Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (12) TMI 455 - ITAT MUMBAI

2015 (12) TMI 455 - ITAT MUMBAI - TMI - Disallowance of website registration expenses - revenue v/s capital expenditure - Held that:- Just because a particular expenditure may result in an enduring benefit would not make such an expenditure of capital nature and real intent and purpose of the expenditure has to be seen, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) considering the nature of expenditure as revenue in nature. See CIT Versus INDI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nal High Court in Godrej & Boyce Mfg. Company Ltd. vs CIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) where their lordship while approving the theory of apportioning expenditure between taxable and nontaxable income speaks about reasonable and fair basis to be followed in making the disallowance u/s 14A of the Act, we note that there is uncontroverted finding in para 6.11 of the impugned order that there is no borrowing by the assessee during the year. The Assessing Officer is directed to make the dis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rst ground raised by the assessee pertains to disallowing website registration expenses amounting to ₹ 1,09,03,798/- as capital expenditure. 2. During hearing, the crux of argument advanced on behalf of the assessee is that the impugned issue is covered by the decision from Hon ble Delhi High Court in the case of CIT vs Indian Visit.com Pvt. Ltd. (2008-TIOL-448-HC-DELIT)( 2008) 219 CTR 603 (Del.) and DCIT vs M/s Mahindra Reality and INF Developers Ltd. in ITA No.1160/Mum/2010, order dated .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and facts of the case. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made by disallowing a software expenditure amounting to ₹ 1,75,500/- for obtaining MS Office Licence and Marketing Data Management System which are capital in nature. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition made by disallowing the expenses for website development amounting to ₹ 8,0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r software expenses and website development charges. Aggrieved, Revenue is in appeal before us. 4. Ground No. 1 pertains to deletion of the addition made by disallowing the software expenditure of ₹ 1,75,500/-. On noticing that the assessee has debited ₹ 1,75,500/- to the P&L account,the A.O. asked the assessee why the same should not be treated as capital expenditure. It was submitted that the expenditure is in the revenue field as it only facilitates carrying on the existing bu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ting Data Management System, the life span of which is very short due to fast technological obsolesces. Therefore, the expenditure is of revenue nature. He relied on the decision of the Special Bench in the case of Amway Enterprises 111ITD 112 (Del) (SB). After considering the facts and contentions of the assessee the CIT(A) deleted the addition stating as under:- 5. I have carefully considered the above facts and find merit in the contentions of the appellant. From the very nature of the softwa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ich also, the assessee claimed expenditure incurred on software packages as revenue one. It was held that such expense which revolves on the modern communication technology enables the assessee to carry on its business operations effectively, efficiently, smoothly and profitably. Such software does not work without fitting it on a compute rand it enhances the efficiency of its operation. It is an aid in the manufacturing process rather than the total tool itself. Accordingly, such expenditure is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

penditure can only be considered as revenue in nature. The Hon'ble Special Bench of ITAT in the case of Amway Enterprises 111 ITD 112 (Del) (SB) inter alia held that for ascertaining as to whether the expenditure on computer software gives an enduring benefit to an assessee, the duration of time for which the assessee acquires right to use the software becomes relevant. Having regard to the fact that software becomes obsolete with technological innovation and advancement and life of the soft .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fers the various details of the company s business and products it offers. Hence it is essentially an advertisement expenses and allowable as revenue in nature. The A.O. did not accept the contentions of the learned A.R. and treated the expenditure as capital in nature stating that the life span of the website is quite long and it is an asset in the cyber space. However, he allowed depreciation @ 25% on website development charges. Before the CIT(A) it was submitted that the website is a very co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

diture incurred on website development is although enduring in nature, the intent and purposes behind the development is not to create an asset but only to provide a means for disseminating the information about the assessee among its clients. In the case of CIT vs. Indian Visit.com P. Ltd. (2008) 219 CTR 603 (Del), on identical facts, such expenditure was held to be revenue expenditure akin to printing of pamphlets etc. It was stated that mere enduring benefit, de hors any accretion to fixed ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

CIT vs. Indian Visit.com P. Ltd. (2008) 219 CTR 603 (Del), wherein it was held as under: - Just because a particular expenditure may result in an enduring benefit would not make such an expenditure of a capital nature. What is to be seen is what is the real intent and purpose of the expenditure and as to whether there is any accretion to the fixed capital of the assessee. In the case of expenditure on a website, there is no change in the fixed capital of the assessee. Although the website may p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much large set of people worldwide. The Tribunal has correctly appreciated the facts as well as the law on the subject and has come to the conclusion that the expenditure on the website was of a revenue nature and not of a capital nature. No substantial question of law arises .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1/2011, if kept in juxtaposition and analyzed, we note that while dismissing the appeal of the Revenue, the Tribunal has already considered the decision from Hon ble Delhi High Court in the case of CIT vs Indian Visit.com Pvt. Ltd. (2008) 219 CTR 603 (Del.), wherein, it was held as under:- Just because a particular expenditure may result in an enduring benefit would not make such an expenditure of a capital nature. What is to be seen is what is the real intent and purpose of the expenditure and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng travel brochures and other published materials and pamphlets. The advance of technology and the wide spread use of the internet has provided a very powerful medium to companies to publicize their activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much large set of people worldwide. The Tribunal has correctly appreciated the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enditure has to be seen, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). 2.4. So far as ground no.2 with respect to deleting the disallowance of ₹ 11,07,00,000/- u/s 14A read with Rule 8D of the Rules is concerned, the factual finding recorded by the ld. Commissioner of Income Tax (Appeals) is reproduced hereunder:- 6.3. I have carefully considered the submissions of the ld. A/R and have gone through the assessment order and the other mat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version