MVM INDUSTRIES,BADDI vs. DCIT/ ACIT, PARWANOO

The assessee has taken three grounds of appeal out of which ground Nos. 1 and 3 are general grounds which do not call for recording of any finding.

In ground No.2, assessee has pleaded that ld.CIT (Appeals) has erred in upholding the action of the AO vide which expenditure of Rs.25,94,500/- incurred on procuring Premium CAD Software as capital expenditure and consequently, disallowance was made in the computation of deduction u/s 80IC of the Act.

With the assistance of the ld. Representative, we have gone through the record carefully. The assessee is entitled for deduction u/s 80IC @ 25% of eligible profit. It has purchased a CAD software for Rs.25,94,500/-. The AO was of the view that this expenditure is to be treated as capital expenditure. The assessee will avail benefit of this software for number of years. Accordingly, he disallowed the claim of revenue expenditure but granted depreciation on this @ 25%. The AO was of the view that since benefit of this software in this year is to be taken for less than 180 days, hence, depreciation is to be calculated at 12.5%, which is 50% of 25% granted on this asset. We find that assumptions of the AO are misplaced. The software have very short life and they require continuous upgradation. It will not grant any A.Y.2017-18 3 enduring benefit to the assessee, hence it is to be allowed as revenue expenditure. Accordingly, we set aside the findings of Revenue Authorities and direct the AO to allow expenditure of Rs.25,94,500/- as revenue expenditure. Consequently, all other benefits of computation u/s 80IC is to be granted to the assessee. In view of the above appeal of the assessee is allowed.

In the result, appeal is allowed.