ACIT 3(1)(2), MUMBAI V. EXPERIAN CREDIT INFORMATION CO. P.LTD, MUMBAI

ITA 805/MUM/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8853 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 03-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANPREET DUGGAL
• Keywords: Business income; Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37(1); 13

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 805/MUM/2017 (ASSESSMENT YEAR 2011-12) I.T.A. NO. 4711/MUM/2018 (ASSESSMENT YEAR 2012-13) I.T.A. NO. 4712/MUM/2018 (ASSESSMENT YEAR 2013-14) I.T.A. NO. 4713/MUM/2018 (ASSESSMENT YEAR 2014-15) ACIT-3(1)(2)/DCIT- 14(1)(2) ROOM NO. 607 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-40 020. VS . M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. 201, 2 ND FLOOR, PLANTIA C-59, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA-EAST MUMBAI-400 051. PAN : AABCE6822A (APPELLANT) ( RESPONDENT ) ASSESSEE BY SHRI KETAN VED DEPARTMENT BY SHRI MANPREET DUGGAL DATE OF HEARING 28.05.2021 DATE OF PRONOUNCEMENT 02 . 0 8 . 20 21 O R D E R PER SHAMIM YAHYA (AM) :- THESE ARE APPEALS BY THE REVENUE AGAINST RESPECTIVE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LEAR NED CIT(A)] FOR AFORESAID ASSESSMENT YEARS. SINCE ISSUES ARE COMMON AND CONN ECTED THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE GROUNDS RAISED IN ITA NO. 805/MUM/2017 FOR A .Y. 2011-12 IS AS UNDER : 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD, CIT(A) ERRED IN ALLOWING THE DEPRECIATION CLAIMED B Y THE ASSESSEE ON HIS ASSETS WITHOUT APPRECIATING HE FACTS THAT THE BUSINESS O F THE ASSESSEE HAD NOT COMMENCED WITHIN THE SIX MONTHS OF THE ISSUE OF THE CERTIFICATE OF REGISTRATION FROM RBI AS PER CICRA, 2005? ' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD, CIT(A) ERRED IN ALLOWING TECHNOLOGY RECHARGE COST T O THE EXTENT OF RS 4,07,89,789/- AS REVENUE EXPENDITURE WITHOUT APPRECIA TING THE FACT THAT THE 2 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. ASSESSEE HAD INCURRED THE SAID EXPENDITURE TO SET UP TECHNOLOGY AND PLATFORM WHICH WOULD HELP HIM IN CONDUCTING THE BUSI NESS IN THE FUTURE?' 3. FOR ALL OTHER FINANCIAL YEARS ONLY ONE COMMON GRO UND RELATING TO GROUND NO. 2 ABOVE IS RAISED. WE ARE REFERRING TO FA CTS AND FIGURES OF A.Y. 2011-12 APROPOS GROUND NO. 1 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED FROM TH E ANNUAL REPORT OF THE COMPANY THAT IT IS ENGAGED IN THE BUSINESS OF PROVI DING CREDIT INFORMATION SERVICE AND THE ASSESSEE RECEIVED THE CERTIFICATE O F REGISTRATION FOR COMMENCING THE BUSINESS OF CREDIT INFORMATION, ISSUED BY THE R BI, ON 17/2/2010 UNDER THE CREDIT INFORMATION COMPANIES REGULATION ACT 2005 (C ICRA). UNDER THE TERMS OF REGISTRATION RECEIVED FROM THE RBI, THE COMPANY WAS REQUIRED TO COMMENCE BUSINESS WITHIN 6 MONTHS OF GRANT OF SUCH REGISTRAT ION. THE ASSESSEE CLAIMED THAT IT COMMENCED BUSINESS OPERATION FROM 12/8/2010 . THE ANNUAL REPORT FURTHER STATED THAT THE COMPANY OPERATES AS A CREDI T BUREAU, WITH 49% SHAREHOLDING HELD BY THE EXPERIAN UK AND THE BALANC E 51% HELD BY SEVEN INDIAN PARTNERS, BEING LEADING BANKS AND NBFCS. THE REPORT ALSO STATED THAT THE COMPANY COLLECTED INFORMATION FROM VARIOUS SOUR CES AND PROVIDES EXPERIAN CREDIT REPORTS TO LENDERS AND CONSUMERS TO REDUCE R ISK AND FACILITATE RESPONSIBLE LENDING TO CONSUMERS, IN COMPLIANCE WIT H RBI GUIDELINES. IT IS ALSO STATED THAT INTANGIBLE ASSET COMPRISE OF EXPENDITUR E INCURRED BY THE COMPANY ON INTERNAL DESIGN AND DEVELOPMENT OF DATABASES AND DEVELOPMENT FEES PAID FOR CUSTOMISING CREDIT BUREAU PLATFORM (CBV2) FOR I NDIAN OPERATIONS. ALL EXPENDITURE THAT CAN BE DIRECTLY ATTRIBUTED OR ALLO CATED ON A REASONABLE AND CONSISTENT BASIS TO CREATE AND MAKE THE ASSET READY FOR ITS INTENDED USE ARE CAPITALISED BY THE COMPANY. THE REPORT STATES THAT THE COMPANY COMMENCED ITS BUSINESS OPERATIONS 12/8/2010 AND CONSEQUENTLY CAPITALISED WIP, WHICH CONSISTED OF COST INCURRED TOWARDS DEVELOPMENT AND DESIGNING OF DATABASES AND CREDIT BUREAU PLATFORM. THEREFORE DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUESTED TO FURNISH COMPLETE DETAILS REGARDING 3 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. BUSINESS ACTIVITY AND MODUS OPERANDI. THE ASSESSEE VIDE ITS LETTER DATED 3/12/2013 FURNISHED A DETAILED NOTE ON ITS BUSINESS ACTIVITY. THE ASSESSEE ALSO FILED VARIOUS SUBMISSIONS DURING THE SCRUTINY ON THE NATURE OF BUSINESS AND ITS COMMENCEMENT WHICH WAS CONSIDERED BY THE AS SESSING OFFICER. 