The Kolkata bench of the Income Tax Appellate Tribunal recently ruled that the payment incurred for the upgradation of technology, because of rapid replacement and constant need for existence, are revenue expenditure for the purpose of the Income Tax Act, 1961.
The assessee, in instant appeal, is engaged in the business of providing broadband and cable services, filed a return and claimed deduction of amount paid for Technology Upgradation Expenses in P&L account. However, the AO denied the claim treating the same as capital expenditure.
Assessee maintained that said expenditure is incurred for maintenance of the transmitting system.
The CIT (A) deleted the disallowance made by AO and stated that the devices used for this business are too sensitive and may undergoes through frequent t replacements and the expenditure incurred do not bring into Existence any asset capable of generating any income.
Aggrieved, assessee carried the matter before the tribunal. allowing the appeal, the bench found that revenue could not controvert any of the findings recorded by the revenue. While relied upon the decision of Apex court in the case of Empire Jute Co. vs CIT wherein held that pursuant to incurrence of expenses , if there is some enduring benefit in the revenue field , then the same would only amount to revenue expenditure.
Based on the aforesaid Judgment the bench acting N.V.Vasudevan, JM & M.Balaganesh, AM held that the expenditure incurred by the assessee towards technology upgradation charges which requires frequent replacement due to rapid change in technology and constant need for upgradation would only be revenue in nature.
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