Shri R. K. Gupta, J.M. - (1.) THESE are two appeals by assessee against the consolidated order of CIT(A) dated 4-12-1992 relevant to assessment years 1989-90 and 1990-91.
(2.) The brief facts of the case are that assessee derives income mainly from computer data processing services and sale of computer stationery. The assessee is mainly doing such work on job work basis for the Organisation who want to out-source the data processing work such as PHED, Education Boards, RFC etc. The direct expenses of the assessee for such work include the payment of job service charges, apart from the expenses like salaries of personnel, data preparation expenses, repair & maintenance of the hardware and cost of stationery. The payment of job service charges, inter alia, comprise of expenditure in relation to development of specific softwares and the programmes which are required to do the job under-taken as per the specifications of the customers. Such programmes are need based and got developed in accordance with the requirements of specific customers. As per written submission filed by assessee wherein it is mentioned that a programme prepared to perform one particular job cannot be used for other jobs and even for the same job, if there arise substantial difference in the requirements of the customers in the changing situation. During the years under consideration, the assessee incurred job service charges of Rs. 2,93,082 and Rs. 4,51,828 for assessment years 1989-90 and 1990-91 respectively. These expenses were debited to the Profit & Loss Account. These expenses also included the expenses for development of software. During the assessment year 1989-90 the expenses on development of software were made at Rs. 85,000 and during the year 1990-91 the expenses were at Rs. 1,35,000. The Assessing Officer disallowed the claim of these expenses by treating these expenses as capital in nature and he allowed depreciation of 1/3rd on these two amounts. Accordingly, additions of Rs. 56,667 and Rs. 71,111 were made in these two years respectively. While treating these expenses as capital in nature, the Assessing Officer was of the view that programmes once written can be used again and again for preparation of desired reports. It was further observed by him that the programmes can be stored in the storage media and can be put in the library. Small changes can be made in the programme but then it becomes more handy and useful for the purpose of records of the customer. It was further observed by the Assessing Officer that assessee has not submitted any evidence for the claim that the old version of the software are deleted from the machine for ever. It was also observed by the Assessing Officer that even if some changes were made in the Software supplied to PHED then it is not clear that whether the changes in the software were made in assessment year 1989-90 or assessment year 1990-91. Likewise, some more observations were made by the Assessing Officer and then he disallowed the claim of the assessee. While disallowing the claim, the Assessing Officer placed reliance on 125 ITR 29 (sic) (Bom.), Scientific Engg. House (P.) Ltd. v. CIT [1986] 157 ITR 86/[1985] 23 Taxman 66 (SC) and a decision of Jaipur Bench in ITA No. 348/JP/88 where it was held that the expenses on technical know-how are capital expenses. The CIT(A) confirmed the findings of the Assessing Officer as it is.
(3.) NOW assessee is in appeal here before us for both the years.;