V.G. Sabhahit, J.@mdashThis appeal is filed by the Revenue being aggrieved by the order passed by the income tax Appellate Tribunal (hereinafter called as "the ITAT") in I. T A. No. 113.0/Bang/2003, dated April 7, 2006, wherein the appeal filed by the Revenue has been dismissed and the appeal filed by the assessee in I.T.A. No. 1022 of 2003 is allowed in part confirming the order passed by the Commissioner of income tax (Appeals). The material facts leading up to this appeal are as under:
The assessee is an exporter of software and filed return of income on November 27, 1998, showing the return of income at Rs. 3,33,94,389 which was processed u/s 143(1) of the income tax Act, 1961 (hereinafter called as "the Act"), on August 23, 2000, accepting the income returned. After scrutiny of the assessment made on August 23, 2000, a notice was issued u/s 143(2) of the Act. In response to which the assessee furnished details. The notice pertains to the payment of Rs. 1,93,521 to clubs to acquire corporate membership/the expenditure incurred in a sum of Rs. 8,74,278 towards the ISO certification and the amount spent towards repairs and maintenance of leased premises in a sum of Rs. 33,40,422, which was proposed as revenue expenditure by the assessee. Further, it was also proposed by the assessee that the fluctuation in the value of currency regarding actual amount realised by the assessee could not have been taken as benefit of the assessee.
2. The Assessing Officer, after considering the contentions raised by the assessee, held that the expenditure incurred towards acquisition of corporate membership in the clubs, amount spent towards obtaining the ISO certification and the amount spent towards repair and maintenance of the leased premises ought to be treated as capital expenditure and not as revenue expenditure as claimed by the assessee. Further, he held that the contention of the assessee that he should have the benefit of fluctuation in the value of currency in respect of software export, cannot be accepted. Accordingly, the Assessing Officer passed the order of assessment. Being aggrieved by the said order an appeal was preferred by the assessee.
3. The appellate authority by order dated July 4, 2003, allowed the appeal and held that the expenses incurred towards acquisition of corporate membership in clubs, expenses incurred towards obtaining the ISO certification and the amount spent towards repairs and maintenance on the leased premises should be treated as revenue expenditure and not as capital expenditure. It also upheld the contention of the assessee that the assessee is entitled to have the benefit of fluctuation in the value of rupee in respect of the value of expert of software made by him. Accordingly, allowed the appeal. Being aggrieved by the same the Revenue preferred an appeal and the assessee also has preferred an appeal regarding the other findings, which are not the subject-matter of this appeal. The income tax Appellate Tribunal by a common order dismissed the appeal filed by the Revenue. Being aggrieved by the same, this appeal is filed raising the following substantial questions of law for consideration of this court, which are as under:
(1) Whether the appellate authorities were correct in holding that the corporate membership fee paid by the assessee to acquire membership of a club is a revenue expense and not a capital expense as held by the Assessing Officer ?
(2) Whether the appellate authorities were correct in holding that the amount paid to obtain the ISO certification useful for a number of years in international business is a revenue expense and not a capital expense as held by the Assessing Officer ?
(3) Whether the appellate authorities were correct in holding that the expenditure incurred towards repairs and maintenance of leased premises of Rs. 33,40,422 is a revenue expenditure and not a capital expenditure and that the assessee would be entitled to depreciation u/s 32(1) Explanation 1 as held by the Assessing Officer ?
(4) Whether the appellate authorities were correct in holding that the exchange rate fluctuation should be taken into consideration for computing section 80HHE deduction by reversing the finding of the Assessing Officer that as per Explanation C to section 80HHE of the Act only actual amount of foreign exchange received in India can be included in the export, turnover for computation of deduction u/s 80HHE of the Act ?
4. We have heard the learned counsel appearing for the parties. The substantial questions of law 1 to 3 are no more res integra, as in respect of the same assessee the expenses incurred towards obtaining corporate membership, the amount spent towards obtaining the ISO certificate and the expenses incurred towards repair and maintenance of leased premises have been held to be revenue expenditure and not as capital expenditure as contended by the Revenue. The said substantial questions of law have been answered against the Revenue and in favour of the assessee in I.T.A. No, 2975 of 2005, disposed off on October 21, 2011, I.T.A. No. 3011 of 2005 disposed off on October 21, 2011, (since reported in
5. Regarding the fourth substantial question of law, the learned counsel submitted that if there is any fluctuation in the valuation of rupee in terms of the foreign exchange which is brought into India, the same cannot be taken into account and has to be included in other receipts and submitted that it has to be answered in favour of the Revenue.
6. On the other hand, the learned counsel appearing for the respondent submitted that when the export of software has already been done and invoices have been issued in terms of the foreign currency, if there is any fluctuation in the valuation of the rupee in terms of the conversion of value into foreign currency, there is direct nexus between the transaction of export of software and cannot be treated as income from other sources.
7. We have heard the learned counsel appearing for the parties and scrutinised the material on record. Both the first appellate authority and the Appellate Tribunal have answered the abovesaid substantial question of law in favour of the assessee and against the/Revenue. The said concurrent finding arrived at by the authorities is justified as the fluctuation in the valuation of currency which has to be converted to foreign currency has direst nexus to the export of software and can never be included as income from other sources. Wherefore, the said finding does not suffer from any error or illegality as to call for interference in this appeal. Accordingly, we answer the fourth substantial question of law also against the Revenue and in favour of the assessee. Accordingly, we hold that the appeal is devoid of merits and pass the following:
ORDER
The appeal is dismissed.
Note:
The above is true transcription of the judgment dictated to me by the late hon''ble Shri Justice V.G. Sabhahit presiding over the Division. Bench with hon''ble Shri Justice S.N. Satyanarayana in open court on November 22, 2011.
(Sd.)...
Nirmala Devi,
Senior Judgment Writer.
