETC. ON T HE BASIS OF FINAL OUTCOME OF THE APPEAL, IF REQUIRED. 16. THE ASSESSEES APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2017. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17.05.2017 SR.PS:- THIRUMALESH ITA NO.4065/M/2013 EMPIRE INDUSTRIES LTD. ASSESSMENT YEAR-2009-10 13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. !$, , , , / DR, ITAT, MUMBAI 6. -. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI