The Principal Commissioner Of Income Tax-1 v. M/S Acalmar Oils And Fats Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 290 of 2020 ==========================================================THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 Versus M/S ACALMAR OILS AND FATS LTD. ==========================================================Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 25/01/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260 A of the Income Tax Act, 1961 (for short “The Act, 1960”) Income Tax Act, 1961 (for short “The Act, 1960”) is at the instance of the Revenue and is directed against the order passed by the Income directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench “D”, dated 21.02.2020 in the CC No.210/AHD/2015 for the A.Y. 2008-09.dated 21.02.2020 in the CC No.210/AHD/2015 for the A.Y. 2008-09. 2. The Revenue has proposed the following solitary question of law for consideration of this Court :-question of law for consideration of this Court :- “Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of Rs.7,61,800/- made on account of software charges being capital expenditure ?and on facts in deleting the disallowance of Rs.7,61,800/- made on account of software charges being capital expenditure ? 3. We have heard Mr. Manish Bhatt, the learned Sr. Counsel appearing for the Revenue and Mr. B.S.Soparkar, the learned counsel appearing for B.S.Soparkar, the learned counsel appearing for the assessee on caveat. 4. As regards the question as proposed by the Revenue, the findings recorded by the Tribunal reads thus : 43.During the course of appellate proceedings before us, the Id. Counsel has placed reliance on the decision of N.J. India Invest Ltd. 215 taxman.com 78 (Guj), Oriental Bank of Commerce 256 taxman.com24 (Del). The Id. counsel has submitted that the said expenditure was revenue in nature and the Id. CIT(A) was not justified in upholding that the said expenditure was in the nature of capital expenditure. On the other hand, the Id. D.R. has supported the order of lower authorities. We have gone through the jurisdictional pronouncement referred by the ld. counsel. It is noticed that Hon’ble Gujarat High Court in the case of NJ India Invest Ltd. supra has held that Software development and upgradation would includedataadministrationservices, information and technology Support services, software asset management services, etc., which was in nature of maintenance, back up and Support service to existing hardware and software and did not give any fresh or new benefit. Further we have seen that Hon'ble Gujarat High Court in the case of Oriental Bank of Commerce vide 93 taxman.com 432 has allowed the deduction on software expenses u/s. 37(1) of the act holding that use of software did not confer any enduring right of assessee. Moreover the assessee’s objective was not to augment software business rather it used computer software as a tool to maximize its purpose and streamline its efficiency. In the light of the above facts, and jurisdictional pronouncement as cited above the Cross Objection of the assessee is allowed.” 5. Thus, it appears from the above that the Tribunal relied on the decision of this High Court in the case of N.J. India Invest Ltd. (supra), 215 taxman.com 78 (Guj), in taking the view that the Software development and C/TAXAP/290/2020 ORDER upgradationwouldincludethedata administrationservices,informationand technology Support services, software asset management services, etc., which could be said 5. Thus, it appears from the above that the Tribunal relied on the decision of this High Court in the case of N.J. India Invest Ltd. (supra), 215 taxman.com 78 (Guj), in taking the view that the Software development and C/TAXAP/290/2020 ORDER upgradationwouldincludethedata administrationservices,informationand technology Support services, software asset management services, etc., which could be said to be in nature of maintenance, back up and Support service. The Tribunal has also placed reliance on the decision of this Court in the case of Oriental Bank of Commerce vide 93 Taxman.com 432, wherein, the High Court allowed the deduction on software expenses u/s. 37(1) of the Act taking the view that the software does not confer any enduring right to the assessee. 6. Having regard to the aforesaid findings, we are of the view that, no error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. Even otherwise, we take notice of the fact that the depreciation granted to the assessee on the allowance comes to an around Rs.7 lacs. The appeal is accordingly dismissed. (J. B. PARDIWALA, J) SUCHIT (ILESH J. VORA,J)