Asstt. Commissioner of Incometax, .. Respondent (OSD) Cir. 3, Pune AND 2 1205/PN/09 200304 3 1206/PN/09 200405 4 466/PN/11 200708 Jt./Asstt. Commissioner of Incometax, .. Appellant (OSD) Cir. 3, Pune Vs. Opus Software Solutions P. Ltd., .. Respondent Pune 411 005 Assessee by: Shri Nikhil Pathak Department by: S/Shri S K Singh , Manoj Kumar Date of hearing : 11.07.2012 Date of pronouncement : 27.07.2012 ORDER PER G.S. PANNU, A.M.: The captioned crossappeals by the assessee and the Revenue involving some common issues were heard together and are being disposed of by way of a combined order for the sake of convenience and brevity. 2 2. We shall first take up assessee's appeal vide ITA No 1179/PN/09 for the assessment year 200304. This appeal is directed against the order of the Commissioner of Incometax (Appeals)II, Pune dated 22.07.2009 which, in turn, has arisen from the order dated 28.02.2006 passed by the Assessing Officer under section 143(3) of the Incometax Act, 1961, (in short "the Act"), pertaining to the assessment year 200304. 3. In this appeal, the substantive dispute raised by the assessee is with regard to the expenditure of Rs 2,77,07,736/ incurred towards product development. The assessee had claimed such expenditure as revenue expenditure whereas the incometax authorities have denied the claim of the assessee and, instead treated the expenditure as capital expenditure. 4. The background of the dispute can be summarized as follows. The appellant is a company incorporated under the provisions of the Companies Act, 1956 and it is engaged in the business of development of software products. In the return of income filed for the assessment year 200304, it declared a loss of Rs 2,42,68,399/, which was subject to scrutiny assessment under section 143(3) of the Act whereby the total income has been determined at a loss of Rs 24,11,209/ as per the normal provisions of the Act, whereas the income under the provisions of section 115JB of the Act has been determined at Rs 2,66,185/. Be that as it may, the dispute before us relates to an expenditure of Rs 2,77,07,736/ incurred by the assessee towards product development, which has been disallowed. The assessee explained that it was engaged in the development of various software packages, like Trade Now, Electra ATM, Electra Card and Electra Payment Gateway (EPG), etc. It was explained that the software packages developed by the assessee are basically used in the banking sector. The assessee explained that the expenditure incurred on development of such products was to be tune of Rs 2,77,07,736/ and the same was claimed as revenue expenditure. The Assessing Officer 3 and, thereafter, the Commissioner of Incometax (Appeals) has held that such development expenditure was capital in nature and against such a disallowance, the assessee is in further appeal before us. 5. From the orders of the authorities below, it emerges that the objections of the Department against the assessee's claim of treating it as revenue expenditure are threefold. Firstly, as per the Department, the assessee has itself treated such expenditure in its account books as deferred revenue expenditure and it has been claimed as a revenue expenditure only in the computation of income for incometax purposes. According to the department, assessee cannot take a different stand while computing its income under the Act. Secondly, as per the Department the expenditure in question has resulted in development of new products and, therefore, assessee has obtained an advantage of enduring nature and thus the expenditure was capital in nature. Thirdly, as per the Department, assessee was in the process of registering the products with the Registrar of Trade Mark and thus, the expenditure was for acquisition of an intangible asset and hence the same constituted capital expenditure. For all the above reasons, as