INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability of - Expenditure towards computerization of bank branches - Whether allowable revenue expenditure or not

Assessee was carrying on the business of banking across the country and claimed a sum as income exempt under section 10 without debiting any expenses for the same. AO held that since administrative expenses were to be incurred for earning exempt income, 50% of the exempt income had to be treated as expenses incurred to unexempt income. Thus, AO added 50% of the amount to income of assessee. Assessee debited the aforesaid amount as write-off of non-convertible debentures under 'provision and contingencies in statement of computation of income' which was disallowed by AO. Assessee had also claimed aforesaid amount as expenditure for computerization of its 125 branches which were networked with a centralized processing solution. Assessee claimed the aforesaid expenditure as revenue expenditure. AO capitalized the said expenditure and allowed depreciation at the rate of 12.5%. Held: The issue with regard to eligibility of claim for deduction of an amount as revenue expenditure incurred by assessee was dealt with by Tribunal by extracting decision of the jurisdictional High Court in CIT v. IBM India Ltd. (2013) 357 ITR 88 (Kar) : 2013 TaxPub(DT) 1945 (Karn-HC). Thereafter, the Tribunal has recorded the conclusion that the expenditure incurred by the assessee for computerization of its branches is revenue in nature. Order passed by Tribunal was cryptic in nature and suffered from vice of non-application of mind. Therefore, matter was remanded back to Tribunal to decide the question of law afresh in accordance with law.

Followed:CIT v. IBM India Ltd. (2013) 357 ITR 88 (KAR) : 2013 TaxPub(DT) 1945 (Karn-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2001-02

INCOME TAX ACT, 1961

Section 36(1)(viia)

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