Commissioner Of Income Taxtrichy v. The Karur Vysya Bank Ltd.,Erode Road, Karur - 639 002

In the High Court of Judicature at Madras Dated: 17.09.2014 Coram The Honourable Mr.JUSTICE R.SUDHAKARandThe Honourable Mr.JUSTICE G.M.AKBAR ALI Tax Case (Appeal) Nos.805 and 806 of 2013& M.P.Nos.1 and 1 of 2013 Commissioner of Income taxTrichy .... Appellant in both T.C.(A)s vs. The Karur Vysya Bank Ltd.,Erode Road, Karur - 639 002. .... Respondent in both T.C.(A)s APPEALs under Section 260 A of the Income Tax Act against theorder dated 30.1.2013 made in I.T.A.Nos.905 & 906/Mds/2010 on thefile of the Income Tax Appellate Tribunal, Madras "A" Bench, againstthe Order passed by the Commissioner of Income Tax [Appeals]Tiruchirapalli dated 23.3.2010 in ITA.No.310/07-08 & 254/04-05 forthe assessment year 2002-2003 against the order passed by theAssistant Commissioner of Income Tax, Company Circle I,Tiruchirapalidated 18.8.2004 & 31.12.2007 in PAN/GIR.No.AAA CT 3373 J for theassessment year 2002-2003, Chennai. For Appellant : Mr.J.NarayanasamyStanding counsel for Income Tax For Respondent : Mr.N.Quadir Hoseyn C O M M O N J U D G M E N T(Delivered by R.SUDHAKAR,J.) The above Tax Case (Appeals) are filed by the Revenue as againstthe order of the Income Tax Appellate Tribunal for the assessmentyear 2002-03 raising the following substantial question of law:"Whether on the facts and in the circumstances of thecase, the Tribunal was right in holding that theexpenditure on software is not capital and therebyallowing the assessee's claim for deduction of revenueexpenditure?" https://hcservices.ecourts.gov.in/hcservices/ 2. The assessee/respondent in both the appeals, which is a bank,claimed the cost of software as Revenue Expenditure in the return ofincome. The Assessing Officer rejected the said claim and treatedthe same as capital expenditure holding that though the softwaredesigned changes year after year, but it was durable for at leastfour years and once, it was designed, the assessee could use it forthe next three years and therefore, the cost of software has to betreated as Capital expenditure in the nature of acquisition of Plantand Machinery under Section 43(3) of the Income Tax Act. Aggrievedby the order of the Assessing Officer, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals), who by following thedecision of this Court reported in (2008) 304 ITR 84 (Commissioner ofIncome Tax V. Southern Roadways Ltd.) granted the relief in favour ofthe assessee. Aggrieved by the same, the Revenue preferred an appealbefore the Tribunal, which confirmed the order of the Commissioner ofIncome Tax (Appeals). Aggrieved by the same, the Revenue is beforethis Court raising the substantial question of law referred supra. 3. Both the learned standing counsel appearing for the Revenueand the learned counsel appearing for the assessee fairly submitsthat issue involved in the above appeals is covered by a decision ofthis Court reported in (2008) 304 ITR 84 (Commissioner of Income TaxV. Southern Roadways Ltd.), wherein this Court, while considering theissue whether the expenditure incurred on the software package is arevenue expenditure, held as follows: 3. Both the learned standing counsel appearing for the Revenueand the learned counsel appearing for the assessee fairly submitsthat issue involved in the above appeals is covered by a decision ofthis Court reported in (2008) 304 ITR 84 (Commissioner of Income TaxV. Southern Roadways Ltd.), wherein this Court, while considering theissue whether the expenditure incurred on the software package is arevenue expenditure, held as follows: "For the assessment years 1995-96 to 1997-98, theassessee claimed the expenditure incurred on softwarepackages as revenue expenditure, but the same wasdisallowed by the Revenue. The concept of enduringbenefit must respond to the changing economic realitiesof the business. The expenses incurred by installationof software packages in the present computer world,which revolves on the modern communication technology,enables the assessee to carry on its business operationseffectively, efficiently, smoothly and profitably.However, such software itself does not work on astand alone basis. It has to be fitted to a computersystem to work. Such software enhances the efficiency ofthe operation. It is an aid in the manufacturing processrather than the tool itself. Therefore, the payment forsuch application software, though there is an enduringbenefit, does not result in acquisition of any capitalasset and it merely enhances the productivity orefficiency and hence, has to be treated as revenueexpenditure. In view of the above, we hold that theTribunal had rightly held that the expenditure incurredon software packages as a revenue expenditure." 4. Following the above-said decision of this Court, we find noquestion of law much less substantial question of law that arises forour consideration in these appeals. Accordingly, the tax case appealsstand dismissed. Consequently, M. P. Nos. 1 and 1 of 2013 are closed. Sd/-Asst. Registrar[cs.iv]Dt/-09/10/2014. /true copy/Sub Asst. Registrar.slTo1. The Income Tax Appellate Tribunal, Madras "A" Bench, Chennai.2. The Commissioner of Income Tax (Appeals), Tiruchirappalli.3. The Assistant Commissioner of Income Tax, Company Circle - I, Trichy.4. The Commissioner of Income Tax, Trichy.2 CCs To Mr.J.Narayanasamy, Advocate SR NO.449701 CC To Mr.N.Quadir Hoseyan, Advocate SR NO.44670T.C.(A) Nos.805 and 806 of 2013msm[co]gp/9.10