Commissioner Of Income Tax-10 v. M/S. Aarti Industries

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (L) NO. 1285 OF 2012 Commissioner of Income Tax-10..Appellantversus M/s. Aarti Industries ..Respondent -------- Mr. Arvind Pinto for the Appellant.None for the Respondent. ............. CORAM : J.P. DEVADHAR & M.S.SANKLECHA, JJ. DATE : 24[th] January, 2013 P.C. : In this appeal by the revenue for the assessment year 2002-03, the following questions of law have been raised for our consideration. a)Whether on the facts and in the circumstances of the case and in law, the ITAT is correct in holding that the deduction under Section 80 IB does not have to be reduced from the profits of the business of the undertakingwhilecomputingthe deduction u/s 80 HHC of the Income Tax Act. b)Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the unrealized export turnover be considered for computation although the amount had not been received within the mandated period of six months. c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the company was eligible to weighted deduction u/s 35 (2AB) even though it did not fulfill the conditions as required by the said section. d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in consideringexpenditureonthe installation of software processes revenue in nature, despite the fact that this was considered as capital expenditure by the company. 2 It is stated by the Counsel for the parties that question (a),(b) and (c) were also raised in Income Tax Appeal No. 166 of 2013 in the case of same assessee for the assessment year 2001-2002. This court by an order passed today has dismissed all three questions raised in ITXA No. 166 of 2013. In view of the above, we do not entertain questions (a), (b) and (c). 3 So far as question (d) is concerned, the respondent-assessee had during the relevant assessment year incurred expenses of Rs.41.44 lacs for purchase and installation of SAP accounting package in place of Tally accounting package used by it earlier. However, the respondent-assessee found that the SAP accounting package did not work appropriately and consequently scraped the same, while reverting back to the Tally accounting package. In the above circumstances, the respondent-assessee classified the expenditure of Rs.41.44 lacs as revenue expenditure. However, the Assessing Officer while passing an assessment order under Section 143(3) of the Act for the assessment year 2002-03 disallowed the expenditure on the ground that the purchase of the SAP accounting package would lead to enduring benefit and thus, classified as capital expenditure. 4 In first appeal, the Commissioner of Income Tax (Appeal) (the CIT(A)) allowed the respondent-assessee's appeal by holding that the amount spent on SAP accounting package which was scraped was to be allowed as business expenditure. 5The revenue carried the matter in appeal to the Tribunal. The Tribunal held on facts that the expenditure incurred on SAP accounting package which did not work on purchase and had to be scraped ought to be allowed as revenue expenditure. The Tribunal held that the revenue does not dispute the fact that the assessee had incurred expenditure for purchase of SAP accounting package nor does the revenue dispute the proposition that the expenditure was for business purposes. In the aforesaid circumstances, the Tribunal held that the scraping of the SAP accounting package was due to commercial expediency and therefore allowable as a revenue expenditure. 5The revenue carried the matter in appeal to the Tribunal. The Tribunal held on facts that the expenditure incurred on SAP accounting package which did not work on purchase and had to be scraped ought to be allowed as revenue expenditure. The Tribunal held that the revenue does not dispute the fact that the assessee had incurred expenditure for purchase of SAP accounting package nor does the revenue dispute the proposition that the expenditure was for business purposes. In the aforesaid circumstances, the Tribunal held that the scraping of the SAP accounting package was due to commercial expediency and therefore allowable as a revenue expenditure. 6We note that the Tribunal has allowed the expenditure incurred on SAP accounting package as being an expenditure incurred for carrying on a business as SAP accounting package had to be scraped since it was purchased. This scraping of SAP accounting package was a business decision taken by the respondent-assessee and we find no fault with the order of the Tribunal allowing the same as revenue expenditure. In view of the above, question (d) does not arise for consideration by this court. 7 Accordingly, all four questions of law formulated by the revenue, in this appeal are dismissed. 8The appeal is dismissed with no order as to costs. (M.S. SANKLECHA, J.) (J.P.DEVADHAR, J.)