4. THE AO NOTED THAT THE ASSESSEE HAD OBTAINED A CE RTIFICATE OF REGISTRATION, ISSUED BY THE RBI ON 17/2/2010 PERMITTING IT TO COM MENCE THE BUSINESS OF PROVIDING CREDIT INFORMATION. IT WAS THEREFORE IMPE RATIVE FOR THE ASSESSEE TO COMMENCE ITS BUSINESS ACTIVITY LATEST BY 16/8/2010 I.E IS WITHIN 6 MONTHS OF THE IMPUGNED RBI LETTER FAILING WHICH ITS CERTIFICA TE OF REGISTRATION WOULD LAPSE UNLESS OTHERWISE APPROVED BY THE RBI. THE ASSESSING OFFICER OPINED THAT IT IS PROVIDING CREDIT INFORMATION AND THE PREDECIDED ELE CTRONIC FORMATS, THE COMPANY NEEDS TO HAVE A SUITABLE DATABASE OF THE CR EDIT HISTORY/TRACKRECORDS OF THE INDIVIDUALS TO BE ABLE TO PROVIDE CREDIT REP ORTS THEREON AND THE REQUIRED SOFTWARE, TO BE ABLE TO STORE, PROCESS THE DATA THA T ARE GENERATED AND DESIRED REPORTS. THAT THE ACTIVITY CLAIMED TO HAVE BEEN LAU NCHED DURING THE YEAR I.E. CORE BUREAU PRODUCTS CONSISTING OF CIR. THAT THE EN TIRE RANGE OF SERVICES RENDERED BY THE ASSESSEE IS BASED ON THE AVAILABILI TY OF A COMPREHENSIVE AND UP-TO-DATE DATABASE ON SUITABLE SOFTWARE TO OPERATE IT. THAT IN THE ABSENCE OF SUCH DATA, NO WORTHWHILE REPORTS CAN BE GENERATED E VEN IF THE SOFTWARE DELIVERY PLATFORMS ARE READY. THAT NO USER OF SUCH CIR WOULD FIND A REPORT BASED ON LIMITED AND INCOMPLETE DATA TO BE OF USE FOR THE PU RPOSE INTENDED. THAT THE USER OF SUCH REPORTS I.E. BANKS/NBFCS/FIS WOULD FIN D UTILITY THEREIN, ONLY IS CREDIT TRACK RECORD OF THE INDIVIDUAL IS CULLED OUT FROM A COMPREHENSIVE DATABASE. THAT IT IS SEEN FROM THE DETAILS OF CUSTO MERS FROM WHOM THE ASSESSEE HAS SIGNED AGREEMENTS FOR FURNISHING DATA, SUBMITTED BY THE ASSESSEE BY ITS LETTER DATED 3/12/13 THAT MOST OF ITS DATABA SE HAS BEEN BUILT AND GENERATED MUCH AFTER THE DAY WHEN IT CLAIMS TO HAVE COMMENCED BUSINESS. 5. THAT SIGNIFICANT PART OF THE DATABASE WAS SCATTE RED AND BUILT-UP, BY RECEIVING FROM BANK/MBA CS/FIS MUCH LATER, THE ASSE SSEE COULD HAVE 4 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. COMMENCED BUSINESS WITH THE AID OF A RELATIVELY SMA LL DATABASE AND IF THE DATABASE WAS INSUFFICIENT THE UTILITY OF CIR TO THE USER THEREOF WAS ITSELF DOUBTFUL. THAT MOREOVER, THE ASSESSEE COMPANY HAD C LAIMED THAT IT HAD ISSUED CIR TO 32 PERSONS, RESULTING IN EARNING AN AGGREGAT E FEE OF RS. 4004/- DURING THE PREVIOUS YEAR AS PER ITS PROFIT AND LOSS ACCOUN T. THAT THEREFORE, THE ASSESSEE WAS REQUESTED TO EXPLAIN THE COMPLETE STEP BY STEP PROCEDURE FOR GENERATING AND ISSUE OF CIR AND FURNISH THE COPIES OF CIR ISSUED TO 32 CUSTOMERS FROM WHOM THE ASSESSEE HAD CLAIMED TO HAV E RECEIVED IN AGGREGATE FEE OF RS. 4004/-. THE ASSESSEE FURNISHED WRITTEN S UBMISSIONS AND THE COPIES OF REPORTS WHICH WAS CONSIDERED BY THE ASSESSING OF FICER. 6. THE ASSESSING OFFICER STATED THAT THE ASSESSEE D ID NOT PRODUCE EVIDENCE IN SUPPORT OF THIRD PARTY SUCH AS UAT CERTIFICATE S IGNED BY THE SOFTWARE PROVIDERS/VENDORS, THE SAID IMPLEMENTATION CERTIFIC ATE WAS A SELF SERVING DOCUMENT WITH QUESTIONABLE AUTHENTICITY. THAT ALSO, DESPITE SEVERAL OPPORTUNITIES TO PROVIDE SUITABLE CERTIFICATE/DOCUM ENTATION FROM THE LIKES OF THIRD PARTY SOFTWARE, TO PROVE THE READINESS OF THE SOFTWARE, THE ASSESSEE FAILED TO DISCHARGE THIS ONUS AND WAS NOT ABLE TO PROVE WI TH COGENT EVIDENCE THAT THE SOFTWARE WAS READY AND INSTALLED, TO BE ABLE TO CON DUCT ITS BUSINESS. THAT MOREOVER, SINCE THE DATABASE WAS NOT READY, SO MUST BE THE SOFTWARE, IN VIEW OF THE DIRECT NEXUS BETWEEN THE TWO. THAT FURTHER N ON-AVAILABILITY OF COMPLETE DATABASE AND SOFTWARE TOO LEADS TO AN INESCAPABLE C ONCLUSION THAT THE ASSESSEE WAS IN NO POSITION TO HAVE BEEN ABLE TO CO MMENCE ITS BUSINESS ACTIVITY, AS HAS BEEN CLAIMED BY IT. THAT IT IS APP ARENT THAT THE ASSESSEE HAD AN RBI DEADLINE IN ORDER TO NOT LOOSE ITS CERTIFICATE, TO CONDUCT THE IMPUGNED BUSINESS ACTIVITY, AS HAS BEEN CLAIMED BY THE ASSES SEE. IT IS APPARENT THAT THE ASSESSEE HAD AN RBI DEADLINE TO MEET IN ORDER TO NO T LOSE ITS CERTIFICATE TO CONDUCT THE IMPUGNED BUSINESS AND THE ALLEGED CONDU CT OF BUSINESS OF