MODI MUNDIPHARMA PVT. LTD.,NEW DELHI vs. ADDL. CIT, NEW DELHI

Date of Hearing : 24.10.2018 Date of Order : 25.10.2018

O R D E R

PER KULDIP SINGH, JUDICIAL MEMBER :

“On the facts of and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) - VI, New Delhi ['CIT(A)'] has:

1. erred in passing an order which is bad in law by confirming the disallowance made by the Ld. AO amounting to Rs. 1,35,954 on account of repairs and maintenance expenses considering them as capital expenditure providing enduring benefits. 1.1 erred in not appreciating that the said expenditure was incurred on purchase of MS Office 2007 software which is used on computer systems installed in the office of the appellant and need to be upgraded on a regular basis with the change in the technology and hence, do not provide any enduring benefits to the appellant. 1.2 Without prejudice to the above, the Ld. CIT(A) even after holding that MS Office 2007 software is covered by the head 'Computers including computer software' as per Appendix - I to Income Tax Rules, 1962 has erred in not allowing depreciation on MS Office 2007 software at higher rates (60%) as applicable to the said head as per the Appendix - I to Income Tax Rules, 1962. 2. erred in passing an order and confirming a disallowance made in the assessment order both of which are perverse.”

Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

“5. This Court is cognizant at the very outset of the fact that the nature of the articles acquired are licenses. They do not confer any enduring right – much less a permanent right as in the nature of acquisition of property. These copyright licenses are used for the duration, spelt out by the licensor/intellectual property owner. Furthermore and importantly, the bank’s objective is not to carry on software business, rather it uses the computer software as a tool to maximise its performance and streamline its efficiency. In Asahi India Safety Glass Ltd. (supra) the Division Bench of this Court after considering the previous judgments including Alembic Chemicals Works (supra) enunciated the correct test and principles as follows: “It is important to bear in mind that what is required to be seen is not whether the advantage obtained lasts forever but whether the expense incurred does away with a recurring expense(s) defrayed towards running a business as against an expense undertaken for the benefit of the business as a whole. In other words, the expenditure which is incurred, which enables the profit-making structure to work more efficiently leaving the source of the profit-making structure untouched, would, in our view, be an expense in the nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably; leaving the fixed assets untouched would be an expenditure in the nature of revenue expenditure even though the advantage would thus collapse in such like cases. It would, in our view, be only truer in cases which deal with technology and software application & connected appeals which do not in any manner supplant the source of income or added to the fixed capital of the assessee.”