1. Two questions of law raised by the Revenue in this appeal, which read thus:
“(a) Whether, on the facts and in the circumstance of the case and in law, the hon'ble Income-tax Appellate Tribunal was justified in deleting the additions in respect of disallowance of software expenditure to the extent of Rs. 23,62,368 as capital expenditure as software used for the first time will have to be considered as capital in nature?
(b) Whether, on the facts and in the circumstances of the case and in law, the hon'ble Income-tax Appellate Tribunal was right in deleting the additions made in respect of the scrap sales as while computing the eligible deduction under section 80HHC of the Act, any receipt credited to the profit and loss account should either be included in the total turnover or 90 per cent, of the same should be reduced while computing profit of the business?”
2. As regards the first question, the Income-tax Appellate Tribunal relying upon on its order in the assessee's own case relating to the assessment year 2001–02 held that the software expenditure was a revenue expenditure.
3. The appeal filed by the Revenue for the assessment year 2001–02 has been dismissed for want of removal of office objections and thus the order passed by the Income-tax Appellate Tribunal for the assessment year 2001–02 has attained finality. Moreover, the Tribunal in its order relating the assessment year 2001–02 has allowed the expenditure as revenue expenditure by recording thus:
“7. When we apply this functional test suggested by the Special Bench of the Tribunal, we find that the impugned software does not form part of the profit-making apparatus of the assessee and, hence, the same is to be allowed as revenue expenditure. We hold so because we find that the business of the assessee-company is that of manufacturing of telecommunication and power cable accessories and trading in oil retracing system and other products and the impugned software is an enterprises resources planning (ERP) package and, hence, it facilitated 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 of 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.”
4. In our view, no fault can be found in the aforesaid order of the Income-tax Appellate Tribunal holding that software expenditure was allowable as revenue expenditure.
5. As regards the second question is concerned, the learned counsel for the parties agree that in view of the judgment in CIT v. Dresser Rand India P. Ltd., [2010] 323 ITR 429 (Bom), the question be restored to the file of the Income-tax Appellate Tribunal for fresh consideration in the light of the aforesaid judgment. Accordingly, the second question is restored to the file of the Income-tax Appellate Tribunal for fresh consideration in the light of the judgment in Dresser Rand India P. Ltd., [2010] 323 ITR 429 (Bom).
6. The appeal is disposed of accordingly.