ISSUANCE OF CIR TO 32 PERSONS IS AN ARRANGEMENT CRE ATED, TO GIVE IT THE RESEMBLANCE OF HAVING COMMENCED BUSINESS TO MEET RB I NORMS, NOTWITHSTANDING THE FACT THAT THE SUBSTRATUM NEED B Y IT TO CONDUCT SUCH 5 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. BUSINESS I.E. DATABASE AND SOFTWARE WAS NOT READY. THAT MOREOVER, THE ASSESSEE INSPITE OF REPEATED OPPORTUNITIES WAS NOT ABLE TO FURNISH DETAILS OF ANY SUCH OR SIMILAR CIR REPORT WHICH WAS GENERATED AND ISSUED EITHER TO AN INDIVIDUAL OR ANY FINANCIAL INSTITUTION. THAT THE F URTHER CLAIM OF RECEIPT OF FEE OF RS. 4004/- DURING THE YEAR WAS NOTHING BUT FACADE C REATED BY THE ASSESSEE TO SHOW THAT IT HAS COMMENCED HIS BUSINESS. THAT SINCE THE BUSINESS WAS NOT SET UP AND COMMENCED AS STRONGLY CLAIMED BY THE ASSESSE E, THE CLAIM OF THE ASSESSEE FOR ALL THE EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT WAS REJECTED BY THE ASSESSING OFFICER AS FAR AS DEPRECIATION WAS CO NCERNED ,THE SAME WAS ALSO REJECTED AS IT CANNOT BE CLAIMED BY AN ENTITY WHICH IS YET TO COMMENCE ITS BUSINESS. THAT THE OTHER INCOME EARNED BY THE ASSES SEE OF RS. 2,81,98,850/- DOES NOT HAVE ANY NEXUS WITH THE BUSINESS ACTIVITY, AND HAS BEEN DISALLOWED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THE ASS ESSING OFFICER ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ALKALI CHEMICALS AND FERTILISERS IN THE ASSESSEE'S CASE. THUS IN VIE W OF THE FACT AND CIRCUMSTANCES, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE COMPANY WAS YET TO SET UP AND COMMENCE ITS BUSINESS ACTIVIT IES AND, THEREFORE, THE INCOME OF RS. 2,81,98,850/-WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE . 7. UPON ASSESSEES APPEAL LEARNED CIT(A) DELETED TH E DISALLOWANCE BY HOLDING AS UNDER : 5.2.4 IT IS NOTED THAT THE APPELLANT IS IN THE BUSINESS OF PROVIDING CREDIT INFORMATION AND IS DULY REGISTERED WITH RBI. AMONGST MANY RELATED SERVICES, ONE OF THE SERVICES IS PROVIDING C REDIT INFORMATION REPORT (CIR) GIVING INFORMATION REGARDING BORROWER'S CREDIT ACCOUNTS AND CREDIT RATINGS ETC. THIS ACTIVITY REQUIRES AVAIL ABILITY OF REQUISITE COMPUTER HARDWARE AND SOFTWARE. THE APPELLANT ENTERE D INTO A SOFTWARE LICENCE AGREEMENT WITH EXPERIAN LTD. (EL) W. E.F. 21/11/2009. AS PER THE AGREEMENT, EL WAS TO DEVELOP AND MAINTAIN S OFTWARE PLATFORM CALLED CREDIT BUREAU PLATFORM (CBV2). THE AP PELLANT ALSO POINTED ANOTHER VENDOR, 'SAS' ON 15/01/2010 FOR PROVI DING SOFTWARE REQUIRED IN RELATION TO CBV2 AND SIGNED AN AGREEMENT ON 01/05/2010. THE CUSTOMISED CBV2 WAS DELIVERED BY EL MARCH 2010. THE APPELLANT WAS RECEIVING NON-STANDARD DATA FORMATS FROM VARIOUS 6 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. BANKS WITH INDIAN NAMES AND ADDRESSES THAT WAS CREATING CERTAIN PROBLEM IN DATA UPLOAD. HOWEVER, DUE TO EFFORTS OF EL AND SAS, THE APPELLANT CLAIMS THAT BY AUGUST 2010 THEY COULD SUCCE SSFULLY PROVIDE MATCHES SAMPLE ENQUIRIES. ACCORDINGLY, THEY ANNOUNC EDL2/08/2010 AS THE DATE ON WHICH CBV2 WAS READY FOR INTENDED. TH IS WAS DULY INTIMATED TO RBI THROUGH LETTERS, COPIES OF WHICH ARE P LACED ON RECORD. 5.2.5 TO CARRY OUT ITS BUSINESS, THE APPELLANT REQUIR ES TO ENTER INTO MEMBERSHIP AGREEMENT (MA) AND SERVICE AGREEMENT (SA) . BROADLY SPEAKING, MA ENABLES APPELLANT TO GET DATA FROM BANKS ETC. AND S A IS AN AGREEMENT TO PROVIDE VARIOUS CREDIT REPORTS SUCH AS CIR 2 CLIENTS. UP TO THIS POINT, THERE IS NO AMBIGUITY OR DOUBT ABOUT THE DATES, FACTS OR DETAILS . 5.2.6 AS PER THE DETAILS SUBMITTED, THE APPELLANT HAD AL READY ENTERED MA WITH 25 BANKS/FIS ETC. BY THE DATE OF COMMENCEMENT OF BUSINESS CLAIMED AS 12/08/2010. EVEN AS PER THE TABLE GIVEN AT PARA 8 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED 5 BANKS RULING ONE N ATIONALISED BANK NAMELY PUNJAB NATIONAL BANK AND ONE MULTINATIONAL BANK NAMELY BARCLAYS BANK AS CUSTOMERS WITH WHOM APPELLANT HAD ENTERED INTO MEMBERSH IP AGREEMENT. THUS, IF AT ALL, THERE CAN BE A DISPUTE BETWEEN THE N UMBER OF AGREEMENTS SIGNED BEFORE 12/08/2010 AS PER THE ASSESSING OFFIC ER AND AS PER THE APPELLANT. HOWEVER, THE FACT REMAINS THAT SUBSTANTIAL DA TABASE OF INDIVIDUALS WAS AVAILABLE WITH THE APPELLANT AS ON THAT DATE. IT IS NOT IMPORTANT WHETHER THAT MUCH DATABASE WAS CAPABLE OF GENERATING VERY HIGH QUALITY CIR REPORTS OR RELATIVELY LESSER QUALITY REPORTS. NEVERTHELESS, I T IS SEEN THAT VIDE LETTER DATED 23/12/2013, THE APPELLANT HAD SUBMITTED DETAILS OF AGREEMENT WITH BANKS ETC., TO THE ASSESSING OFFICER WHICH CLEARLY SHO WS 25 AGREEMENTS WERE ENTERED INTO ON OR BEFORE 10/08/2010. IT IS CONTENDED BY THE APPELLANT THAT BY 12/10/2010 IT HAD A DATABASE OF 27.4 3 MILLION RE CORDS OUT OF WHICH 19.43 MILLION RECORDS WERE PROCESSED AS ON 12/08/20 10. THERE IS NO ADVERSE FINDING ABOUT THE AMOUNT OF DATA COLLECTED BY THE APP ELLANT AND PROCESSED IN THE ASSESSMENT ORDER. 