TMI Blog2013 (6) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer had initiated penalty proceedings in respect of following additions: 1. Loss on sale of assets ₹ 1,82,060/- 2. Sundry balance written off Rs. 5,35,000/- 3. Disallowance of deferred revenue expenditure ₹ 84,76,603/- 4. Ld. CIT(A), while partly allowing the assessee s appeal, deleted the penalty apropos disallowance of deferred revenue expenditure of ₹ 84,76,603/- which was claimed in entirety as revenue expenditure by assessee. 4.1 Being aggrieved with the order of ld. CIT(A) the Department is in appeal before us and has tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eoperative expenses in schedule 10. 6. After considering the assessee s reply, the AO concluded that development of website comes into the category of development of software which was capital asset and was eligible for depreciation under the Income Tax Rules. He further pointed out that since the E-Business activity had not started, therefore, assessee was not entitled for depreciation. The AO did not accept the assessee s reply that this business vertical E-Business was in existence even prior to the development of this website and the product line was also the same. He observed that there is no controversy about the expenses of assessee s business or line of business but the development of website was capital in nature being in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival submissions and have perused the record of the case. The facts are not disputed. The assessee had claimed the impugned amount of ₹ 84,76,603/- in respect of development of website as revenue expenditure, whereas the AO held the same as capital expenditure. Admittedly, assessee had not preferred any appeal against the order o AO. In the backdrop of these facts, it is necessary to examine the reason why assessee had claimed the amount as revenue expenditure. The assessee s reply dated 25th October, 2010 has been noted by AO at page 3 of his order in which assessee had submitted as under: The expenses shown under the Deferred Revenue expense consist the amount incurred for the development of a website called OniMoney which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1962 and the whole of the amount incurred on the development of the website was charged to income of the respective financial year in which the amount was incurred because all the expenses were of revenue nature and no expenses was the capital expense. 7.2 Thus, assessee had itself treated the expenditure having enduring benefit but did not capitalize on the ground that website did not construe to be an intangible asset. Therefore, the whole amount was charged to profit and loss account. Thus, assessee had given detailed reasons for claiming the whole amount as revenue expenditure. The same has not been found to be wrong. The assessee had disclosed in the audited balance sheet accompanying its return of income, details pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee that due to oversight this amount was not added back in the computation of income which ought to have been adjusted in the block of assets. The amount was added back to the income of the assessee, with its consent. It was further noticed that another sum of ₹ 1 lakh had been debited under the head Income Tax paid in Schedule X relating to administration and other expenses. In this regard also the assesee claimed that due to oversight, this amount was not added back to the computation of income. Therefore, AO added this amount also to the income of the assessee. In the backdrop of these facts, penalty was initiated. The assessee claimed that it had committed a bona fide mistake and all the facts material to the computation we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claring all the material facts necessary for assessment, the amount was claimed as revenue expenditure. This cannot be branded as an incorrect or wrong claim but it was a claim advanced on the basis of reasonable belief that it was allowable as revenue expenditure. It is pertinent to note at this juncture that AO had referred to the definition of computer software u/s 10A and also to the CBDT Circular issued in regard to the definition of computer software as contained in Explanation 2(b) to sec. 10A which includes in the definition of computer software customized electronic data or any product or service of similar nature. This circular is relevant only for the purpose of section 10A and the meaning of computer software in common paralence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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