Income Tax Appellate Tribunal - Bangalore
M/S Axa Group Solutions Private ... vs Dcit, Bangalore on 27 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH : BANGALORE
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
ITA No.136/Bang/2016
Assessment year : 2009-10
M/s. Capgemini Solutions Pvt. Vs. Deputy Commissioner
Ltd., (earlier known as M/s AXA of Income Tax,
Group Solutions Private Limited), Circle 1(1)(1),
2nd & 3rd Floor, MFAR Manyata Bengaluru.
Tech Park, Phase - IV, Green
Heart, Rachenahalli Village,
Nagawara, Bengaluru-560045.
PAN : AAFCA2750H
APPELLANT RESPONDENT
Assessee by : Shri. T. Suryanarayana,
Advocate
Revenue by : Smt. Padma Meenakshi, JCIT
Date of hearing : 16.11.2017
Date of Pronouncement : 27.11.2017
ORDER
Per Sunil Kumar Yadav, Judicial Member
This appeal is preferred by the assessee against the order of CIT(A), interalia, on the following grounds:
1. That the order of the learned Commissioner of Income-tax (Apeals) ['CIT(A)'] in so far as it is prejudicial to the interest of the appellant is bad in law and therefore not sustainable.
2. The Ld. CIT(A) erred in upholding the order of the learned assessing Officer in disallowing the expenditure incurred by the appellant towards software maintenance/services and minor portion towards application software on the basis that it is capital in nature.
3. Without prejudice to the above, the Ld. CIT(A) erred in not considering such adjustment in arriving at the profits from business eligible for a deduction under section 10A of the Act.
4. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.ITA No. 136/Bang/2016 Page 2 of 3
2. Though various grounds are raised but they all relate to the nature of expenditure incurred by the assessee towards software maintenance/service. According to the assessee, it has incurred the expenditure towards software maintenance/services and support. Therefore it is of revenue in nature. Whereas the AO has made out the case that the assessee has not only rendered its services of maintenance but also acquired the software. He accordingly held the entire expenditure to be in capital in nature and allowed the depreciation thereon.
3. Assessee preferred an appeal before the CIT but did not find favour with him. Now the assessee is before us and during the course of hearing, the learned counsel for the assessee invited our attention to certain sample of invoice with the submission that the expenditure were incurred towards the software maintenance/services. Whereas the learned DR emphatically argued that it was not only for software maintenance/services but it was acquisition of software, therefore the Revenue authorities have rightly treated it to be capital expenditure.
4. Having carefully examined the orders of the authorities below and documents placed on record, in the light of rival submissions, we find that assessee has incurred an expenditure relating to software. The assessee has filed few samples of invoices of small amount where from it can be deduced that expenditure must have been incurred for software maintenance/services but details of major expenditures are not available. During the course of hearing, both the parties have agreed that let the matter be sent back to the AO for verification of the entire expenditure and if any expenditures are incurred towards the acquisition of the software, the same be treated to be capital expenditure and the expenditure incurred for maintenance/service may be treated as revenue expenditure.
6. Having carefully examined the orders of the lower authorities in the light of rival submissions, we are of the view that since the issue was not properly examined and the lower authorities have taken a different view without examining the evidences on record, it requires a proper adjudication by the AO. We accordingly set aside the order of the CIT(A) and restore the matter to the AO to verify the entire expenditure incurred towards software and if he comes to the conclusion that certain part of expenditure was incurred for ITA No. 136/Bang/2016 Page 3 of 3 acquisition of software, the same may be treated as capital expenditure and the expenditure relating to software maintenance/services may be treated to be revenue expenditure. Accordingly, matter is restored to the file of the AO to readjudicate the issue in terms indicated above after affording opportunity of being heard to the assessee.
7. In the result, appeal of the assessee is allowed for statistical purposes.
Pronounced in the open court on 27th November, 2017.
Sd/- Sd/-
(INTURI RAMA RAO) (SUNIL KUMAR YADAV)
Accountant Member Judicial Member
Place : Bangalore
Dated : 27/11/2017
/NS/*
Copy to :
1 Appellant 2 Respondent
3 CIT(A)-II Bangalore 4 CIT
5 DR, ITAT, Bangalore. 6 Guard file
By order
Sr. Private Secretary,
ITAT, Bangalore.