5.2.7 DURING THE RELEVANT YEAR, 32 INDIVIDUAL CUSTOME RS APPROACHED THE APPELLANT FOR CIR REPORT'S AND PAID SERVICE FEE. OF THESE, 28 CUSTOMERS WERE GIVEN A NIL REPORT AND BALANCE FOR REPORTS WERE APPRO PRIATELY ISSUED. ALL DETAILS RELATING TO THESE 32 INDIVIDUAL CUSTOMERS WERE SUBMITTED TO THE ASSESSING OFFICER VIDE LETTER DATED 16/01/2014. THE DETAILS THEREIN ARE NOT DISPUTED. 5.2.8 DISTILLING ALL THE OBJECTIONS OF THE ASSESSING O FFICER, IT CAN BE SAID THAT THE PRIMARY OBJECTION WAS THAT THE APPELLANT DID NOT H AVE SUFFICIENT DATABASE TO MAKE IT POSSIBLE EVEN TO GENERATE A SINGLE CIR REPO RT. SECONDLY, 32 INDIVIDUAL CUSTOMERS WERE TOO LOW A NUMBER TO ESTABLISH COMMENCEMENT OF BUSINESS. NEW AGE SOFTWARE AND DATA PROCESSING BASED BUSINESS IS EXTREMELY DIFFERENT FROM BRICKS AND MORTAR BUSINESS INFORMATION TECHNOLOGY IS A DYNAMIC AND COMPLEX SERVICE CAPABLE OF GROWING EXPO NENTIALLY. APART FROM CONJECTURES AND SURMISES, THERE IS NOTHING TO CONCLUDE THAT THE CLAIM OF THE APPELLANT THAT ITS SOFTWARE CBV2 PLATFORM WAS FUNCTIONAL ON 12/08/2010 7 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. WAS INCORRECT. PARTICULARLY SO, WHEN THE APPELLANT HA S DULY REPORTED OPERATIONAL STATUS TO RBI. 5.2.9 ACCEPTING THAT THE SOFTWARE FOR PROCESSING DATA WAS OPERATIONAL, IT HAS NOW TO BE SEEN WHETHER THE APPELLANT HAD ANY DATA AVAIL ABLE FOR PROCESSING. AS CAN BE SEEN FROM THE DETAILS FILED BEFORE THE ASSES SING OFFICER, THE APPELLANT HAD ALREADY ENTERED INTO SERVICE AGREEMENTS WITH 25 BANKS/FIS ETC., INCLUDING SEVERAL NATIONALISED, PRIVATE INDIAN AND MULTINATIONAL BANKS SUCH AS PNB, ICICI, KOTAK MAHINDRA BANK, HSBC, INDIA BULLS FINANCIAL SERVICES LTD, BARCLAYS BANK ETC. ALTHOUGH THESE 25 FIN ANCIAL INSTITUTIONS TOGETHER WOULD NOT COVER EACH AND EVERY INDIVIDUAL BAN K CUSTOMER IN INDIA, TOGETHER THESE INSTITUTIONS WOULD HAVE A HUGE DATABASE OF PAST AND PRESENT CLIENTS. 5.2.10 IT WOULD BE UNREASONABLE TO CONCLUDE THAT THIS NU MBER WOULD BE SO MINISCULE AND NEGLIGIBLE AS TO MAKE IT IMPOSSIBLE FOR THE APPELLANT TO GENERATE ANY CIR REPORT. OBVIOUSLY, AS THE APPELLANT ENTERS INTO MORE AND MORE MEMBERSHIP AGREEMENTS, THE DATABASE WOULD INCREAS E AND THE ACCURACY AS WELL AS THE REACH OF ITS CBV2 SOFTWARE W OULD ENHANCE. JUST AS ALL PRINCIPLES OF MARKET RESEARCH/STATISTICAL FORMULA E CAN BE APPLIED TO A RELATIVELY SMALL SAMPLE SIZE, SO ALSO CAN A PROCESSI NG SOFTWARE BE APPLIED ARE COMPARATIVELY SMALLER DATABASE. FURTHER, JUST AS A LA RGER SAMPLE SIZE WILL IMPROVE THE QUALITY OF STATISTICAL ANALYSIS, SO ALSO WILL A LARGER DATABASE IMPROVE QUALITY OF A REPORT LIKE CIR. HOWEVER, THE QU ALITY OF THESE REPORTS IS NOT CRUCIAL IN DECIDING WHETHER OR NOT THE APPELLANT CO ULD HAVE COMMENCED BUSINESS WITH THE LIMITED DATABASE THAT IT POSSESSED AS ON 12/08/2010. ASSUMING THAT THE APPELLANT POSSESSED DATABASE SUPPLIE D ONLY BY PUNJAB NATIONAL BANK ONLY FEW MILLION ACCOUNTS/NAMES IN THE IR LIST OF CLIENTS, THE APPELLANT STILL BE ABLE TO GENERATE CIR REPORTS IN RES PECT OF THOSE INDIVIDUALS AND ANALYSE THEIR CREDIT RATINGS WITH ONLY THE TRACK R ECORD AVAILABLE IN THE DATABASE OF PUNJAB NATIONAL BANK. ADMITTEDLY, SUCH A R EPORT WOULD BE NOT VERY ROBUST CREDIT RATING REPORT AND MAY NOT BE ABLE TO GIVE ANY ANALYSIS ABOUT AN INDIVIDUAL WHO IS NOT OR HAS NEVER BEEN A C LIENT OF THE SAID BANK. HOWEVER, THAT DOES NOT MEAN THAT THE APPELLANT WAS NOT EN GAGING IN BUSINESS ACTIVITY JUST BECAUSE OF SUCH DATA HANDICA P, UNLESS THERE IS ANY CONTRARY FINDING OF FACT. IN THE INSTANT CASE, THERE IS NO SUCH FINDING OF FACT. 5.2.11 COMING TO THE SMALL NUMBER OF CLIENTS CIR PROCU RED BY THE APPELLANT DURING THE YEAR, THE CONCLUSION OF THE ASSESSING OFFI CER