ACIT Vs First Advantage Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai held that software license expenditure incurred for carrying out the routine operations is revenue in nature. Hence, disallowing the same by treating it as capital unjustified. Thus, disallowance deleted.
Facts- Assessee is a private limited company engaged in the business of employment background screening services. For the year under consideration, the assessee filed its return of income on 29/11/2017 declaring a total income of Rs. 25,01,35,460 under the normal provisions and book profit u/s. 115JB of the Act at Rs.8,10,93,284. The return filed by the assessee was selected for complete scrutiny and statutory notices u/s. 143(2) as well as section 142(1) of the Act were issued and served on the assessee.
AO vide order dated 27/12/2019 passed u/s. 143(3) of the Act assessed the total income of the assessee at Rs.36,72,33,727 under normal provisions of the Act, inter-alia, after disallowing software license expenses treating the same as capital in nature, and making disallowance u/s. 40(a)(ia) of the Act.
CIT(A) granted relief to the assessee and deleted the aforesaid disallowed. Being aggrieved, the Revenue has preferred the present appeal.
Conclusion- Held that in DCIT v/s M/s First Advantage Private Limited, in ITA No. 6659/Mum./2013, for the assessment year 2010-11, the coordinate bench of the Tribunal vide order dated 30/06/2015 held the software license expenditure on similar products to be revenue in nature.
