2009 (5) TMI 841 - AT - Income Tax

Summary

Issues involved: Appeal against Commissioner of Income-tax (Appeals) order for assessment year 2003-04.

Issue 1 - Web-site and software development charges: Assessee appealed against disallowance of Rs. 25,100 for web-site expenses and software development charges, treated as capital in nature. Assessing Officer and Commissioner of Income-tax (Appeals) upheld the disallowance. ITAT Mumbai held that domain booking charges, web hosting charges, and web development charges are revenue expenses, but software development charges are capital expenses. Partial confirmation of Commissioner's order.

Issue 2 - Tele-connection charges: Disallowance of Rs. 38,500 claimed as capital expenditure for tele-connection charges. Assessing Officer treated the expenses as capital in nature. Assessee argued that telephone handsets purchased under a scheme should be treated as revenue in nature as per CBDT Circular. ITAT Mumbai agreed, allowing the claim for telephone handsets and talk time charges as revenue expenditure. Partial allowance of appeal.

The judgment by ITAT Mumbai in the appeal against the Commissioner of Income-tax (Appeals) order for the assessment year 2003-04 addressed two main issues. Firstly, regarding web-site and software development charges amounting to Rs. 25,100, the ITAT Mumbai held that while domain booking charges, web hosting charges, and web development charges are revenue expenses, software development charges are capital expenses. The order of the Commissioner of Income-tax (Appeals) was partially confirmed in this regard. Secondly, in the case of tele-connection charges of Rs. 38,500, the ITAT Mumbai allowed the claim for telephone handsets and talk time charges as revenue expenditure based on the CBDT Circular. The appeal of the assessee was partially allowed in this aspect as well.