THAT IT WAS DONE MERELY TO CREATE RESEMBLANCE OF HAVING COMMENCED BUS INESS APPEARS TO BE BASED ON CONJECTURES AND NOT ON ANY HARD INVESTIGATIV E FINDING. THERE IS NOTHING TO INDICATE THAT THESE CUSTOMERS WERE KIND OF DU MMY CUSTOMERS SHOWN ONLY TO ESTABLISH THAT BUSINESS HAD COMMENCED. SETUP OR COMMENCEMENT OF BUSINESS CANNOT BE DEPENDENT UPON THE N UMBER OF CUSTOMERS OPTED OR THE VALUE OF BUSINESS DONE. EVEN I F ONE GENUINE CUSTOMER HAS BEEN PROVIDED ANY GOODS OR SERVICES, IT WILL HAV E TO BE ACCEPTED THAT BUSINESS HAS COMMENCED. MOREOVER, FOR A BUSINESS LI KE THIS, DATA FROM BANKS/FIS ETC., IS AKIN TO RAW MATERIAL. PROCUREMENT O F RAW MATERIAL AND PROCESSING THEREOF HAS TO BE TREATED AS COMMENCEMENT OF BUSINESS AND CANNOT BE SUBJECT TO A CERTAIN VOLUME OF SALES OR EVEN QUALITY OF PRODUCTS 8 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. SOLD DURING THE YEAR. A NEW ENTRANT IN A MARKET MAY UND ERGO THE ENTIRE BUSINESS PROCESS OF PROCUREMENT OF RAW MATERIAL, PR OCESSING IT BUT MAY END UP WITH MAKING VERY MEAGRE SALES OR MAY END UP SELL ING POOR QUALITY PRODUCT. IT IS FOR THE MARKET FORCES IN TO DECIDE WHETH ER THAT BUSINESS WILL PROSPER OR FAIL IN FUTURE. IT IS NOT FOR THE ASSESSING OFFICER TO DISMISS THE EXISTENCE OF AN ANY SUCH BUSINESS WHICH HAS VERY ME AGRE SALES IN ITS 1 ST YEAR OF OPERATIONS AND CONCLUDE THAT BUSINESS ACTIVITY HA S NOT COMMENCED. 5.2.12 IN DECIDING THIS ISSUE, I FIND GUIDANCE IN D ECISION OF HON'BLE ITAT A BENCH, MUMBAI, [2016] 71 TAXMANN.COM 374 (MUMBAI - TRIB.)PINEBRIDG E INVESTMENTS CAPITAL INDIA (P.) LTD.V.INCOME TAX OFF ICER, RANGE 6(1)(4), MUMBAI. THE HEADNOTES READ AS BELOW: SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINESS EXPENDITURE - ALLOWABILITY OF (SETTING UP OF BUSINESS) - ASSESSMENT YEAR 2007-08 - WHETHER BUSINESS MAY BE COMMENCED SUBSEQUENTLY, BUT FOR PURP OSE OF ALLOWING EXPENSES, IT HAS TO BE SEEN WHEN BUSINESS CAN BE SAID TO BE 'SET-UP' - HELD, YES - WHETHER WHERE ASSESSEE-COMPANY INCORPORATED W ITH AN OBJECT TO MAKE INVESTMENT IN OTHER COMPANIES HAD RECEIVED FUNDS IN F ORM OF SHARE CAPITAL OR OTHER SOURCES BEFORE 11-10-2006 WHEN IT GOT NBFC REGI STRATION CERTIFICATE AND THEREAFTER IT HAD STARTED MAKING DUE DILIGENCE FO R POTENTIAL INVESTEE COMPANIES, IT COULD BE SAID THAT ASSESSEE-COMPANY WAS READY TO COMMENCE ITS BUSINESS AND, THUS, ITS BUSINESS WAS SET-UP ON 11 -10-2006 - HELD, YES [PARAS 10.1 AND 11,1 J FIN FAVOUR OF ASSESSEE] 5.2.13 WHILE DECIDING THE CASE, HON'BLE ITAT MADE THE FOLLOWING OBSERVATION: 'IT MAY BE NOTED FROM THE PERUSAL OF THE PROVISO TO 'SEC T/ON 3' THAT IN THE CASE OF NEWLY SET UP BUSINESS, THE PREVIOUS YEAR SHAL L BE THE PERIOD BEGINNING WITH THE DATE OF SETTING UP OF THE BUSINESS OR, AS THE CASE MAY BE, THE DATE ON WHICH THE SOURCE OF INCOME NEWLY COMES IN TO EXISTENCE AND ENDING WITH THE SAID FINANCIAL YEAR. THUS, ONE NEED S TO FIND OUT WHEN THE BUSINESS OF THE ASSESSEE-COMPANY CAN BE SAID TO BE 'SET-UP'. THE BUSINESS MAY BE COMMENCED SUBSEQUENTLY, BUT FOR THE PURPOSE OF ALLOWING THE EXPENSES, IT HAS TO BE SEEN WHEN THE BUSINESS CAN BE SAID TO BE 'SET-UP' IT IS NOTED FROM THE 'NOTES TO THE COMPUTATION SHEET' ATTACHE D WITH THE RETURN OF INCOME THAT ASSESSEE HAD CLEARLY GIVEN ITS DATE OF SETT ING UP OF BUSINESS AS 11-10-2006 BEING THE DATE ON WHICH THE ASSESSEE-COMPA NY RECEIVED NBFC REGISTRATION CERTIFICATE FROM RBI. ON THIS DATE, THE A SSESSEE WAS LEGALLY AND COMMERCIALLY COMPETENT TO DO ITS BUSINESS. THE EXPRE SSION 'SETTING-UP' MEANS, AS DEFINED IN THE OXFORD ENGLISH DICTIONARY, 'TO PLACE ON FOOT' OR 'TO ESTABLISH', AND IN CONTRADISTINCTION TO 'COMMENCE'. THE DISTINCTION IS THIS THAT WHEN A BUSINESS IS ESTABLISHED AND IS READY TO BE COMMENCED, THEN IT CAN BE SAID THAT BUSINESS IS 'SET-UP'. BUT BEFORE IT I S READY TO COMMENCE BUSINESS, IT IS NOT SETUP. IN OTHER WORDS, FOR SETTING UP OF BUSINESS, WHAT IS REQUIRED IS READINESS FOR COMMENCEMENT OF BUSINESS A ND ACTUAL COMMENCEMENT OF BUSINESS WOULD NOT BE NECESSARY.'[P ARA 10] 5.2.14 THE ABOVE DECISION TOOK INTO CONSIDERATION RATI OS OF WESTERN INDIA VEGETABLE PRODUCTS LTD. V. C/T[1954] 26 ITR 151 (BOM.) (PARA 10), CITV. 9 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. RALLIWOLF LTD. [1980J 121 ITR 262 (BOM.) (PARA 10), CIT VS. SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. [1973] 91 ITR 170 (GUJ.) (PARA 10) AND DHL EXPRESS (I) (P.) LTD. V. ASSTT CIT (2009) 124 TTJ 108 (MUM.) (PARA 10.1). 