TMI Blog2012 (3) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 - R.P. TOLANI, K.D. RANJAN, JJ. ORDER K.D. Ranjan, Accountant Member These cross appeals by the assessee and Revenue for Assessment Year 2004-05 arise out of the order of the Commissioner of Income-tax (Appeals)-IX, New Delhi. These appeals were heard together and for the sake of convenience, are disposed of by this consolidated order. The grounds of appeal raised by the assessee and Revenue are reproduced as under:- ITA No.3916/Del/2009 (By the assessee): "1. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing the depreciation on website development cost as 'software' instead allowing the deprecation treating it as an intangible asset under Section 32 of the Income-tax Act, 1961 ('the Act'). 2. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that the Website Development Cost qualifies as 'software' within the meaning of Section 32 of the Act read with Appendix 1 of the Rules and eligible for depreciation at the rate of 60 percent. 3. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is depreciable under the provisions of Income-tax Act. He placed reliance on the decision in the case of Hylam Ltd., 87 ITR 310 for the proposition that if the expenditure was incurred for initial outlay or acquiring or bringing into existence an asset of enduring nature for the business of the assessee or for expansion of assessee's business or for substantial replacement, it will be treated capital expenditure. Therefore, the expenses incurred on development of website was capital asset and depreciation claimed by the assessee was disallowed which resulted in addition of Rs. 24,00,777/-. 3. Before the learned CIT(A) it was submitted that the Department had examined the issue in Assessment Year 2001-02 at length and had allowed depreciation on website development as an intangible asset and never challenged the same in later assessment years i.e. Assessment Years 2002-03 and 2003-04. It was also submitted that the AO had erred in holding that the website development does not qualify as software eligible for depreciation @ 60% merely on the ground that the assessee did not claim so in its return of income. Referring to the provisions of sec. 32 of the Act, the learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the exceptions provided in sec. 2(14) of the Act and therefore, the website was an asset which was required to be provided with an allowance on account of depreciation. He also observed that the website was used by the assessee for the purpose of its business and therefore, depreciation was allowable. The depreciation was allowable under Rule 5(1A) and Appendix-I of the Income-tax Rules, 1962, @ 25% applicable to the intangible assets which include know-how, patents, copy rights, trade marks, licenses, franchises or any other business or commercial rights of similar nature. The learned CIT(A) further noted that in Assessment Year 2001-02 the assessee had claimed depreciation @ 25% on website development cost, which was allowed by the AO on the ground that capitalized amount of Rs. 85,96,714/- on which depreciation was claimed, included expenses on salaries, recruitment, travelling expenses etc. and these expenses were incurred before the commencement of business having no relation to website development cost. The learned CIT(A) therefore, confirmed the addition made by the Assessing Officer. However, he allowed depreciation @ 25% on website development cost treating the same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment cost as separate block of assets on which depreciation @ 25% has been claimed from A.Y. 2001-02 to 2003-04. The Revenue has treated the website development cost as business asset and had allowed depreciation for Assessment Years 2001-02 to 2003-04. During the year under consideration the Revenue has taken a contrary view that website is not a depreciable asset and has disallowed depreciation claimed by the assessee at Rs. 24,00,777/-. The learned CIT(A) following the principle of consistency has allowed depreciation @ 25%. The assessee is in the business of tour and travel and for the purpose of its business, has developed a website on which information about the assessee is available. The assessee is also doing business through its website and therefore, the website development cost represents business asset falling under the block of intangible assets. Therefore, the learned CIT(A), in our considered opinion, has rightly allowed depreciation @ 25% treating the website as business asset. Accordingly, we do not find any infirmity in the order passed by the learned CIT(A) allowing the relief to the assessee. 8. In the result, the appeal filed by the Revenue is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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