Bombay High Court
The Commissioner Of Income Tax-Iv vs Ballarpur Industries Ltd on 1 February, 2018
Author: R.K. Deshpande
Bench: R.K. Deshpande, M.G. Giratkar
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itl175.07.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
Income Tax Appeal No.175 of 2007
The Commissioner of Income Tax-IV,
Aayakar Bhawan,
Nagpur. ... Appellant
Versus
Ballarpur Industries Ltd.,
First India Place,
Tower 'C', Mehrauli-Gurgaon Road,
Gurgaon (Haryana). ...Respondent
Shri S.N. Bhattad and Shri A.J. Bhoot, Advocates for Appellant.
Shri K.P. Dewani, Advocate for Respondent.
CORAM : R.K. DESHPANDE & M.G. GIRATKAR, JJ.
DATE : 1ST FEBRUARY, 2018
ORAL JUDGMENT (PER R.K. DESHPANDE, J.) :
1. This appeal was admitted on the following substantial questions of law :
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itl175.07.odt "[1] Whether on the facts and in the circumstances of the case, the ITAT was justified in upholding the order of the CIT [A] in deleting the addition of Rs.45,89,991/- made by the Assessing Officer on account of disallowance of payments made by the assessee to educational institutions and clubs in the vicinity of the assessee's factory premises?
[11] Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was justified in upholding the order of the CIT [A] deleting the addition of Rs.95,35,510/- made by the Assessing Officer on account of disallowance of payments made towards expenses on Enterprises Resource Planning?"
2. Shri Bhattad, the learned counsel appearing for the appellant-Department, submits that the substantial question of law at serial No.[1] is concluded against the Revenue in ITR No.4 of 1996 decided on 13-7-2017. Hence, the question of law at serial No.[1] is answered against the appellant-Department.
3. So far as the substantial question of law at serial No.[2] is concerned, Shri Bhattad for the appellant-Department has invited our attention to para 14 of the decision of the Assessing Officer, showing ::: Uploaded on - 02/02/2018 ::: Downloaded on - 04/02/2018 01:52:56 ::: 3 itl175.07.odt the expenses incurred on Enterprises Resource Planning (ERP) to the tune of Rs.95,35,510/-, classified as under :
"14. Enterprises Resource Planning expenses Rs.95,35,510/- (ERP) :
(1) The assessee has incurred expenses of Rs.95,35,510/- on Enterprises Resource Planning (ERP), which consists of following expenditure.
1. IBM Global services India Pvt. Ltd.
Towards consultancy charges. 4,40,000
2. Expenses incurred/allocated for
the project
i) Salaries & Wates 19,74,696
ii) Contb. To PF etc. 4,23,901
iii) Rent paid 5,19,800
iv) Staff welfare exps. 7,71,791
v) Insurance charges 6,701
vi) Administrative expenses 53,98,621 90,95,510
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95,35,510"
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4. The question is whether the aforesaid expenditure has to be treated as capital expenditure or revenue expenditure. The Assessing Officer has determined it as capital expenditure, whereas the Commissioner of Income Tax as well as the Income Tax Appellate Tribunal have decided it as revenue expenditure. It is not in dispute that neither "capital expenditure" nor "revenue expenditure" are the terms which are defined either under the Act or the Rules. It is, therefore, for the authorities concerned to take into consideration the nature of expenditure and decide, in the facts and circumstances of each case, as to whether the expenditure claimed is to be considered as capital expenditure or revenue expenditure.
5. Our attention is invited by Shri Dewani, the learned counsel appearing for the respondent-assessee, to the decision of the Division Bench of this Court in the case of Commissioner of Income Tax v. Raychem RPG Ltd., reported in (2012) 346 ITR 0138. The Division Bench has concluded in para 7 of the order passed by the Tribunal as under :
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itl175.07.odt "7. When we apply this functional test suggested by the Special Bench of the Tribunal, we find that impugned software does not form part of the profit-making apparatus of the assessee and hence the same is to be disallowed as revenue expenditure.
We hold so because we find that the business of t he assessee company is that of manufacturing of telecommunication and power cable accessories and trading in oil retracing system and other products and impugned software is an enterprises resources planning (ERP) package and hence iit facilitates the assessee's trading operations or enabling the management to conduct the assessee's business more efficiently or more profitably but it is not in the nature of profit-making apparatus. We, therefore, decide this issue also in favour of the assessee and we hold that this expenditure of Rs.20.60 lakhs is revenue expenditure. We hold so by following the judgment of the Special Bench of the Tribunal relied upon by the learned Authorised Representative of the assessee."
The Division Bench has held that no fault can be found with the aforesaid observation of the Tribunal, holding that software expenditure is allowable as revenue expenditure. Apparently, the expenditure was in respect of Enterprises Resources Planning (ERP) package. In the facts and circumstances of the case, the two authorities below have considered the expenditure as revenue ::: Uploaded on - 02/02/2018 ::: Downloaded on - 04/02/2018 01:52:56 ::: 6 itl175.07.odt expenditure, and we do not find any perversity in taking such a view. Thus, the substantial question of law at serial No.[2], in our view, does not at all arise.
6. In the result, the appeal is dismissed.
(M.G. Giratkar, J.) (R.K. Deshpande, J.) LANJEWAR ::: Uploaded on - 02/02/2018 ::: Downloaded on - 04/02/2018 01:52:56 :::