5.2.15 QUESTIONS SUCH AS LACK OF 3 RD PARTY/VENDOR CERTIFICATION ETC., RAISED BY THE ASSESSING OFFICER ARE NOT RELEVANT IN DECIDING THE ISSUE. IN THE INSTANT CASE, RELYING ON DECISIONS OF JURISDICTIONAL COURTS A ND CONSIDERING THE FACTS AND CIRCUMSTANCES, IT CANNOT BE DENIED THAT THE APPELLA NT HAD SET UP ITS BUSINESS FROM THE DATE OF REGISTRATION WITH RBI AND TH E BUSINESS COMMENCED ON 12/08/2010 AS ALSO INTIMATED TO RBI. THEREFORE, THE INCOME SHOWN HAS TO BE TREATED AS 'BUSINESS INCOME' AND NOT 'INCOME FROM OTH ER SOURCES' AND DEDUCTION OF BUSINESS EXPENSES AND DEPRECIATION HAS TO BE ALLOWED AS PER LAW. THESE GROUNDS OF APPEAL ARE THEREFORE ALLOWED. 8. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT THE ISSUE IN DISPUTE HERE IS WHETHER THE ASSESSEE H AS COMMENCED THE BUSINESS ON THE DATE CLAIMED OR NOT. THE ASSESSEE WAS DULY G RANTED REGISTRATION BY THE RBI AND AS PER THE TERMS OF THE REGISTRATION THE AS SESSEE WAS TO COMMENCE THE BUSINESS WITHIN SIX MONTHS. THE ASSESSING OFFIC ERS DOUBT IS THAT THE ASSESSEE COULD NOT HAVE ARRANGED INFRASTRUCTURE. HE WAS ALSO OF THE OPINION THAT THE ASSESSEES CLAIM OF ISSUING CIR REPORTS TO 32 PERSONS IS ALSO ONLY AN ARRANGEMENT. THAT EARNING OF FEE OF RS. 4004/- IS T OO SMALL. IN OUR CONSIDERED OPINION EXCEPT FOR THE SURMISES AND CONJECTURES, TH E ASSESSING OFFICERS HYPOTHESIS HAS NO LEGS TO STAND. THERE IS NO LAW TH AT THERE IS A PRESUMPTION THAT IF THE ASSESSEE EARNS A SMALLER INCOME, COMMEN CEMENT OF BUSINESS SHOULD BE DOUBTED. THE CLAIM THAT THE ISSUE OF CIR TO 32 PERSONS IS AN ARRANGEMENT IS NOT BACKED BY ANY INQUIRY WHATSOEVER FROM THOSE 32 PERSONS BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS CLEARLY MISLED HIMSELF. NO CASE HAS MADE OUT THAT THERE WAS ANY EXAMINATION OF ASSESSEES INFRASTRUCTURE AND IT WAS FOUND LACKING. MOREOVER, IN OUR CONSIDER ED OPINION THE ASSESSING OFFICER HAS NO TECHNICAL QUALIFICATION WHATSOEVER I N COMMENTING UPON THE TECHNOLOGICAL PREPARATION OF THE ASSESSEE IN DELIVE RING OUTPUT. IN OUR CONSIDERED OPINION LEARNED CIT(A) HAS PASSED A CORR ECT ORDER AND HAS ANALYSED 10 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. ALL THE FACTS POINTED OUT BY THE ASSESSING OFFICER. HENCE, THE ORDER OF LEARNED CIT(A) DOES NOT NEED ANY INTERFERENCE FROM OUR PART . ACCORDINGLY, WE UPHOLD THE SAME. IN THE RESULT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. APROPOS GROUND NO. 2 10. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER OBSERVED THAT THE APPELLANT COMPANY HAD CLAIMED THE TECHNOLOGY RE CHARGE COST OF RS. 10,18,95,804/-IN ITS PROFIT AND LOSS ACCOUNT OUT OF WHICH RS. 5,13,62,128/- WAS CONSIDERED AS CAPITAL AND THE BALANCE AS A REVE NUE IN NATURE. ON PERUSAL OF THE ITEMS, THE ASSESSING OFFICER NOTED THAT ALL RELATE TO THE CREATION OF INTANGIBLES WHICH CONSTITUTE THE PRIMARY ASSETS/RES OURCE, TO ENABLE THE COMPANY TO CONDUCT THE BUSINESS. THAT THE EXPENSES WERE SET UP FOR A TECHNOLOGY TO ENABLE THE COMPANY TO CONDUCT ITS BUS INESS AND THEREFORE ONLY OF CAPITAL NATURE. THAT THE COSTS WERE RELATED TO INTA NGIBLES, WHICH ARE NOT OWNED BY THE COMPANY, BUT ARE A KEY RESOURCE FOR THE COND UCT OF ITS BUSINESS. THAT THEY REPRESENTED TECHNOLOGY COST, WHICH ARE THE MOS T CRITICAL RESOURCE FOR ENABLING THE ASSESSEE TO CONDUCT ITS BUSINESS AND P ROVIDE A BENEFIT OF AN ENDURING NATURE TO THE COMPANY. THAT IT IS THE CBV2 SOFTWARE PLATFORM AND ALL RELATED INTANGIBLES THAT ENABLE THE COMPANY TO RUN ITS BUSINESS. SUCH COSTS ARE NOT OF A REVENUE NATURE BUT CLEARLY AN INTANGIB LE CAPITAL ITEM. THAT THESE COSTS ARE NOT EXPENSED OUT TO EARN INCOME DURING TH E COURSE OF THE FINANCIAL YEAR, BUT CONTINUE TO PROVIDE BENEFIT OVER A PERIOD OF YEARS AND ARE THE CORE ASSET OF THE COMPANY FOR THE CONDUCT OF ITS BUSINES S. THAT THE COSTS ARE, THEREFORE, HELD TO BE OF CAPITAL NATURE, BEING AN I NTANGIBLE ASSET ON WHICH DEPRECIATION SHALL BE ALLOWED AS AND WHEN THE APPEL LANT IS ELIGIBLE TO CLAIM IT, UPON THE COMMENCEMENT OF ITS BUSINESS. THAT THE ASS ESSEE'S CLAIM THAT THE TECHNOLOGY COSTS ARE OF REVENUE ITEM AND HENCE CHAR GED TO ITS PROFIT AND LOSS ACCOUNT WAS, THEREFORE, REJECTED. THE ASSESSING OFF ICER, THEREFORE, DISALLOWED THE ENTIRE TECHNOLOGY RECHARGE COST OF RS. 10,80,95 ,804/- AS CAPITAL EXPENDITURE AND ADDED IT BACK TO THE TOTAL INCOME O F THE ASSESSEE. 