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II. Direct Taxes Case Laws:
1. Indian Aluminium Company Limited Vs. CIT, I.T.A. No. 278 of 2007, Date of Judgment: 18.03.16, High Court of Calcutta
Issue:
Whether the expenditure incurred on the development of software
can be said to be of capital nature and disallowed u/s 32 merely on the
basis of its enduring nature?
Held_No
Brief Facts:
The assessee is engaged in manufacture and production of aluminum. It
incurred an expenditure of Rs. 41,08,556/- on software development. AO
disallowed this expenditure holding it to be of capital nature, while
CIT (A) allowed the expenditure. ITAT upheld the order of AO disallowing
the expenditure. Therefore, the assessee appealed before the High Court
of Calcutta u/s 260A of the Income Tax Act.
Held:
Hon’ble High Court of Calcutta held that test of enduring nature of
expenditure cannot be applied without taking into account the facts and
circumstances of the case as there may be cases where expenditure, even
if incurred for obtaining advantage of enduring benefit, may,
nonetheless, be on revenue account and the test of enduring benefit may
break down. Moreover the software developed by the company is the
application software used for lithography and study of vermiculture of
bio-degradable wastes and is subject to advancements and changes at a
lightning pace. Further, the developed software neither adds to the
capital of the company nor leads to the creation of new asset. Hence,
the debated expenditure will be allowed as revenue expenditure for the
AY 1997-98 as per section 32 of the Income Tax Act.
The appeal of the assessee is allowed.
(Please click here for judgment)
2. M/s DMA Investment Pvt. Ltd. Vs. DCIT, I.T.A. Nos. 5688-5691/Del/2013, Date of Judgment: 05.04.2016, ITAT - DELHI
Issue:
Whether any additions can be made to the assessed income of the
assessee u/s 153A without any incriminating material found during the
search and seizure operation?
Held_No
Brief Facts:
A search and seizure operation was carried out on the premises of the
assessee company M/s DMA Investments Pvt. Ltd. Subsequently notice u/s
153A(1) was issued to the assessee, in response of which assessee filed a
return declaring NIL income. Thereafter, AO completed the assessment at
Rs. 50,000/- for making disallowance u/s 14A. CIT(A) partly allowed the
appeal of the assessee. Aggrieved by such order, assessee is in appeal
before the ITAT.
Held:
As per section 153A, assessment cannot be made without any relevance
or nexus with the seized material. Only one assessment shall be made
separately for each AY on the basis of the findings of the search and
any other material existing or brought on the record of the AO. In
absence of any incriminating material, the completed assessment can be
reiterated and the abated assessment or reassessment can be made.
Completed assessments can be interfered with by the AO while making the
assessment under Section 153A only on the basis of some incriminating
material unearthed during the course of search. If no incriminating
material was unearthed during the search, no additions could have been
made to the income already assessed.
The appeal of the assessee is allowed.
(Please click here for judgment)
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