INCOME TAX ACT, 1961

Section 37(1)

Capital or revenue expenditure - Software and EDP expenses - Allowed as revenue expenditure in earlier year by Tribunal -

During the course of assessment proceedings, the assessee submitted before the AO that it had debited EDP expenses and included it in 'Miscellaneous Expenses'. The AO following the judgment of the Rajasthan High Court in the case of CIT v. Arawali Constructions (P) Ltd. (2003) 259 ITR 30 (Raj-HC) : 2003 TaxPub(DT) 316 (Raj-HC) disallowed the said EDP expenses. CIT(A) agreed with the findings of the AO and dismissed the appeal of the assessee. Held: Assessee-company was engaged in the business of manufacturing, trading and marketing of industrial and automatic lubricants. EDP expenses was not a part of profit making apparatus of the assessee-company. Following the decision of the Bombay High Court in Raychem RPG Ltd., the AO was directed to treat the EDP expenses as revenue expenditure. ITAT had allowed the claim of the assessee on the basis of the decision of Bombay High Court in the case of Raychem RPG Ltd. (2012) 346 ITR 138 (Bom-HC) : 2012 TaxPub(DT) 0716 (Bom-HC). Since the claim of the assessee had duly been covered by the decision of the ITAT in the assessee's own case for the assessment year 2008-09 in ITA. No. 1271/M/2013, dated 20-12-2017, therefore, in the said circumstances, the finding of the CIT(A) on this issue was set aside and allowed the claim of the assessee.

Followed:ITAT in the assessee's own case in ITA No. 1271/M/2013, dated 20-12-2017 and CIT v. Raychem RPG Ltd. (2012) 346 ITR 138 (Bom-HC) : 2012 TaxPub(DT) 716 (Bom-HC).