11 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. 11. UPON ASSESSEES APPEAL LEARNED CIT(A) DELETED T HE DISALLOWANCE. HE NOTED THE ASSESSEES SUBMISSION AS UNDER :- THE APPELLANT SUBMITS THAT DURING THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR 2011-12, THE APPELLANT INCURRED AN AM OUNT OF RS. 10,18,95,804 TOWARDS TECHNOLOGY COSTS. OF THE TOTAL COST S OF RS. 10,18,95,804/-, THE APPELLANT HAS CONSIDERED AN AMOU NT OF RS. 5,13,62,128/- AS CAPITAL EXPENDITURE, AN AMOUNT OF RS. 97,43,887/- HAS BEEN DISALLOWED AS THE AMOUNT WAS PRE-OPERATIVE IN NA TURE. THE DEDUCTION WAS CLAIMED IN RESPECT OF THE BALANCE AMOUNT OF RS. 4,07,89,789/- AS BEING REVENUE IN NATURE. PARTICULARS AMOUNT AMOUNT (RS.) AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT 10,18,95,804 LESS: PRE-OPERATIVE EXPENSES (97,43,887) LESS: AMOUNTS TREATED AS CAPITAL EXPENDITURE AS PER RETURN A. CBV 2 LICENSE FEES B. CBV 2 MATCHING FEES AND FIXED TEAM FEES C. SAS LICENSE FEES AND CUSTOMIZATION COST 83,43,66 1 1,00,18,467 3,30,00,000 (5,13,62,128) BALANCE TREATED AS REVENUE EXPENDITURE IN THE RETURN 4,07,89,789 2. THE DETAILS OF RS. 40,789,789/- ARE AS UNDER : PARTICULARS AMOUNT 1 . SOFTWARE MAINTENANCE FEES 11,42,081 2. COMPUTER HARDWARE INSTALLATION AND MAINTENANCE COST 3,87,505 3. CBV 2 SUPPORT AND MAINTENANCE COST 1,81,17,617 4. TECHNICAL SERVICES RECHARGES 1,13,40,598 5. GLOBAL VALUE ADDED PRODUCTS ('GVAP') ANNUAL LICENSE AND SUPPORT FEES 98,01,988 TOTAL 4,07,89,789 3. THE NATURE OF ABOVE EXPENSES IS AS UNDER: I. SOFTWARE MAINTENANCE FEE-RS. 11,42,081 THE AMOUNT OF RS. 11,42,081 IS INCURRED TOWARDS ANNUA L MAINTENANCE COST FOR THE CBV 2 SOFTWARE. THESE COSTS ARE INCURRED TOWARDS THE SMOOTH FUNCTIONING OF THE BUSINESS AND NOT TOWARDS ACQ UISITION OF THE CBV 2 PLATFORM. THE SOFTWARE MAINTENANCE COSTS ARE INCURRE D TOWARDS INCREASING THE STABILITY OF THE PLATFORM. THE SAID EXPE NDITURE IS 12 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. RECURRING AND THEREFORE REVENUE IN NATURE. ACCORDIN GLY A DEDUCTION HAS BEEN CLAIMED UNDER SECTION 37(1) WHILE COMPUTING THE TOTAL INCOME. II. COMPUTER HARDWARE INSTALLATION AND MAINTENANCE COST - RS. 3,87,505 THE AMOUNT OF RS. 3,87,505 IN INCURRED TOWARDS HARDWA RE INSTALLATION AND SUPPORT SERVICES FOR THE STABILITY OF THE CBV 2 PLATFORM. III. CBV 2 SUPPORT AND MAINTENANCE COST - RS. 1,81,17,617 THE ABOVE EXPENSES ARE TOWARDS MAINTENANCE COST FOR T HE CBV 2 SOFTWARE FROM 12 AUGUST 2010 TO 31 MARCH 2011. THESE ARE ADDITIONAL MONTHLY COST FOR STANDBY RESOURCES FROM EL TO SUPPORT C BV 2 TEAM OF THE APPELLANT. THE EXPENSES ALSO COVER SUPPORT SERVICES PROVIDED BY EL TO STABILIZE THE CBV 2 SOFTWARE AND TO IMPROVE THE FUNCTIONALITIES WITH REGAR D TO MATCHING OF DATA. THE ABOVE EXPENDITURE IS REVENUE IN NATURE. ACCORDI NGLY A DEDUCTION HAS BEEN CLAIMED UNDER SECTION 37(1) WHILE COMPUTING THE TOTAL INCOME. IV. TECHNICAL SERVICE RECHARGES-RS. 1,13,40,598 THE CBV 2 PLATFORM IS ON THE SERVER WHICH IS LOCATED IN UNITE D KINGDOM. ALSO, THE DATA WITHIN THE CBV 2 SYSTEM IS STORED IN THE DATA STORAGE CENTRE MAINTAINED IN THE UNITED KINGDOM. THE SE RVER AS WELL THE REQUIRED INFRASTRUCTURE FOR THE DATA AND THE CBV 2 PLATFORM IS MAINTAINED BY EL. THE TS RECHARGES ARE TOWARDS MAINTE NANCE OF INFRASTRUCTURE AND DATA STORAGE FACILITY. THE SAID EXP ENDITURE IS REVENUE IN NATURE. ACCORDINGLY A DEDUCTION HAS BEEN CLAIMED UNDER SECTION 37(1) WHILE COMPUTING THE TOTAL INCOME. V. GVAP MONTHLY LICENSE AND SUPPORT FEES-RS. 98 ,01,988 THE AMOUNT OF RS, 98,01,988 IS TOWARDS GVAP ANNUAL LI CENSE AND SUPPORT SERVICES OF THE VALUE ADDED PRODUCTS VIZ. ACCOUNT REV IEW, PORTFOLIO BENCHMARKING TRIGGERS ETC. THESE COSTS ARE CHARGED TO THE APPELLANT ON A MONTHLY BASIS BY EL FOR ADDITIONAL SUPPORT AND HENCE ARE RECURRING IN NATURE. ACCORDINGLY A DEDUCTION HAS BEEN CLAIMED UNDE R SECTION 37(1) WHILE COMPUTING THE TOTAL INCOME. 12. LEARNED CIT(A) CONSIDERING THE ABOVE DELETED TH E DISALLOWANCE HOLDING AS UNDER :- 13 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. 