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2017 (6) TMI 66 - AT - Income TaxAddition of expenditure incurred on development of software - CIT(A) confirming that the expenditure on development of software is covered under section 35D and thereby sustaining the disallowance of expenditure incurred on development of software - assessee is in business of software development and sale of software products - Held that:- It is an undisputed fact that the assessee did incurred expenditure for development of software way back in the A.Y. 2004-05 and such development of software was meant to be sold in the market as a part of core its business activity. If over the period of time the said product could not be sold and has become obsolete due to fast changing technologies and software programme, then it has to be left to the prudence of the businessman to write it off in the year in which it considers that the said product cannot be sold at all or it has become scrap. In the year under consideration, the assessee has written off the said amount of expenses, which has been amortized since 2004-05, therefore, the same needs to be allowed as business loss in this year. The revenue has not disputed the fact that software is not saleable or has ‘nil’ realizable value. It is also the fact stated before us that this software is not sold as it has lost its utility. Thus, on this ground we are of opinion that the said amount of ₹ 24,65,578/- is to be allowed as business loss as technical obsolescence of the inventory while computing the income under section 28/29 of the act in this year. Hence, the appeal of the assessee is allowed on the reasoning given above.
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