INDO BRITISH GARMENTS P.LTD,NEW DELHI vs. ACIT, CIRCLE-12(1), NEW DELHI

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ITA 4393/DEL/2018Status: DisposedITAT Delhi14 November 2022AY 2014-152 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal confirmed the order of the revenue authorities, disallowing the claim for revenue expenditure. It held that since the expenses were capitalized, the assessee is eligible to claim depreciation on the software.

What were the facts?

The assessee claimed expenses related to software license for ERP software as revenue expenditure. However, the assessee had capitalized these expenses in its financial statements.

What were the issues?

Whether expenses capitalized in financial statements can be claimed as revenue expenditure, and the eligibility for depreciation on software.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI

Before: Sh. N. K. ChoudharyDr. B. R. R. Kumar

Hearing: 31.08.2022Pronounced: 14.11.2022

Heard together (2 matters)

ITA No. 2550/Del/2018
ITA No. 4393/Del/2018

Read from the judgment's own cause title. This page is filed under one of them.

Per Dr. B. R. R. Kumar, Accountant Member:

1.

These appeals have been filed by the assessee against the order of ld. CIT(A)-4, New Delhi dated 17.01.2018 and the order of ld. CIT(A)-22, New Delhi dated 28.02.2018.

2.

Since, the issue involved in both the appeals are identical, they were heard together and being adjudicated by a common order.

Disallowance of Expenditure:

3.

The solitary issue in this appeal is that the assessee has capitalized the said expenses in their financial statements and treated the same as royalty and claimed the same as revenue expenditure in the computation of income. The AO held that since the assessee itself has capitalized the said expenses in its & 4393/Del/2018 2 Indo British Garments Pvt. Ltd.

financial statements and disallowed revenue expenditure claimed. The facts revealed that the assessee entered into a software license agreement with World Fashion Exchange India Pvt. Ltd. for ERP software named WFX-ERP-II and claimed that since the payment was for the use of software, the same should be treated as royalty and allowed as revenue expenditure. We find that the same has been capitalized in the books of accounts. Since, the same has been capitalized, we confirm the order of the revenue authorities and as the payment made is for obtaining computer software, we hold that the assessee is eligible to claim depreciation as per the provisions of Income Tax Act.

4.

In the result, the appeals of the assessee are allowed. Order Pronounced in the Open Court on 14/11/2022.

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