5.3.2 IN THE COURSE OF APPEAL PROCEEDINGS, THE APPEL LANT HAS EXPLAINED IN DETAIL THE NATURE OF EXPENSES RELATED TO TECHNOLOGY TRE ATED AS REVENUE EXPENDITURE IN THE RETURN. THIS EXPLANATION HAS BEEN EXTRACTED ABOVE AND IS HENCE NOT REPEATED HERE. IT WOULD SUFFICE TO NOTE THA T SOFTWARE MAINTENANCE FEE TOWARDS ANNUAL MAINTENANCE COST FOR THE CBV2 SOFTW ARE, COMPUTER HARDWARE INSTALLATION AND MAINTENANCE COST, CBV2 SUPPOR T AND MAINTENANCE COST TECHNICAL SERVICES RECHARGES TOWARD S MAINTENANCE OF DATA STORAGE FACILITY AND GVAP MONTHLY LICENSE AND SUPPOR T FEES TOWARDS CUSTOMISATION AND VALUE-ADDED SERVICES ARE INTEGRAL P ART OF THE PROFIT-EARNING PROCESS AND NOT FOR ACQUISITION OF AN ASSET OR A RIGH T OF A PERMANENT CHARACTER. IN A BRICKS AND MORTAR WORLD PLANT AND MAC HINERY HAVE TO BE REPAIRED, MAINTAINED AND AT TIMES MODIFIED OR CUSTOMISE D TO CATER TO MARKET DEMAND. THESE EXPENSES HAVE TO BE TREATED AS REVENUE IN NATURE. IN THE VIRTUAL WORLD OF DATA ANALYSIS, SIMILAR REPAIR, MAINT ENANCE OR MODIFICATION HAS TO BE DONE TO COMPUTER HARDWARE AND SOFTWARE PLAT FORM/ARCHITECTURE. APPLYING THE RATIO OF DECISION OF HON'BLE SUPREME CO URT IN EMPIRE JUTE COMPANY LTD (124 ITR 1) CITED BY THE-APPELLANT, IN MY OPINION, THE IMPUGNED EXPENSES CANNOT BE CONSIDERED AS CAPITAL IN NATURE. PERHAPS, THE ASSESSING OFFICER DID BECAUSE HE DID NOT FULLY UNDE RSTAND THE DIFFERENCE BETWEEN A BRICKS AND MORTAR BUSINESS AND A BUSINESS THAT USES COMPUTERS AND SOFTWARE PLATFORM/ARCHITECTURE AS MACHINERY THAT R EQUIRES REGULAR UPKEEP, REPAIR AND MAINTENANCE. ACCORDINGLY, DISALL OWANCE OF RS. 4,07,89,789/-IS DELETED. THIS GROUND OF APPEAL IS A LLOWED. 13. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE FIND THAT THE ISSUE HERE IS WHETHER THE ASSESSEES CLAIM OF T ECHNOLOGY RECHARGE COST IS REVENUE EXPENDITURE OR CAPITAL EXPENDITURE. THE OR DER OF THE ASSESSING OFFICER IS AGAIN THOROUGHLY BASED UPON SURMISES AND CONJECT URE WITH NO COGENT MATERIAL WHATSOEVER. THE OPINION OF THE ASSESSING O FFICER THAT COST AND EXPENSES ARE INCURRED NOT TO EARN INCOME DURING THE YEAR BUT CONTINUE TO PROVIDE BENEFIT OVER A PERIOD OF YEARS IS TOTALLY A SURMISES AND CONJECTURE. MOREOVER, IN TAX LAWS THERE IS NO CONCEPT OF DEFERR ED REVENUE EXPENDITURE. MOREOVER, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY COGENT MATERIAL HOW THESE ITEMS ARE IN C APITAL IN NATURE. ON THE OTHER HAND LEARNED CIT(A) HAS ANALYAISED EXPENDITUR E IN DETAIL AND HAS FOUND THAT THESE EXPENSES ARE BASICALLY REVENUE IN NATURE AND THEY SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE. HERE WE NOTE THAT L EARNED CIT(A) WAS RIGHTLY REFERRED TO THE DECISION OF HON'BLE SUPREME COURT I N THE CASE OF EMPIRE JUTE 14 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. CO. LTD. (124 ITR 1). IT MAY BE GAINFUL TO REFER TO THE EXPOSITION IN THE CASE OF EMPIRE JUTE CO. LTD. (SUPRA) WHEREIN IT WAS OBSERVE D THAT 'THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCURRED FOR OBTAINING A N ADVANTAGE OF ENDURING BENEFIT, MAY, NONE THE LESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVERY ADVANTAGE O F ENDURING NATURE ACQUIRED BY AN ASSESSEE THAT BRINGS THE CASE WITHIN THE PRIN CIPLES LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NATURE OF THE A DVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSES SEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEE 'S BUSINESS TO BE CARRIED ON MORE EFFECTIVELY OR MORE PROFITABLY WHILE LEAVIN G THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN T HOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE.' ON THE TOUCHSTONE OF THE ABOVE SAID HON'BLE SUPREME COURT DECISION AND ON THE FACTS AND CIRCUMS TANCES OF THE CASE IN OUR CONSIDERED OPINION LEARNED CIT(A) HAS TAKEN CORRECT VIEW OF THE MATTER AND IT DOES NOT NEED ANY INTERFERENCE IN OUR PART. 15. ACCORDINGLY ALL THESE APPEALS OF THE REVENUE ST ANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 2.8.2021. SD/- SD/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 02/08/2021 COPY OF THE ORDER FORWARDED TO : THE APPELLANT THE RESPONDENT THE CIT(A) CIT DR, ITAT, MUMBAI 15 M/S. EXPERIAN CREDIT INFORMATION COMPANY PVT. LTD. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI