Case Law Details
PCIT Vs ST Microelectronics Pvt. Ltd. (Delhi High Court)
Background: The case involves an appeal by the Revenue seeking to challenge the order of the Income Tax Appellate Tribunal (ITAT) dated 28.09.2020 concerning Assessment Year (AY) 2008-09. The appeal primarily revolves around the treatment of expenses incurred by ST Microelectronics Pvt. Ltd. in purchasing licensed software and on employee training.
Delay Condonation: The appellant/revenue moved an application for condonation of a 460-day delay in re-filing the appeal. The respondent/assessee did not object to the condonation, and the court allowed the delay.
Questions of Law Proposed: The appellant proposed several questions of law for consideration by the court, primarily related to the treatment of certain companies as functionally non-comparable by the ITAT. However, the court noted that questions (i) to (v) were covered against the appellant by a previous decision in the matter of Principal Commissioner of Income Tax vs. ST Microelectronics Private Limited.
Software License Expenses: The main contention of the appellant was that expenses incurred by the respondent/assessee for purchasing software licenses should be treated as expenses on the ‘capital’ account. The appellant argued that the expenses resulted in an ‘enduring benefit’ to the assessee and, therefore, should be considered as ‘capital’ expenditure. However, the Tribunal had ruled in favor of the assessee, stating that the expenses were revenue in nature as the software licenses failed the test of ownership.
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