DCIT CIR. - 7(1), MUMBAI V. M/s. NATIONAL STOCK EXCHANGE INDIA LTD., MUMBAI

ITA 867/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56344 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-10-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GOLI SRINIVAS RAO
• Keywords: Capital asset; Depreciation; Earning of tax free income; Cost of acquisition; Corroborative evidences; Revenue expenditure; Capital expenditure
• Section: 43B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO. 4855/ MUM/2004: ASSESSMENT YEAR: 1999-2 000 I.T.A NO. 7325/ MUM/2004: ASSESSMENT YEAR: 2000-200 1 I.T.A NO. 3321/ MUM/2006: ASSESSMENT YEAR: 2002-200 3 I.T.A NO. 826/ MUM/2009: ASSESSMENT YEAR: 2004-2005 I.T.A NO. 3114/ MUM/2009: ASSESSMENT YEAR: 2005-200 6 M/S. NATIONAL STOCK EXCHANGE OF INDIA LTD. APPELLANT EXCHANGE PLAZA, C-1, BLOCK-G, BANDRA KURLA COMPLEX, BANDRA(EAST), MUMBAI-051. PA NO.AAACN 1797 L VS. ACIT/ADDL. CIT, CIRCLE 7(1), ................ RESPONDENT MUMBAI I.T.A NO. 4542/ MUM/2004: ASSESSMENT YEAR: 1999-20 00 I.T.A NO. 7246/ MUM/2004: ASSESSMENT YEAR: 2000-200 1 I.T.A NO. 4045/ MUM/2006: ASSESSMENT YEAR: 2002-200 3 I.T.A NO. 867/ MUM/2009: ASSESSMENT YEAR: 2004-2005 I.T.A NO. 3047/ MUM/2009: ASSESSMENT YEAR: 2005-200 6 ACIT/ADDL. CIT, CIRCLE 7(1), ................. .APPELLANT MUMBAI VS NATIONAL STOCK EXCHANGE OF INDIA LTD. RES PONDENT EXCHANGE PLAZA, C-1, BLOCK-G, BANDRA KURLA COMPLEX, BANDRA(EAST), MUMBAI-051. PA NO.AAACN 1797 L APPEARANCES: A.V.SONDE , FOR THE ASSESSEE GOLI SRINIVAS RAO, FOR THE REVENUE 2 DATE OF HEARING : 26.12.2011 DATE OF PRONOUNCEMENT : 30 .12.2011 O R D E R PER PRAMOD KUMAR: 1. THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AN D REVENUE AGAINST SEPARATE ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEARS 1999- 2000, 2000-2001, 2002-03, 2004-05 & 2005-06, RESPECTIVELY. SINCE SOME COMMON ISSUES ARE INVOLVED IN THESE APPEALS, AND FOR THE SAKE OF CONVENIENCE, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP THE APPEALS FILED BY THE ASSESS EE AND REVENUE FOR THE ASSESSMENT YEAR 1999-2000. 3. IN GROUND NO.1, THE ASSESSEE IS AGGRIEVED BY THE CIT(A)S MAKING DISALLOWANCE OF LEASE PREMIUM PAID TO BMRDA AMOUNTI NG TO RS.1,17,81,341. 4. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE IS SUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04. WE FIND THAT THE TRIBUNAL FOLLOWING THE EARLIER YEARS DECISION ON IDENTICAL FACTS, DECIDED THE ISSUE AGAINST THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER EXTRACTED FROM THE AS SESSMENT YEAR 1998-99 IS AS UNDER: 13. WE FIND UNDER IDENTICAL FACTS THE SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF MUKUND LTD., [SUPRA], AFTER CONSIDERING VAR IOUS DECISIONS INCLUDING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS AT. KHIMLINE PUMPS LTD. [SUPRA] AND THE VARIOUS OTH ER DECISIONS CITED BY BOTH THE SIDES HAS HELD IN THAT CASE THAT THE CONSIDERAT ION OF RS.2.04 CRORES PAID BY THE ASSESSEE FOR OBTAINING LEASEHOLD LAND FROM MAHA RASHTRA INDUSTRIAL DEVELOPMENT CORPORATION IN ITS FAVOUR FOR A PERIOD OF 99 YEARS WAS CAPITAL IN NATURE AND ACCORDINGLY, IT WAS HELD THAT THE SAME W AS NOT ALLOWABLE AS 3 DEDUCTION. WE FIND THE TRIBUNAL AT PARA 26 OF THE O RDER HAS OBSERVED AS UNDER: 26. WE FIND THAT THE FACTS OF THE CASE BEFORE US A RE SIMILAR TO THE FACTS OF THE CASE IN THE CASE OF KHIMLINE PUMPS LTD. (SUP RA). WE ARE NOT IMPRESSED BY THE ARGUMENT OF THE LEARNED COUNSEL FO R THE ASSESSEE THAT THE RATIO OF DECISION OF HONBLE BOMBAY HIGH C OURT IN KHIMLINE PUMPS LTD. CASE (SUPRA) IS DISTINGUISHABLE SINCE IN KHIMLINE PUMPS LTD. CASE (SUPRA) THE ASSESSEE WAS NOT THE ORIGINAL LESSEE. THIS DISTINCTION POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE IS NOT SUSTAINABLE FOR THE REASON THAT THE DECISION OF THE HONBLE HIGH COURT IS NOT BASED ON THE FACT THAT THE ASSESSEE WAS NOT THE ORIGINAL LESSEE OF THE PREMISES. ALL OTHER FACTS OF THE CASE OF THE AS SESSEE BEFORE US ARE SIMILAR TO THE FACTS OF THE CASE OF KHIMLINE PUMPS LTD. (SUPRA). THE RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF KHIMLINE PUMPS LTD. (SUPRA) IS CLEARLY APPLICABLE T O THE FACTS OF THE CASE OF THE ASSESSEE. IN THIS CASE OF THE ASSESSEE ALL THE ESSENTIAL INGREDIENTS OF TREATING THE AMOUNT OF RS. 2.04 CROR ES PAID BY THE ASSESSEE FOR ACQUISITION OF LEASEHOLD RIGHTS FOR 99 YEARS IN THE LAND AS CAPITAL IN NATURE ARE PRESENT. THE BENEFIT CONFERRE D ON THE ASSESSEE OF LEASE RIGHTS IS FOR 99 YEARS AGAINST THE LUMP SUM P AYMENT OF RS. 2.04 CRORES IS OF ENDURING NATURE. THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE SUM OF RS. 2.04 CRORES HAD BEEN PAID BY WA Y OF ADVANCE RENT NOR WAS THERE ANY PROVISION FOR ITS ADJUSTMENT TOWA RDS RENT OR FOR ITS REPAYMENT TO THE ASSESSEE. WE FIND THAT IN CASE, TH E ASSESSEE TERMINATES THE LEASE AGREEMENT AND HANDOVERS THE VA CANT POSITION OF THE LAND TO MIDC (LESSOR) PRIOR TO THE EXPIRY OF LE ASE PERIOD OF 99 YEARS, IT SHALL NOT BE ENTITLED TO ANY REFUND OUT O F THE AMOUNT OF RS. 2.04 CRORES PAID BY THE ASSESSEE. THERE IS ALSO NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS MADE THE ADVANCE PAYM ENT OF RENT FOR FUTURE YEARS TO SECURE ANY REDUCTION IN THE RENT PA YABLE FOR THE FUTURE YEARS OR FOR ANY OTHER BUSINESS CONSIDERATION. CONS IDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE TERMS OF THE AGREEMENT DT. 5TH MARCH, 1992 ENTERED INTO BETWEEN THE ASSESSEE COMPANY AND MIDC AS A WHOLE, WE HOLD THAT THE CONSI DERATION OF RS. 2.04 CRORES PAID BY THE ASSESSEE COMPANY FOR OBTAIN ING THE LEASEHOLD RIGHTS FROM MIDC IN FAVOUR OF THE ASSESSEE FOR A PE RIOD OF 99 YEARS IS CAPITAL IN NATURE AND THEREFORE, NOT ALLOWABLE AS D EDUCTION TO THE ASSESSEE. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASES OF PANBARI TEA CO. LTD. 57 ITR 422 (SC), DURGA DAS KHA NNA 72 ITR 796 (SC), ADITYA MINERALS (P) LTD. VS.CIT 239 ITR 817 ( S.C) AND HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHIMLINE P UMPS LTD. 258 ITR 459 (BOM) WOULD SQUARELY APPLY TO THE FACTS OF THE CASE OF THE ASSESSEE, AND BEING BINDING IN NATURE, WE DECIDE TH E ISSUE IN GROUND OF APPEAL NO. 10 OF THE REVENUE IN FAVOUR OF THE RE VENUE AND THE GROUND OF APPEAL NO. 10 OF THE REVENUE IS ALLOWED A ND THE ISSUE 4 REFERRED TO THE SPECIAL BENCH BY THE PRESIDENT, TRI BUNAL IS ANSWERED IN THE NEGATIVE AND IN FAVOUR OF THE REVENUE. 14. FURTHER, WE ALSO DO NOT FIND ANY MERIT IN THE C HART FILED BY THE ASSESSEE TO JUSTIFY THE SAVINGS ON ACCOUNT OF LOWER RENT PAID P ER SQ.FT. AS AGAINST THE HIGHER RENT, SINCE THIS, IN OUR OPINION IS ONLY A S ELF SERVING DOCUMENT WITHOUT ANY AUTHENTICITY. SINCE THE FACTS OF THE PRESENT CA SE ARE IDENTICAL TO THAT OF THE CASE (MUKUND LTD. [SUPRA]) DECIDED BY THE SPECIAL B ENCH OF THE TRIBUNAL, WHICH IN TURN HAS FOLLOWED THE DECISION OF THE HON' BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHEMLINE PUMPS LTD. [SUPRA], T HEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE CIT[A] WAS JUS TIFIED IN UPHOLDING THE AOS ACTION IN TREATING THE PAYMENT OF LEASE PREMIU M AMOUNTING TO RS.7,75,736/- AS CAPITAL IN NATURE. THE GROUND RAIS ED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY DISMISSED. FOLLOWING THE ABOVE, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 5. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOL LOWING THE VIEWS OF THE SPECIAL BENCH AS ALSO THE COORDINATE BENCHES, WE HOLD THIS ISSUE AGAINST THE ASSESSEE. 6. GROUND NO.1 IS THUS DISMISSED. 7. GROUND NO.2 IS AGAINST THE CIT(A)S CONFIRMING T HE DISALLOWANCE OF RS.1,78,562 BEING PRIOR PERIOD ADJUSTMENTS ON ACCOU NT OF WATER CHARGES OF RS.5,720, HIRE CHARGES OF RS.22,350, TRAVELING EXPENSES OF RS .1,17,220 AND MEETING & CONFERENCE EXPENSES OF RS.33,272. 8. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) HAS CONFIRMED THE D ISALLOWANCES ON THE GROUND THAT ANY OTHER SUPPORTING EVIDENCES TO THE EFFECT THAT T HE LIABILITY TO PAY THESE EXPENSES CRYSTALLISED DURING THE RELEVANT PREVIOUS TEAR WERE NOT PRODUCED BEFORE THE AO OR BEFORE HIM. WE ALSO FIND THAT THE ISSUE OF PRIOR P ERIOD EXPENSES ON ACCOUNT OF HIRE CHARGES, TRAVELING EXPENSES AND MEETING & TRAVELING EXPENSES HAD COME UP FOR CONSIDERATION IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 1998-99 IN ITA NO.3799/M/2004 BEFORE THE COORDINATE BENCH AND THE SAID ISSUES WERE DECIDED AS FOLLOWS: 5 3.2 HIRE CHARGES OF RS. 43,418/-: THIS AMOUNT WAS P AID TO M/S. ANIL ELECTRIC CO. ON 16.07.1997 TOWARDS HIRE CHARGES OF CUPBOARDS FROM OCTOBER 1996 TO ARCH 1997 AS HIRE CHARGES WERE ULT IMATELY PASSED FOR PAYMENT AND CRYSTALLISED IN THE CURRENT YEAR. THE C IT(A) HAS EXAMINED THE BILLS IN QUESTION AND AS THESE BILLS W ERE DRAWN ON DATES ANTERIOR TO THE PREVIOUS YEAR UNDER CONSIDERATION H E DID NOT ALLOW. THERE IS NO EVIDENCE ON RECORD THAT THESE BILLS WER E RECEIVED DURING THE YEAR, WHICH FINDING WAS ALSO GIVEN BY THE CIT(A ). IN VIEW OF THIS, WE ARE UNABLE TO HOLD THAT THE EXPENDITURE HAS CRYS TALLISED DURING THE YEAR. SINCE IT PERTAINS TO PREVIOUS YEAR, THE SAME CANNOT BE ALLOWED IN THIS YEAR UNLESS IT IS CRYSTALLISED DURING THE YEAR . THEREFORE, THE DISALLOWANCE CONFIRMED BY THE CIT(A) IS UPHELD. GRO UND ON THIS ISSUE IS REJECTED. 3.4 TRAVELLING EXPENSES OF RS. 8,272/-: THIS EXPEND ITURE IS REIMBURSEMENT OF TRAVELLING EXPENDITURE RS. 8,272/- RECEIVED SUBSEQUENT TO FINALISATION OF ACCOUNTS. THE EXPENDI TURE WAS ACCOUNTED AND PAID ON 17.06.1997 RELEVANT FOR ASSES SMENT YEAR UNDER CONSIDERATION. THE CIT(A) DID NOT ALLOW THE SAME ST ATING THAT THE BILLS WERE DATED 01.07.1996. EVEN THOUGH THE ORIGINALS WE RE DATED 01.07.1996, THE CLAIM WAS MADE BY THE CONCERNED PER SON VIDE LETTER DATED 22.05.1997 WHICH PERTAINS TO THE YEAR UNDER C ONSIDERATION. THEREFORE, IT CAN BE CONSIDERED THAT THE LIABILITY HSS CRYSTALLISED DURING THE YEAR. ACCORDINGLY THE A.O. IS DIRECTED T O ALLOW THE AMOUNT. 3.5 MEETING & CONFERENCE EXPENSES OF RS.8,5321/-: T HIS EXPENDITURE PERTAINING TO MEETING HELD OF TRADING MEMBERS AT BA NGALORE. IT WAS THE SUBMISSION THAT THE BILL DATED 01.07.1996 WAS N OT RECEIVED FROM THE PARTY AND COPIES OF THE BILLS WERE SENT ON 22.0 5.1997, THEREFORE THE AMOUNT WAS CLAIMED IN THIS YEAR. AFTER EXAMININ G THE DATES INVOLVED, WE ARE OF THE OPINION THAT THE AMOUNT HAS CRYSTALLISED DURING THE YEAR. ASSESSEE COULD NOT HAVE MADE PROVI SIONS IN THE ABSENCE OF BILL RAISED ON IT AND SINCE COPIES OF TH E BILLS WERE RECEIVED FOR THE FIRST TIME ON 22.05.1997 THE SAME CAN BE CO NSIDERED AS CRYSTALLISED DURING THE YEAR. ACCORDINGLY THE AMOUN T IS AN ALLOWABLE EXPENDITURE. THE A.O. IS DIRECTED TO ALLOW THE AMOU NT. 9. THE ENTIRE DISPUTE THUS HINGES ON THE QUESTION AS TO THE PREVIOUS YEAR IN WHICH LIABILITY TO PAY HAS CRYSTALLIZED AND THERE I S NO DISPUTE ABOUT ADMISSIBILITY OF THE CLAIM PER SE . LEARNED COUNSEL, HOWEVER, POINTS OUT THAT IN CASE THE REVENUE AUTHORITIES WERE TO BE OF THE VIEW THAT THE EXPENSE S BELONGED TO THE EARLIER PREVIOUS YEAR, THE ALLOWANCE FOR DEDUCTION WILL HAVE TO BE A LLOWED ACCORDINGLY. IT WOULD NOT, 6 THEREFORE, MAKE ANY SUBSTANTIAL DIFFERENCE EXCEPT F OR SHIFTING OF YEARS OF ADMISSIBILITY OF CLAIM, WHICH , OVER THE YEARS, WIL L BE TAX NEUTRAL ANYWAY. IN ANY CASE, EVEN UNDER THE MERCANTILE METHOD, THE YEAR IN WHICH EXPENSES ARE TO BE ALLOWED AS DEDUCTION IS NOT ESSENTIALLY THE YEAR TO WHICH THE EXPENSES PERTAIN BUT THE YEAR IN WHICH LIABILITY TO PAY CRYSTALLIZES. A PLAIN READING OF THE ASSESSMENT ORDER, HOWEVER, INDICATES THAT THE REASON FOR DISAL LOWANCE SIMPLY IS THAT SINCE THE ASSESSMENT IS FOLLOWING MERCANTILE METHOD OF ACCOUN TING, IT COULD HAVE TAKEN THESE AMOUNTS ON ACCRUAL BASIS IN .(THE PRECEDING YEAR) . THIS APPROACH, IN OUR CONSIDERED VIEW, IS A VERY HYPER TECHNICAL AND VERY PEDANTIC APPROACH. AS LONG AS THERE IS A REASONABLE BASIS FOR CLAIM, I.E. CRYSTAL LIZATION OF LIABILITY TO PAY OR RECEIPT OF BILLS AT A LATER POINT OF TIME, AND MERELY BECAUSE PROVISION COULD NOT BE MADE IN THE YEAR OF EXPENSE, THE DEDUCTION CANNOT BE DECLINED A T THE POINT OF TIME WHEN LIABILITY HAS CRYSTALLIZED. ONCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE CLOSED AND IT IS NOT POSSIBLE TO PROVIDE FOR AN EXPENSE ON THE BASIS OF SUBSEQUENT INFORMATION COMING TO THE ASSESSEE, THE ASSESSEE CANNOT CLAIM IT IN THE Y EAR IN RESPECT OF WHICH BOOKS ARE CLOSED. IT IS NOT A CASE OF DOUBLE DEDUCTION AND TH E AMOUNTS INVOLVED ARE RELATIVELY INSIGNIFICANT. IN VIEW OF THESE DISCUSSIONS, AND BE ARING IN MIND ENTIRETY OF THE CASE, WE HOLD THAT THE ASSESSEES CLAIM FOR EXPENSES, EVE N THOUGH STRICTLY SPEAKING THESE EXPENSES PERTAIN TO THE PRECEDING YEAR, ARE ELIGIBL E FOR DEDUCTION IN THIS YEAR THAT IS THE YEAR IN WHICH LIABILITY HAS CRYSTALLISED AND BI LLS ARE RECEIVED. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 10. GROUND NO.2 IS THUS ALLOWED. 11. IN GROUND NO.3, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF Y2K EXPE NSES OF RS.46,04,734 BY TREATING THE SAME AS ONE TIME CAPIT AL EXPENDITURE AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF THE INCOME TAX ACT, 1961 AND RULES MADE THEREUNDER. 7 12. FACTS IN BRIEF ARE THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEB ITED AN AMOUNT OF RS.46,04,734 ON ACCOUNT OF Y2K EXPENSES. IN RESPONSE TO ASSESSI NG OFFICERS QUERY AS TO WHY THE SAME SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE, IT WAS SUBMITTED BY THE ASSESSEE THAT THE EXPENSES ARE IN THE NATURE OF CONSULTANCY CHARGES AND SYSTEM EVALUATION CHARGES PAID TO TCS AND MASTEK LTD ON ACCOUNT OF Y2 K EXPENSES AND, THEREFORE, TAKEN AS REVENUE EXPENDITURE. THE EXPLANATION OF T HE ASSESSEE WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER. HE WAS OF THE VIEW THAT THE Y2K EXPENSES WERE INCURRED FOR REDESIGNING THE COMPUTER SYSTEM TO MAKE IT COMP ATIBLE FOR ANY CHANGE REQUIRED ON ACCOUNT OF YEAR 2000 IN THE COMPUTER SYSTEM, WHI CH HAS RESULTED IN ENHANCING THE CAPABILITIES OF THE COMPUTER SYSTEM AND UNDERWE NT ENDURING BENEFIT TO THE ASSESSEE. HE ALSO OBSERVED THAT THE DIRECTORS REP ORT TO THE MEMBERS MAKE IT CLEAR THAT THE ACTIONS TO RESOLVE THE MILLENNIUM BUG WERE CENTERED NOT ONLY AT MAKING NECESSARY CORRECTIONS TO THE COMPUTER SYSTEMS BUT A LSO TO PREPARE THE EXCHANGE TRADING MEMBERS TO ADEQUATELY MEET THE MILLENNIUM C HALLENGE. HE ALSO OBSERVED THAT INSERTION OF SECTION 36(1)(XI) W.E.F. A.Y.2000 -2001 FOR ALLOWING Y2K EXPENSES ARE NOT APPLICABLE TO THE YEAR UNDER CONSIDERATION. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER TREATED THE EXPENSES OF RS.46,04, 734 AS CAPITAL EXPENDITURE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 14. WE HAVE NOTED THE ASSESSEES CONTENTION THAT T HE EXPENSES ARE FOR SERVICES AND CONSULTANCY CHARGES IN RESPECT OF THE EXISTING SOFTWARE. HOWEVER, THE ASSESSING OFFICER HAS PROCEEDED TO DISALLOW THE SAME AS CAPIT AL EXPENDITURE ON THE SHORT GROUND THAT Y2K EXPENSES ARE ONCE IN A MILLENNIUM EXPENSES AND CANNOT BE EQUATED TO REGULAR MAINTENANCE CHARGES ALLOWABLE UN DER SECTION 37(1). NO DOUBT , AS A RESULT OF INSERTION OF SECTION 36(1)(XI), WITH EFFECT FROM 1 ST APRIL 2000, ALL THE Y2K EXPENSES ARE ALLOWABLE WHETHER CAPITAL OR REV ENUE, BUT MERELY BECAUSE THIS 8 SECTION CAME INTO EFFECT FROM 1 ST APRIL 2000, IT CANNOT BE INFERRED THAT EVEN REVENU E EXPENSES, WHICH WERE OTHERWISE ELIGIBLE FOR DEDUCTI ON UNDER SECTION 37(1), WERE TO BE TREATED AS INADMISSIBLE IN THE EARLIER ASSESSMEN T YEARS EVEN WHEN THERE IS NO SPECIFIC FINDING, BACKED BY COGENT REASONS, TO THE EFFECT THAT SUCH Y2K EXPENSES ARE CAPITAL IN NATURE. A CONCESSION GRANTED BY THE STAT UTE, I.E. PERMITTING DEDUCTION IN RESPECT OF Y2K EXPENSES, WHETHER CAPITAL OR REVENUE , CANNOT SO INFERRED AS TO RESTRICT ADMISSIBILITY OF DEDUCTION IN RESPECT OF Y 2K EXPENSES WHICH WERE OTHERWISE ELIGIBLE, SUCH AS REVENUE EXPENSES IN NATURE. IN TH E PRESENT CASE, THE EXPENSES ARE ONLY FOR SYSTEMS TESTING AND CONSULTANCY CHARGES AN D THERE IS NO MATERIAL WHATSOEVER, EXCEPT FOR POINTING OUT THAT THESE ARE ONCE IN A MILLENNIUM EXPENSES, THAT THESE EXPENSES ARE CAPITAL EXPENSES. IN THIS V IEW OF THE MATTER, AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) WAS INDEED IN ERROR IN UPHOLDING THIS DISALLOWANCE. WE DELETE THE SAME. 15. GROUND NO. 3 IS THUS ALLOWED. 16. IN GROUND NO.4, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPE NDITURE OF RS.6,83,441 BEING 0.5% OF GROSS INTEREST INCOME AND REDUCING EXEMPTION U/S.10(15) OF THE I.T.ACT, 1961 ASSUMING THAT AN EXPENDITURE OF RS.6,83,441 MUST HAVE BEEN INCURRED FOR EARNING GROSS INTEREST AND THE REASONS ASSIGNED BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE , PROVISIONS OF INCOME TAX ACT, AND THE RULES MADE THEREUNDER. 17. THE ASSESSING OFFICER, IN GROUND NO.3, HAS RAIS ED THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN RESTRICTING THE EXPENDITURE CONNECT ED WITH EARNING OF INTEREST INCOME EXEMPT U/S.10(15) FROM 2% TO 0.5% W ITHOUT APPRECIATING THAT THE DISALLOWANCE MADE BY THE AO W AS QUITE REASONABLE. 18. FACTS IN BRIEF ARE THAT THE ASSESSING OFFICER D ISALLOWED RS.27,33,764 BEING ESTIMATED EXPENDITURE @ 2% FOR EARNING GROSS INTERE ST OF RS.13.66 CRORES, WHICH 9 WAS CLAIMED AS EXEMPT UNDER SECTION 10(15) BY THE A SSESSEE. ON APPEAL, THE CIT(A), FOLLOWING THE DECISION IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEAR 1998-99, SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER IN PRINCIPLE BUT REDUCED THE QUANTUM TO RS.6,83,441 BEING 0.5% OF THE GROSS INTEREST RECEIVED. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 19. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE FIND THAT IN ASSESSMENT YEAR 1998-99 IN ITA NO.3799/M/2004, ON SIMILAR FACTS, THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO 1% AS AGAINST 0.5% RESTRICTED BY THE CIT(A) TO MEET THE ENDS OF JUSTICE. LEARNED REPRESENTATIVES ALSO DID NOT DISPUTE THE DECISIONS OF THE COORDINATE BENCH FOR T HE ASSESSMENT YEAR 1998-99. THERE IS NO DISPUTE THAT THE FACTS ARE SIMILAR TO T HAT OF ASSESSMENT YEAR 1998-99. THEREFORE, RESPECTFULLY FOLLOWING THE COORDINATE BE NCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1998-99, WE RESTRICT THE DISALL OWANCE TO 1%. 20. GROUND NO.4 RAISED BY THE ASSESSEE IS REJECTED AND GROUND NO.3 RAISED BY THE REVENUE IS PARTLY ALLOWED. 21. IN GROUND NO.5, THE ASSESSEE IS AGGRIEVED BY TH E CIT(A)S UPHOLDING THE DISALLOWANCE OF RS.3952 U/S.43B R.W.S. 36(1)(VA) ON ACCOUNT OF DELAY OF PF CONTRIBUTIONS TO EMPLOYEES. 22. HAVING HEARD THE RIVAL CONTENTIONS, WE FIND THA T THE ASSESSING OFFICER HAS DISALLOWED RS.61,541 ON ACCOUNT OF DELAY IN PAYMENT OF PF CONTRIBUTION TO THE GOVERNMENT TREASURY. ON APPEAL, THE CIT(A) DELETED AN AMOUNT OF RS.57,589 ON ACCOUNT OF THE FACT THAT THE SAID PAYMENT HAS BEEN DEPOSITED WITHIN THE GRACE PERIOD ALLOWED UNDER THE P.F.ACT. HOWEVER, HE SUSTAINED T HE BALANCE AMOUNT OF RS.3952 AS THE SAME WERE NOT PAID WITHIN THE DUE DATE BUT BEFO RE THE DATE OF FILING OF THE RETURN. THE HONBLE SUPREME COURT IN THE CASE OF CI T V. ALOM EXTRUSIONS LTD., 319 ITR 306 (SC),HAS HELD THAT DELETION OF SECOND PROV ISO TO SECTION 43B BY FINANCE ACT, 2003 IS RETROSPECTIVE AND IT WOULD OPERATE WITH EFF ECT FROM 1.4.1988 AND THE 10 AMOUNT PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER THE ACT IS ALLOWABLE DEDUCTION. RESPECTFULLY FOLLOWING THE SAME, WE DIR ECT THE AO TO ALLOW THE DEDUCTION. 23. GROUND NO.5 OF THE ASSESSEE IS THUS ALLOWED. 24. THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND, WHICH IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LOWER AUTHORITIES OUGHT TO HAVE ALLOWED DEDUCTION OF A SU M OF RS.2,06,354 BEING PRIOR PERIOD EXPENSES DISALLOWED AS DEDUCTION IN ASSESSMENT YEAR 2000-2001 AND NOT DOING SO IS WRONG AND CONTRA RY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF THE IN COME TAX ACT, 1961 AND RULES MADE THEREUNDER. 25. GIVEN OUR FINDINGS EARLIER IN THIS ORDER THAT T HE PRIOR PERIOD EXPENSES ARE ALLOWABLE AS DEDUCTION, IT IS NOT REALLY NECESSARY TO DEAL WITH THIS GROUND OF APPEAL. THE SAME IS DISMISSED AS INFRUCTUOUS. 26. IN GROUND NO.1, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE EXPEN DITURE OF RS.48,55,283 AS REVENUE EXPENDITURE WITHOUT APPRECI ATING THE FACT THAT THE ASSESSEE CANNOT BE SAID TO HAVE GAIN A NEW AND DIFFERENT ADVANTAGE AND BENEFIT OF ENDURING NATURE BY INCURRI NG THESE EXPENSES. 27. FACTS IN BRIEF ARE THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CL AIMED AN AMOUNT OF RS.48,55,283 AS REVENUE EXPENDITURE TOWARDS SHIFTING OF VSAT. T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS INCURRED AN EXTRA ORDINARY EXPENDITURE TOWARDS VSAT SHIFTING EXPENSES FOR REALIGNMENT OF VSAT TO MULTIP LE SATELLITES DUE TO DRIFTING AND WOBBLING OF THE EXISTING SATELLITE. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER CONSIDERED THE EXPENDITURE AS ENDURING BENEFIT TO T HE ASSESSEE AND TREATED THE SAME AS CAPITAL EXPENDITURE. AGGRIEVED, THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT (A) FOLLOWING HIS DECIS ION FOR THE ASSESSMENT YEAR 1998- 99, WHEREIN, IT WAS TREATED AS REVENUE EXPENDITURE, HELD THAT VSAT SHIFTING EXPENSES 11 OF RS.48,55,283 INCURRED DURING THE YEAR ALSO BEING REVENUE ACCOUNT AND DIRECTED THE AO TO ALLOW THE SAME. AGGRIEVED BY THE STAND S O TAKEN BY THE CIT(A), THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 28. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE A COORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSMENT YEAR 1998- 99, WHEREIN, FOR THE DETAILED REASONS GIVEN, THE TRIBUNAL UPHELD THE ACTION OF TH E CIT(A) TREATING THE EXPENDITURE AS REVENUE EXPENDITURE, AS FOLLOWS: WE HAVE CONSIDERED THE ISSUE. WE ARE OF THE OPINIO N THAT THE EXPENDITURE IS REVENUE IN NATURE AS THE ASSESSEE HA S TO REALIGN THE EXISTING NETWORK WHICH IS SYNCHRONIZED WITH EARLIER SATELLITE TO A NEW SATELLITE WHICH DOES NOT GIVE ANY ENDURING ADVANTAG E. IT ALLOWED FOR SMOOTH CONDUCT OF THE EXISTING OPERATIONS WHICH ARE GENERALLY THROUGH THE SATELLITE ONLY FOR CONNECTIVITY WITH VA RIOUS NSE CENTRES AND DEALERS ALL OVER INDIA. IN FACT AS STATED BY TH E CIT(A), ASSESSEE IN A SHORT SPAN HAS TO DEPUTE TECHNICAL PERSONS TO VARI OUS CENTRES TO REALIGN THE TRANSPONDERS TO THE SATELLITE. MOST OF THE EXPENSES ARE WITH REFERENCE TO SALARY AND TRAVEL EXPENSES PERTAINING TO THE OFFICIALS/ TECHNICAL PERSONNEL AND NOT TO PURCHASE OF ANY ASSE T. IN VIEW OF THIS, WE AGREE WITH THE FINDING OF THE CIT(A) THAT THE EX PENDITURE IS REVENUE IN NATURE. THE CASE LAW RELIED UPON BY THE LEARNED D.R. ARE GIVEN IN DIFFERENT CONTEXT OF SHIFTING PHYSICAL PLA NTS EXISTING IN ONE PLACE TO ANOTHER PLACE. THIS IS NOT LIKE THAT. THIS IS A CONNECTION NETWORK OF ADVANCED NATURE IN WHICH ONLY THE TRANSP ONDERS WERE ALIGNED AND THE EXPENDITURE IS INCURRED FOR DEPUTIN G PERSONS TO DO THE JOB. THEREFORE, THE EXPENDITURE IS RIGHTLY CONSIDE RED BY THE CIT(A) AS REVENUE EXPENDITURE. WE REJECT THE GROUND. 29. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD STAN D OF THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 30. GROUND NO.1 OF THE ASSESSING OFFICER IS THUS DI SMISSED. 31. IN GROUND NO.2, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE AO TO GRANT INTEREST OF RS.1,36,61,761 U/S.36(1)(III) WITHOUT APPRECIATING THAT THE ASSESS EE ITSELF HAS 12 CAPITALIZED THE INTEREST IN THE BOOKS OF ACCOUNT AN D THE INTEREST RELATED TO THE PERIOD PRIOR TO THE USE OF THE ASSET S. 32. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST AMOUNT OF RS.1,36,61,761 RECEIVED FROM SYNDICATE BANK, ON THE LOAN OBTAINED FOR PURCHASE OF CAPITAL ASSETS AS ALLOWABLE EXPENDITURE. THE AO ALSO NOTICED THAT ALTHOUGH THE SAID AMOUNT HAS BEEN CAPITALIZED IN THE BOOKS OF AC COUNT OF THE ASSESSEE TOWARDS THE COST OF ACQUISITION OF THE CAPITAL ASSETS, THE ASSESSEE HAS CLAIMED THE AMOUNT AS REVENUE EXPENDITURE ALLOWABLE UNDER SECTION 36(1)(I II) OF THE ACT. THE ASSESSING OFFICER DISALLOWED THE CLAIM FOR DEDUCTION BECAUSE IN ITS OWN BOOKS OF ACCOUNT, THE ASSESSEE HAS CAPITALIZED THE SAID INTEREST. THE AO ALSO NOTED THAT THE ABOVE INTEREST ON BORROWED FUNDS RELATED TO THE PERIOD PRIOR TO TH E DATE OF USE OF THE SAID ASSETS. HE OBSERVED THAT AS PER EXPLANATION 8 TO SECTION 43 (1), IF ANY AMOUNT IS PAID OR PAYABLE AS INTEREST IN CONNECTION WITH ACQUISITION OF ANY ASSET, SO MUCH OF SUCH AMOUNT AS IS RELATABLE TO ANY PERIOD AFTER SUCH ASS ET IS FIRST PUT TO USE, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET. IT WAS I N THIS BACKGROUND THAT THE ASSESSING OFFICER INFERRED THAT THE AMOUNT OF INTEREST PRIOR TO THE PERIOD OF FIRST USE OF THE ASSET IS TO BE INCLUDED AS ACTUAL COST OF THE ASSET FOR THE PURPOSE OF DEPRECIATION AND TREATED THE SAME AS CAPITAL EXPENDITURE. AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO RELYING ON THE DECISI ON FOR THE ASSESSMENT YEAR 1998- 99, DIRECTED THE AO TO ALLOW THE ASSESSEES CLAIM F OR DEDUCTION OF INTEREST OF RS.1,36,61,761. AGGRIEVED, THE ASSESSING OFFICER I S IN APPEAL BEFORE US. 33. LEARNED COUNSEL FOR THE ASSESSEE PRODUCED BEFOR E US A DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL FOR THE ASSESSMEN T YEAR 1998-99 IN ITA NO.4022/M/2004 AND CONTENDED THAT THE ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT DISPUTE THE SAME. 34. WE FIND THAT THE ISSUE IN THIS GROUND IS SQUARE LY COVERED BY A COORDINATE BENCHS DECISION IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 1998-99 (SUPRA), WHEREIN THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS: 13 16. THIS ISSUE WAS ALREADY CONSIDERED BY THE ITAT IN ASSESSEES OWN CASE IN ITA 7436/MUM/2007 FOR A.Y. 1994-95 WHICH WAS FOLLOW ED IN A.Y. 1995-96. THE FINDINGS OF THE ITAT IN PARA 17 IN ORDER DATED 22.12.2008 ARE AS UNDER: - 17. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 7436/MUM/07 VIDE ORDER DATED 27 TH MARCH, 2007 FOR THE ASSESSMENT YEAR 1994-95 HAS DIRECTED THE ASSESSING OFFICER TO ALLOW THE VARIOUS EXPENSES AND DEPRECIATION FOR THE YEAR UNDE R CONSIDERATION HOLDING THAT THE BUSINESS OF THE ASSESSEE HAS BEEN SET UP F OR THE PURPOSE OF CARRYING ON THE BUSINESS. M/S. NATIONAL STOCK EXCHANGE OF IN DIA LTD. ACCORDINGLY, THE EXPENDITURE INCLUDING THE DEPRECIATION FOR THE YEAR UNDER CONSIDERATION WAS ALLOWED AS DEDUCTION. FURTHER, WE FIND THAT THE HON 'BLE SUPREME COURT IN THE CASE OF JCIT VS. UNITED PHOSPHOROUS LTD., 229 ITR 9 (SC) HAS HELD THAT THE INTEREST PAID IN RESPECT OF BORROWINGS FOR CAPITAL ASSET NOT PUT TO USE IN THE CONCERNED FINANCIAL YEAR IS AN ALLOWABLE DEDUCTION UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT. THE SAME VIEW HAS AGAIN BEEN TA KEN BY THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. ARVIND POLYCO T LTD. REPORTED IN299 ITR 12 (SC). IN VIEW OF THE DECISION OF THE HON'BLE SUP REME COURT CITED ABOVE, THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED AS REVENUE EXPENDITURE. THE GROUND RAISED BY THE ASSESSEE IS A CCORDINGLY ALLOWED AND THE GROUND RAISED BY THE REVENUE ON THIS ISSUE IS D ISMISSED. 17. SINCE THE ISSUE IS ALREADY COVERED AGAINST REVE NUE AND IN FAVOUR OF THE ASSESSEE AND SINCE THE CIT(A) FOLLOWED EARLIER YEAR S ORDER FOR ALLOWING IN THIS YEAR, WE UPHOLD THE ORDER OF THE CIT(A) IN ALL OWING IT AS REVENUE EXPENDITURE. THEREFORE, THE GROUND OF THE REVENUE I S REJECTED. 35. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH, AND WE ARE IN CONSID ERED AGREEMENT WITH THE SAME AND, ACCORDINGLY, UPHOLD THE GRIEVANCE OF THE ASSES SEE AND DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A) ALLOWING THE AMOUNT AS REVE NUE EXPENDITURE. 36. GROUND NO.2 OF THE REVENUE IS THUS DISMISSED. 37. IN THE RESULT, THE APPEALS OF THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED. ASSESSMENT YEAR: 2000-2001: 38. IN GROUND NO.1, THE ASSESSEE IS AGGRIEVED BY TH E CIT(A)S MAKING DISALLOWANCE OF LEASE PREMIUM PAID TO BMRDA AMOUNTI NG TO RS.1,17,15,935. 14 39. THIS GROUND IS SIMILAR TO GROUND NO.1 OF THE AS SESSEE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISION OF EVEN DATE FOR THE ASSESSMENT YEAR 1999- 2000, WE REJECT THE GROUND TAKEN BY THE ASSESSEE. 40. GROUND NO.1 IS THUS DISMISSED. 41. IN GROUND NO.2, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.9,58,845 OUT OF SOFTWARE EXPENSES BY TREATING THE SAME AS CAPITAL EXPENDITURE WHICH HAS BEEN SPECIFICALLY INCLUDED US.32(1)(II) AND THE REASONS ASSIGNED BY HIM FOR DO ING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE , PROVISIONS OF THE I.T.ACT, 1961 AND RULES MADE THEREUNDER. 42. FACTS IN BRIEF ARE THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLA IMED RS. 25,53,030, INCLUDING AN AMOUNT OF RS.9,58,645 TOWARDS PURCHASE OF NEW SOFTW ARE, AS DEDUCTION UNDER THE HEAD SOFTWARE EXPENSES. THE ASSESSING OFFICER TR EATED THE AMOUNT OF RS.9,58,645 AS CAPITAL EXPENDITURE, AS THE SAME PERTAINS TO CAP ITAL ASSETS OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. AGGRIEVED FURTHER, THE ASSESSEE IS IN APPEAL BEFORE US. 43. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXPENSES INCURRED TOWARDS SOFTWARE ARE FOR SMOOTH AND EFFICIENT FUNCT IONING OF BUSINESS AND NOT HAVING ANY ENDURING BENEFIT. DUE TO OVER CHANGING TECHNOLOGY IN THE MODERN DAYS, IT IS REQUIRED TO UPGRADE THE COMPUTER ON PERIODIC BASIS. THEREFORE, THE EXPENDITURE IS REVENUE EXPENDITURE. LEARNED COUNSEL RELIED ON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SOUTHERN ROADWAYS LTD(304 ITR 64) AND ALSO THE DECISION OF ITAT (SB) DELHI IN THE CASE OF AMWAY IN DIA ENTERPRISES VS DCIT(111 ITD 112). 44. HAVING HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTHERN ROADWAYS LTD 15 (SUPRA) HAS HELD THAT THE EXPENDITURE INCURRED ON REPLACEMENT ON UPS SYSTEM AND ON REPLACEMENT OF PRINTER WAS REVENUE EXPENDITURE. THE ASSESSEE HAS PURCHASED NEW SOFTWARE AMOUNTING TO RS.9,58,845 ,INTER ALIA, FOR UPDATION OF THE EXISTING SOFTWARE FOR SMOOTH FUNCTIONING OF THE COMPUTER. FROM THE ASSESSMENT ORDER, IT REVEALS THAT THE AMOUNT OF RS.9,58,845 INCLUDES PUR CHASE OF DIFFERENT TYPES OF SOFT WARES FROM NINE DIFFERENT PARTIES. THE ITAT DELHI IN THE CASE OF AMWAY INDIA ENTERPRISES (SUPRA) HAS STIPULATED SOME GUIDELINES FOR ALLOWING THE CLAIM OF THE ASSESSEE IN RESPECT OF SOFTWARE EXPENSES. THEREFOR E, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT TO DECIDE THE AFRESH BASED ON T HE GUIDELINES LAID DOWN IN AMWAY ENTERPRISES CASE (SUPRA) AND IN VIEW OF THE JUDGMEN T OF HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTHERN ROADWAYS LTD(SUPRA). 45. GROUND NO.2 IS TREATED AS ALLOWED FOR STATISTIC AL PURPOSES. 46. GROUND NO.3 OF THE ASSESSEE PERTAINS TO PRIOR P ERIOD EXPENSES OF RS.2,06,354. 46. IN VIEW OF OUR DISCUSSIONS EARLIER IN THIS ORDE R, IN RESPECT OF SIMILAR DISALLOWANCE FOR THE IMMEDIATELY PRECEDING YEAR, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 47. GROUND NO. 3 IS THUS ALLOWED. 48. GROUND NO.4 RAISED BY THE ASSESSEE IS AGAINST T HE RESTRICTION OF DISALLOWANCE U/S. 14A TO RS.6,16,686 FROM 2% OF GROSS INTEREST I NCOME TO 0.5% OF GROSS INTEREST INCOME. 49. GROUND NO.3 OF THE ASSESSING OFFICER RELATES TO RESTRICTION OF EXPENDITURE INCURRED FOR EARNING INTEREST INCOME FROM 2% TO 0.5 %. 49. SIMILAR GROUND WAS TAKEN BY THE ASSESSEE IN GRO UND NO.3 FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISION OF EVEN DATE IN PARA 17 ABOVE, WE REJECT 16 THE GROUND TAKEN BY THE ASSESSEE AND PARTLY ALLOWED THE GROUND TAKEN BY THE REVENUE. 50. GROUND NO.4 OF THE ASSESSEE IS THUS DISMISSED A ND GROUND NO.3 OF THE REVENUE IS PARTLY ALLOWED. 51. IN GROUND NO.1, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE AO TO TREAT THE EXPENDITURE OF RS.60,82,890 AS REVENUE EXPENDITURE IGNORING THE FACT THAT THE ASSESSEE HAD GAINED A NEW AND DIFFERENT ADVANTAGE AND BENEFIT OF ENDURING NATURE BY INCURRING THESE EXPENSES. 52. THIS GROUND IS SIMILAR TO GROUND NO.1 OF THE RE VENUE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISION OF EVEN DATE FOR THE ASSESSMENT YEAR 1999- 2000, IN PARAS 27 & 28, WE REJECT THE GROUND TAKEN BY THE REVENUE. 53. GROUND NO.1 OF THE REVENUE IS DISMISSED. 54. IN GROUND NO.2, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE AO TO ALLOW INTEREST OF RS.19,95,038 U/S.36(1)(III) IGNORING THE FACT THAT THE ASSESSEE ITSELF HAS CAPITALIZED THE INTEREST IN THE BOOKS OF ACCOUNT AND THE INTERE ST RELATED TO THE PERIOD PRIOR TO THE USE OF THE ASSETS. 55. THIS GROUND IS SIMILAR TO GROUND NO.2 OF THE RE VENUE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISION OF EVEN DATE, IN PARAS 33 & 34, WE REJECT THE GROUND TAKEN BY THE ASSESSING OFFICER. 56. GROUND NO.2 IS THUS DISMISSED. 57. IN THE RESULT, APPEAL OF THE ASSESSEE AND REVEN UE ARE PARTLY ALLOWED. 17 ASSESSMENT YEAR: 2002-2003: 58. IN GROUND NO.1, THE ASSESSEE IS AGGRIEVED BY TH E CIT(A)S MAKING DISALLOWANCE OF SHIFTING EXPENSES AMOUNTING TO RS.9 8,57,966 AND SIMILAR ISSUE HAS BEEN TAKEN BY THE ASSESSING OFFICER IN GROUND NO.1 OF THE REVENUES APPEAL. 59. THIS GROUND IS SIMILAR TO GROUND NO.1 OF THE RE VENUE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISION OF EVEN DATE FOR THE ASSESSMENT YEAR 1999- 2000, IN PARAS 27 & 28, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND REJECT THE GROUND TAKEN BY THE REVENUE. 60. GROUND NO.1 OF THE ASSESSEE IS THUS ALLOWED AND GROUND NO.1 OF THE REVENUE IS DISMISSED. 61. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY TH E CIT(A)S MAKING DISALLOWANCE OF LEASE PREMIUM PAID TO BMRDA AMOUNTI NG TO RS.1,25,09,468. 62. THIS GROUND IS SIMILAR TO GROUND NO.1 TAKEN BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISI ON OF EVEN DATE, WE REJECT THIS GROUND. 63. GROUND NO.2 OF THE ASSESSEE IS THUS DISMISSED. 64. GROUND NO.3 OF THE ASSESSEE PERTAINS TO CONFIRM ATION OF DISALLOWANCE OF RS.1,19,212 AS PRIOR PERIOD EXPENSES. 65. THIS GROUND IS SIMILAR TO GROUND NO.3 OF THE AS SESSEE FOR THE ASSESSMENT YEAR 2000-2001. IN VIEW OF THE REASONS SET OUT EARLIER IN THIS ORDER, WHILE DEALING WITH IDENTICAL DISALLOWANCE AND BY WAY OF A SPEAKING ORD ER, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DE LETE THE IMPUGNED DISALLOWANCE. 18 66. GROUND NO.4 OF THE ASSESSEE PERTAINS TO RESTRIC TING THE CLAIM OF DEPRECIATION IN RESPECT OF CAPITALIZED SOFTWARE TO THE EXTENT O F RS.2,05,77,981. 67. LEARNED COUNSEL FAIRLY ACCEPTS THAT THE ISSUE I S COVERED AGAINST THE ASSESSEE BY A COORDINATE BENCHS DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02. WE ACCORDINGLY DISMISS THE GROUND OF APPEA L. 68. GROUND NO.5 OF THE ASSESSEE PERTAINS TO CONFIRM ATION OF DISALLOWANCE OF RS.5,59,376 BEING 0.5% OF GROSS INTEREST INCOME. 69. GROUND NO.2 OF THE REVENUE PERTAINS TO RESTRICT ION OF EXPENDITURE CONNECTED WITH EARNING OF INTEREST INCOME EXEMPT U/S.10(15) F ROM 2% TO 0.5%. 70. THIS ISSUE IS SIMILAR TO GROUND NO.4 OF THE ASS ESSEE AND GROUND NO.3 OF THE REVENUE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISION OF EVEN DATE, WE REJECT THE GROUND TAKEN BY THE ASSESSEE AND PART LY ALLOWED THE GROUND TAKEN BY THE REVENUE. 71. GROUND NO.5 OF THE ASSESSEE IS THUS DISMISSED A ND GROUND NO.2 OF THE ASSESSEE IS PARTLY ALLOWED. 72. GROUND NO.6 OF THE ASSESSEE PERTAINS TO DISALLO WANCE OF SOFTWARE EXPENSES. 73. THIS ISSUE IS SIMILAR TO GROUND NO.1 OF THE ASS ESSEE FOR THE ASSESSMENT YEAR 2000-2001. IN LINE WITH OUR DECISION OF EVEN DATE, WE RESTORE THE ISSUE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH. 74. GROUND NO.6 OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. 19 75. IN GROUND NO. 1 OF THE ASSESSING OFFICER, THE A SSESSING OFFICER HAS RAISED A GRIEVANCE AGAINST CIT(A)S ALLOWING DEDUCTION IN RE SPECT OF VSAT SHIFTING EXPENSES OF RS 8,41,816. 76. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDERS OF THE COORDINATE BENCHES FO R THE ASSESSMENT YEAR 1998-99 AND 2001-02 . FOLLOWING THESE DECISIONS, AS ALSO OU R OWN VIEWS AND REASONING SET OUT EARLIER IN THIS ORDER WHILE DEALING WITH THE AS SESSMENT YEAR 1999-2000, WE REJECT THE GRIEVANCE OF THE ASSESSING OFFICER AND D ECLINE TO INTERFERE IN THE MATTER. 77. GROUND NO. 1 IS THUS DISMISSED. 78. AS REGARDS GROUND NO. 2, WE HAVE ALREADY DEALT WITH THE SAME ALONGWITH ASSESSEES RELATED GRIEVANCE. 79. IN GROUND NO.3, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE AO TO GRAND DEPRECIATION AS CLAIMED BY THE ASSESSEE ON VSAT EQUIPMENT INSTALLED AT THE PREMISES OF THE MEM BER BROKER AS AGAINST PROPORTIONATE DISALLOWANCES MADE BY THE AO BY INVOK ING THE PROVISIONS OF SECTION 38(2). 80. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS ALSO COVERED, IN FAVOUR OF THE ASSESSEE, BY ORDERS OF THE COORDINATE BENCHE S IN ASSESSEES OWN CASE FO THE ASSESSMENT YEARS 1997-98, 2001-02 AND 2003-04. COPI ES OF THESE ORDERS WERE PLACED ON RECORDS BEFORE US. IN THIS VIEW OF THE MA TTER, AND RESPECTFULLY FOLLOWING THE COORDINATE BENCHES, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ASPECT AS WELL AND DECLINE TO INTERFERE IN THE MATTER. 81. GROUND NO. 3 IS ALSO DISMISSED. 84. IN GROUND NO.4, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: 20 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE ADDITION MA DE TO THE ASSESSEES BOOK PROFIT U/S.115JB BY WAY OF PROVISION OF DOUBTFUL D EBT. 85. LEARNED COUNSEL SUBMITS THAT IN VIEW OF RETROSP ECTIVE AMENDMENT TO SECTION 115JB, HE DOES NOT WISH TO PRESS THIS GROUND OF APP EAL. ACCORDINGLY, GROUND IS DISMISSED AS NOT PRESSED. 86. IN THE RESULT, APPEAL FILED BY THE ASSESSEE AND REVENUE ARE PARTLY ALLOWED. ASSESSMENT YEAR: 2004-05: 87. GROUND NO.1 PERTAINS TO DISALLOWANCE OF EXPENSE S UNDER SECTION 14A OF THE INCOME TAX ACT. 88. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED 2% OF GROSS INTEREST INCOME RELYING ON THE PROVISIONS OF SECTIO N 14A OF THE I.T.ACT. ON APPEAL, THE CIT(A) DIRECTED THE AO TO RE-COMPUTE THE AMOUNT OF EXACT DISALLOWANCE U/S.14A AS PER THE METHOD PRESCRIBED IN THE NEWLY INTRODUCE D RULE 8D TO THE I.T.RULES, 1962. ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 89. BEFORE US, LEARNED REPRESENTATIVES AGREE THAT S O FAR AS THE QUESTION OF RULE 8D IS CONCERNED, THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESEE BY THE HONBLE JURISDICTIONAL HIGH COURTS JUDGEMENT IN THE CASE O F GODREJ & BOYCE MFG CO LTD VS DCIT (328 ITR 81), WHEREIN, IT HAS BEEN HELD THAT RULE 8D OF THE INCOME TAX RULES, 1962 IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y . 2008-09. THE ASSESSMENT YEAR INVOLVED IN THE PRESENT CASE IS 2004-05 AND, THEREF ORE, RULE 8D IS NOT APPLICABLE IN THE PRESENT CASE. THEREFORE, THE CIT(A) IS NOT J USTIFIED IN DIRECTING THE AO TO RE- COMPUTE THE AMOUNT OF DISALLOWANCE U/S.14A AS PER R ULE 8D. THE HONBLE HIGH COURT HAS HELD THAT A REASONABLE DISALLOWANCE FOR EXPENSES INCURRED IN EARNING DIVIDEND INCOME IS NEVERTHELESS TO BE COMPUTED BY T HE AO. WE ALSO FIND THAT THE 21 TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASS ESSMENT YEARS, ON SIMILAR SET OF FACTS, HAS RESTRICTED THE DISALLOWANCE TO 1% TO TH E EXEMPT INCOME. THEREFORE, FOLLOWING THE SAME WE DIRECT THE AO TO RESTRICT THE EXEMPT INCOME TO 1%. 90. GROUND NO.1 IS THUS PARTLY ALLOWED. 91. GROUND NO.2 OF THE ASSESSEE PERTAINS TO UPHOLDI NG OF DISALLOWANCE OF THE SHIFTING EXPENSES AMOUNTING TO RS.3,60,780 BY TREAT ING THE SAME AS CAPITAL EXPENDITURE. 91. THIS ISSUE IS SIMILAR TO GROUND NO.1 OF THE REV ENUE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISION OF EVEN DATE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE. 92. GROUND NO.2 IS THUS ALLOWED. 93. IN GROUND NO.3, THE ASSESSEE IS AGGRIEVED BY TH E CIT(A)S MAKING DISALLOWANCE OF LEASE PREMIUM PAID TO BMRDA AMOUNTI NG TO RS.1,28,37,644. 94. THIS GROUND IS SIMILAR TO GROUND NO.1 TAKEN BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISI ON OF EVEN DATE, WE REJECT THIS GROUND. 95. GROUND NO.3 OF THE ASSESSEE IS THUS DISMISSED. 96. IN GROUND NO.4, THE ASSESSEE IS AGGRIEVED BY TH E DISALLOWANCE OF RS.6,51,649 AS PRIOR PERIOD EXPENSES. 97. IN VIEW OF THE REASONS SET OUT AND DISCUSSIONS EARLIER IN THIS ORDER, WHILE DEALING WITH IDENTICAL GRIEVANCE FOR THE PRECEDING ASSESSMENT YEARS, WE UPHOLD THE 22 GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 98. IN GROUND NO.5, THE ASSESSEE IS AGGRIEVED BY TH E CIT(A)S TREATING AN AMOUNT OF RS.1,39,91,621 BEING MAINTENANCE CHARGES RECOVER ED FROM THE LICENSES AS INCOME FROM HOUSE PROPERTY. 99. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS LET OUT A PART OF ITS PREMISES TO VARIOUS PERSONS LIKE ONGC, SEBI, NATION AL SECURITIES CLEARING CORP LTD ETC, AND EARNED RENTAL INCOME FROM THE SAME. THE AS SESSING OFFICER FURTHER NOTICED THAT THE TOTAL RENTALS RECEIVED FROM THESE PERSONS INCLUDED RENT (RS 12,05,13,061), MAINTENANCE CHARGES (RS 1,39,91,621) AND MUNICIPAL TAXES (RS 2,43,72,366), BUT THE ASSESSEE HAS NOT SHOWN THE AMOUNT OF RS 1,39,91,621 IN THE COMPUTATION OF INCOME FROM HOUSE PROPERTY. THIS AMOUNT WAS INSTEAD TAKEN TO THE PROFITS AND GAINS FROM BUSINESS AND WAS SHOWN AS REDUCED FROM EXPENDITURE FOR MAINTENANCE, AND ONLY THE NET AMOUNT ( EXCESS OF EXPENSES OVER THIS RECEIPT) WAS TAKEN TO THE PROFIT AND LOSS ACCOUNT. THE STAND OF THE ASSESSEE WAS THAT THE MA INTENANCE CHARGES RECOVERED WAS NOTHING BUT A REIMBURSEMENT OF EXPENSES, AND IN FAC T A PARTIAL REIMBURSEMENT. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE S AID PLEA AND INCLUDED THE MAINTENANCE EXPENSES IN THE COMPUTATION OF INCOME F ROM HOUSE PROPERTY. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BU T WITHOUT ANY SUCCESS. ELABORATE ARGUMENTS WERE ADVANCED ON THE FACTUAL AND LEGAL AS PECTS OF THIS TREATMENT, BUT THE CIT(A) DISMISSED THE ARGUMENTS OF THE ASSESSEE BY M AKING A VERY BRIEF OBSERVATION TO THE EFFECT THAT SINCE THE ASSESSING OFFICER HAS BASED HIS CONCLUSIONS ON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF SHAMBHU INV ESTMENTS (263 ITR 143), THE ACTION OF THE ASSESSING OFFICER IS SUSTAINED. THE A SSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 100. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) HAS INDEED BEEN VER Y SUPERFICIAL IN HIS APPROACH AND 23 HAS SIMPLY BRUSHED ASIDE CONTENTIONS OF THE ASSESSE E. THE ISSUE IN APPEAL DOES NOT HAVE MUCH TO DO WITH THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF SHAMBHU INVESTMENTS (SUPRA). IT IS A CASE WHERE SEPARATE PA YMENT IS BEING MADE AND THERE IS NO DISPUTE THAT THE RENT IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. THE QUESTION REALLY IS WHETHER A SEPARATE PAYMENT IS BE ING MADE FOR OTHER SERVICES WHETHER THE SAME COULD BE TREATED AS INCOME FROM HO USE PROPERTY. IT IS ALSO TO BE EXAMINED WHETHER SUCH A PAYMENT IS TO BE EXCLUDED F OR DETERMINATION OF ANNUAL VALUE. THERE ARE DECISIONS ON THE COORDINATE BENCHE S AS ALSO HONBLE COURTS ABOVE DEALING WITH FINE POINTS REGARDING THESE ASPECTS. L EARNED COUNSEL HAS, EVEN BEFORE US, MADE THESE LEGAL SUBMISSIONS WHICH THE CIT(A) H AD NO OCCASION TO DEAL WITH BY WAY OF A SPEAKING ORDER. IN THIS VIEW OF THE MATTER , WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE CIT(A) WITH A S PECIFIC DIRECTION TO DEAL WITH ALL THE CONTENTIONS OF THE ASSESSEE BY WAY OF A SPEAKING OR DER AND IN ACCORDANCE WITH THE LAW. WE DIRECT SO. 101. GROUND NO. 5 IS THUS ALLOWED FOR STATISTICAL P URPOSES IN THE TERMS INDICATED ABOVE. 102. THE ONLY GRIEVANCE OF THE ASSESSING OFFICER IS AGAINST THE DIRECTION OF THE CIT(A) TO GRANT DEPRECIATION AS CLAIMED BY THE ASSE SSEE ON VSAT EQUIPMENT INSTALLED AT THE PREMISES OF THE MEMBER BROKER AS A GAINST PROPORTIONATE DISALLOWANCES MADE BY THE AO BY INVOKING THE PROVIS IONS OF SECTION 38(2) OF THE I.T.ACT. 103. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY ORDERS OF THE COORDINATE BENCHES I N ASSESSEES OWN CASES FOR THE ASSESSMENT YEARS 1997-98, 2001-02 AND 2003-04. RESP ECTFULLY FOLLOWING THESE DECISIONS, WE UPHOLD THE ORDER OF THE CIT(A) ON THI S ISSUE AND DECLINE TO INTERFERE IN THE MATTER. 24 104. THE APPEAL OF THE ASSESSEE IS THUS PARTLY ALLO WED AND THE APPEAL OF THE REVENUE IS DISMISSED. ASSESSMENT YEAR: 2005-06: 105. GROUND NO.1 OF THE ASSESSEE PERTAINS TO DISALL OWANCE U/S.14A OF THE ACT. 106. THIS GROUND IS SIMILAR TO GROUND NO.1 OF THE A SSESSEE FOR THE ASSESSMENT YEAR 2004-05. IN LINE WITH OUR DECISION OF EVEN DATE, W E RESTRICT THE DISALLOWANCE TO 1% OF THE EXEMPT INCOME. 107. GROUND NO.1 IS THUS PARTLY ALLOWED. 108. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED BY T HE CIT(A)S MAKING DISALLOWANCE OF LEASE PREMIUM PAID TO BMRDA AMOUNTI NG TO RS.1,28.37,644. 109. THIS GROUND IS SIMILAR TO GROUND NO.1 TAKEN BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000. IN LINE WITH OUR DECISI ON OF EVEN DATE, WE REJECT THIS GROUND. 110. GROUND NO.2 OF THE ASSESSEE IS THUS DISMISSED. 111. IN GROUND NO.3, THE ASSESSEE IS AGGRIEVED BY T HE CIT(A)S TREATING AN AMOUNT OF RS.1,62,05,179 BEING MAINTENANCE CHARGES RECOVER ED FROM THE LICENSES AS INCOME FROM HOUSE PROPERTY. 112. FOLLOWING THE DISCUSSIONS AND THE CONCLUSIONS EARLIER IN THIS ORDER, WITH RESPECT TO IDENTICAL ISSUE FOR THE IMMEDIATELY PREC EDING YEAR, WE REMIT THIS ISSUE TO THE FILE FOR ADJUDICATION DE NOVO BY WAY OF A SPEAK ING ORDER, IN ACCORDANCE WITH THE LAW AND AFTER GIVING A DUE AND FAIR OPPORTUNITY TO THE ASSESSEE. 25 113. GROUND NO. 3 IS THUS ALLOWED FOR STATISTICAL P URPOSES IN THE TERMS INDICATED ABOVE. 114. GROUND NO.4 OF THE ASSESSEE PERTAINS TO RESTRI CTING THE CLAIM OF DEPRECIATION IN RESPECT OF CAPITALIZED SOFTWARE TO THE EXTENT O F RS.1,54,52,437. 115. THE SHORT GRIEVANCE IS WITH REGARD TO THE RATE AT WHICH DEPRECIATION IS TO BE ALLOWED - @25% OR @ 60%. AS LEARNED REPRESENTATIVE S AGREE, THIS ISSUE IS ALSO COVERED, IN FAVOUR OF THE ASSESSE, BY SPECIAL BENCH DECISION IN THE CASE OF AMWAY INDIA ENTERPRISES VS DCIT (111 ITD SB 112) AND BY C OORDINATE BENCH DECISIONS IN THE CASE OF NATIONAL SECURITIES CLEARING CORP LTD. IN THIS VIEW OF THE MATTER, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON SOFTWARE @ 60%. 116. GROUND NO. 4 IS THUS ALLOWED. 117. IN GROUND NO.5, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCES: (A)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.48,20,060 ON ACCOUNT OF SOFTWARE EXPENSES BY TREATING THE SAME AS CAPITAL IN NATURE AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS A ND CIRCUMSTANCES OF THE CASE, THE PROVISIONS OF THE I.T.ACT, AND THE RULES MADE THEREUNDER. (B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN HOLDING SOFTWARE EXPENSES BEING LICENSE FE ES IN NTURE WILL FALL INTO PART B OF APPENDIX I(I.E. INTANGIBLE ASSETS) AND TH EREBY ERRED IN CONFIRMING THE ACTION OF AO IN RESTRICTING THE CLAIM OF DEPREC IATION ON COMPUTER SOFTWARE EXPENDITURE OF RS.48,20,060 AT THE RATE OF 25% AS AGAINST THE APPLICABLE RATE OF 60% AND THE REASONS ASSIGNED FOR DOING SO IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS O F I.T.ACT, 1961 AND THE RULES MADE THEREUNDER. 118. WHAT IS REALLY PRESSED BEFORE US IS THE SHORT GRIEVANCE IS WITH REGARD TO THE RATE AT WHICH DEPRECIATION IS TO BE ALLOWED - @25% OR @ 60%. AS LEARNED REPRESENTATIVES AGREE, THIS ISSUE IS ALSO COVERED, IN FAVOUR OF THE ASSESSE, BY SPECIAL 26 BENCH DECISION IN THE CASE OF AMWAY INDIA ENTERPRIS ES VS DCIT (111 ITD SB 112) AND BY COORDINATE BENCH DECISIONS IN THE CASE OF NA TIONAL SECURITIES CLEARING CORP LTD. IN THIS VIEW OF THE MATTER, WE UPHOLD THE GRIE VANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON SOFT WARE @ 60%. 119. GROUND NO.5 OF THE ASSESSEE IS ALLOWED. 120. THE ONLY GRIEVANCE OF THE ASSESSING OFFICER IS AGAINST THE DIRECTION OF THE CIT(A) TO GRANT DEPRECIATION OF RS.7,06,87,379 ON V SAT EQUIPMENT INSTALLED AT THE PREMISES OF THE MEMBER BROKER AS AGAINST PROPORTION ATE DISALLOWANCES MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 38(2) OF T HE I.T.ACT. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS COV ERED, IN FAVOUR OF THE ASSESSEE, BY ORDERS OF THE COORDINATE BENCHES IN ASSESSEES OWN CASES FOR THE ASSESSMENT YEARS 1997-98, 2001-02 AND 2003-04. RESPECTFULLY FOLLOWIN G THESE DECISIONS, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND DECLINE T O INTERFERE IN THE MATTER. 121. THE APPEAL OF THE REVENUE IS THUS DISMISSED, W HILE THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2011 SD/- (N.V.VASUDEVAN) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 30 TH DECEMBER 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-XIX 4. COMMISSIONER OF INCOME TAX, CITY-VII , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI 27