BHARAT PETROLEUM CORPORATION LTD, MUMBAI V. DCIT RG 2(1),

ITA 6213/MUM/2013

• Counselvise Citation: 621319914 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 23-10-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J D MISTRI
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.6213/MUM/2013 ASSESSMENT YEAR: 2005-06 BHARAT PETROLEUM CORPORATION LTD. TAXATION DEPARTMENT, 3 RD FLOOR, BHARAT BHAVAN-II, 4 & 6 CURRIMBHOY ROAD, BALLARD ESTATE, MUMBAI-400001 / VS. DY. CIT, RANGE-2(1), MUMBAI ( ! ' /ASSESSEE) ( # / REVENUE) P.A. NO. AAA CB2902M # / REVENUE BY SHRI N.P.SINGH CIT-DR ! ' / ASSESSEE BY SHRI J.D. MISTRI $ #% & ' ' / DATE OF HEARING : 29/06/2015 & ' ' / DATE OF ORDER: 24/07/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 14/08/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SH RI J.D. MISTRI, LD. COUNSEL FOR THE ASSESSEE AND SHRI N.P. BHARAT PETROLEUM CORPORATION LTD. ITA NO.6213/MUM/2013 2 SINGH, LD. CIT-DR. THE FIRST GROUND PERTAINS TO CO NFIRMING THE ACTION OF THE LD. DCIT TO BELIEVE THAT INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND CONSEQUENTLY REASSESSMENT NOTICE AND REASSESSMENT ORDER ARE VALID/WITHIN PROPER JURISDICTION. THE LD. COUNSEL F OR THE ASSESSEE FAIRLY CONTENDED THAT THIS ISSUE IS IN-FRU CTUOUS. THE LD. CIT-DR ALSO CONSENTED TO THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, THIS GROUND IS DISMISSED AS IN-FRUCTUOUS. 3. THE NEXT GROUND PERTAINS TO CONFIRMING IN TREATING THE EXPENDITURE INCURRED FOR IMPLEMENTING ERP PACKAGE AS CAPITAL EXPENDITURE INSTEAD OF ALLOWIN G IT AS REVENUE EXPENDITURE. THIS GROUND WAS CLAIMED TO BE COVERED BY THE LD. COUNSEL FOR THE ASSESSEE BY THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN CIT VS RA YCHEM RPG LTD. ORDER DATED 04 TH JULY, 2011 (ITA NO.4176 OF 2009) AND ALSO BY THE DECISION FROM HONBLE DELHI HIGH CO URT IN CIT VS M/S ASAHI INDIA SAFETY GLASS LTD. ORDER DATE D 04 TH NOVEMBER, 2011 (ITA NOS. 1110/2006 AND 1111/2006). THIS FACTUAL MATRIX WAS CONSENTED TO BE CORRECT BY THE LD. CIT-DR. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT ON IDENTICAL QUESTION, THE HONBLE BOMBAY HIGH COURT I N CIT VS RAYCHEM RPG LTD. (SUPRA) HELD THAT SOFTWARE EXPENDITURE IS A REVENUE EXPENDITURE UPHOLDING THE STAND BHARAT PETROLEUM CORPORATION LTD. ITA NO.6213/MUM/2013 3 OF THE TRIBUNAL TAKEN FOR THE ASSESSMENT YEAR 2001- 02 IN THE AFORESAID CASE, WHEREIN, THE TRIBUNAL HELD AS U NDER:- 7. WHEN WE APPLY THIS FUNCTIONAL TEST SUGGESTED BY THE SPECIAL BENCH OF THE TRIBUNAL, WE FIND THAT IMPUGNED SOFTWARE DOES NOT FORM PART OF THE PROFIT MAKING APPARATUS OF THE ASSESSEE AND HENCE THE SAME IS TO BE DISALLOWED A REVENUE EXPENDITURE. WE HOLD SO BECAUSE WE FIND THAT THE BUSINESS OF THE ASSESSEE COMPANY IS THAT OF MANUFACTURING OF TELECOMMUNICATION AND POWER CABLE ACCESSORIES AND TRADING IN OIL RETRACTING SYSTEM AN D OTHER PRODUCTS AND IMPUGNED SOFTWARE IS AN ENTERPRISES RESOURCES PLANNING (ERP) PACKAGE AND HENCE IT FACILITATE THE ASSESSEES TRADING OPERATIO NS OR ENABLING THE MANAGEMENT TO CONDUCT THE ASSESSEES BUSINESS MORE EFFICIENTLY OR MORE PROFITABLY BUT IT IS NOT IN THE NATURE OF PROFIT MA KING APPARATUS. WE, THEREFORE, DECIDE THIS ISSUE ALSO I N FAVOUR OF THE ASSESSEE AND WE HOLD THAT THIS EXPENDITURE OF RS.20.60 LAKH IS OF REVENUE EXPENDITURE. WE HOLD SO BY FOLLOWING THE JUDGMENT O F THE SPECIAL BENCH OF THE TRIBUNAL RELIED UPON BY TH E LD. AR OF THE ASSESSEE. IN VIEW OF THE ABOVE AND THE DECISION OF THE SPECIA L BENCH OF THE TRIBUNAL QUOTED BY THE HONBLE BOMBAY HIGH COURT AND HONBLE DELHI HIGH COURT IN THE AFORESAI D CASE, RESPECTFULLY FOLLOWING THE AFORESAID ORDERS, WE ALL OW THIS GROUND OF THE ASSESSEE. BHARAT PETROLEUM CORPORATION LTD. ITA NO.6213/MUM/2013 4 FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 29/06/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ( DATED : 24/07/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1' ( *+ ) / THE CIT, MUMBAI. 4. 0 0 $ 1' / CIT(A)- , MUMBAI 5. 3#4 .' , 0 *+' * 5 , $ % / DR, ITAT, MUMBAI 6. 6 7% / GUARD FILE. / BY ORDER, /3+' .' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI