Commissioner of Income-tax, Trichy v. The Karur Vysya Bank Ltd
[Citation -2014-LL-0917-86]
| Citation | 2014-LL-0917-86 |
|---|---|
| Appellant Name | Commissioner of Income-tax, Trichy |
| Respondent Name | The Karur Vysya Bank Ltd. |
| Court | HIGH COURT OF MADRAS |
| Relevant Act | Income-tax |
| Date of Order | 17/09/2014 |
| Assessment Year | 2002-03 |
| Judgment | View Judgment |
| Keyword Tags | plant and machinery • revenue expenditure • capital expenditure • software packages • capital asset |
| Bot Summary: | For Appellant : Mr.J.Narayanasamy Standing counsel for Income Tax For Respondent: Mr.N.Quadir Hoseyn COMMON JUDGMENT The above Tax Case are filed by the Revenue as against the order of the Income Tax Appellate Tribunal for the 2 assessment year 2002-03 raising the following substantial question of law: Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure on software is not capital and thereby allowing the assessee's claim for deduction of revenue expenditure 2. The assessee/respondent in both the appeals, which is a bank, claimed the cost of software as Revenue Expenditure in the return of income. The Assessing Officer rejected the said claim and treated the same as capital expenditure holding that though the software designed changes year after year, but it was durable for at least four years and once, it was designed, the assessee could use it for the next three years and therefore, the cost of software has to be treated as Capital expenditure in the nature of acquisition of Plant and Machinery under Section 43(3) of the Income Tax Act. Both the learned standing counsel appearing for the Revenue and the learned counsel appearing for the assessee fairly submits that issue involved in the above appeals is covered by a decision of this Court reported in 304 ITR 84, wherein this Court, while considering the issue whether the expenditure incurred on the software package is a revenue expenditure, held as follows: For the assessment years 1995-96 to 1997-98, the assessee claimed the expenditure incurred on software packages as revenue expenditure, but the same was disallowed by the Revenue. The expenses incurred by installation of software packages in the present computer world, which revolves on the modern communication technology, enables the assessee to carry on its business operations effectively, efficiently, smoothly and profitably. The payment for such application software, though there is an enduring benefit, does not result in acquisition of any capital asset and it merely enhances the productivity or efficiency and hence, has to be treated as revenue expenditure. In view of the above, we hold that the Tribunal had rightly held that the expenditure incurred on software packages as a revenue expenditure. |