The Commissioner of Income Tax-IV, Aayakar Bhawan, vs Ballarpur Industries Ltd., First India Place,

This appeal was admitted on the following substantial

questions of law :

"[1] Whether on the facts and in the circumstances of the case, the ITAT was justified in upholding the order of the CIT [A] in deleting the addition of Rs.45,89,991/- made by the Assessing Officer on account of disallowance of payments made by the assessee to educational institutions and clubs in the vicinity of the assessee''s factory premises?

[11] Whether on the facts and in the circumstances of the case, the Hon''ble ITAT was justified in upholding the order of the CIT [A] deleting the addition of Rs.95,35,510/- made by the Assessing Officer on account of disallowance of payments made towards expenses on Enterprises Resource Planning?"

Shri Bhattad, the learned counsel appearing for the

appellant-Department, submits that the substantial question of law at

serial No.[1] is concluded against the Revenue in ITR No.4 of 1996

decided on 13-7-2017. Hence, the question of law at serial No.[1] is

answered against the appellant-Department.

So far as the substantial question of law at serial No.[2] is

concerned, Shri Bhattad for the appellant-Department has invited our

attention to para 14 of the decision of the Assessing Officer, showing

the expenses incurred on Enterprises Resource Planning (ERP) to the

tune of Rs.95,35,510/-, classified as under :

"14. Enterprises Resource Planning expenses Rs.95,35,510/- (ERP) :

(1) The assessee has incurred expenses of Rs.95,35,510/- on Enterprises Resource Planning (ERP), which consists of following expenditure.

IBM Global services India Pvt. Ltd. Towards consultancy charges. 4,40,000

Expenses incurred/allocated for the project i) Salaries & Wates 19,74,696

ii) Contb. To PF etc. 4,23,901

iii) Rent paid 5,19,800

iv) Staff welfare exps. 7,71,791

v) Insurance charges 6,701

vi) Administrative expenses 53,98,621

90,95,510

95,35,510"

The question is whether the aforesaid expenditure has to be

treated as capital expenditure or revenue expenditure. The Assessing

Officer has determined it as capital expenditure, whereas the

Commissioner of Income Tax as well as the Income Tax Appellate

Tribunal have decided it as revenue expenditure. It is not in dispute

that neither "capital expenditure" nor "revenue expenditure" are the

terms which are defined either under the Act or the Rules. It is,

therefore, for the authorities concerned to take into consideration the

nature of expenditure and decide, in the facts and circumstances of

each case, as to whether the expenditure claimed is to be considered as

capital expenditure or revenue expenditure.

Our attention is invited by Shri Dewani, the learned counsel

appearing for the respondent-assessee, to the decision of the Division

Bench of this Court in the case of Commissioner of Income Tax v.

Raychem RPG Ltd ., reported in (2012) 346 ITR 0138. The Division

Bench has concluded in para 7 of the order passed by the Tribunal as

under :

"7. When we apply this functional test suggested by the Special Bench of the Tribunal, we find that impugned software does not form part of the profit-making apparatus of the assessee and hence the same is to be disallowed as revenue expenditure. We hold so because we find that the business of t he assessee company is that of manufacturing of telecommunication and power cable accessories and trading in oil retracing system and other products and impugned software is an enterprises resources planning (ERP) package and hence iit facilitates the assessee''s trading operations or enabling the management to conduct the assessee''s business more efficiently or more profitably but it is not in the nature of profit-making apparatus. We, therefore, decide this issue also in favour of the assessee and we hold that this expenditure of Rs.20.60 lakhs is revenue expenditure. We hold so by following the judgment of the Special Bench of the Tribunal relied upon by the learned Authorised Representative of the assessee."

The Division Bench has held that no fault can be found with

the aforesaid observation of the Tribunal, holding that software

expenditure is allowable as revenue expenditure. Apparently, the

expenditure was in respect of Enterprises Resources Planning (ERP)

package. In the facts and circumstances of the case, the two

authorities below have considered the expenditure as revenue

expenditure, and we do not find any perversity in taking such a view.

Thus, the substantial question of law at serial No.[2], in our view, does

not at all arise.

In the result, the appeal is dismissed.