2014 (7) TMI 1099 - AT - Income Tax

Disallowance of web and portal charges - Held that - Expenditure incurred on the development of web and portal charges are definitely revenue expenditure - The hon ble Delhi High Court has considered the decision of the hon ble Supreme Court in the case of Alembic Chemical Works Co.Ltd. v. CIT 1989 (3) TMI 5 - SUPREME Court wherein the expenditure on development of website was held to be revenue in nature. Therefore, this issue is directly covered by the decision of the hon ble Delhi High Court in the case of Indian Visit.com (P.) Ltd. (2008 (9) TMI 8 - DELHI HIGH COURT). Deletion of the addition made on account of not allowing depreciation - Assessing Officer disallowed the depreciation by holding that no business was carried out. The Commissioner of Income-tax (Appeals) allowed the appeal of the assessee by holding that the assessee was carrying on the business. Therefore, there is no question of disallowance of depreciation. After hearing both sides, we find that the learned Commissioner of Income-tax (Appeals) has rightly allowed the claim of the assessee. Deletion of ad hoc disallowance at the rate of 10 per cent. of the expenses - No specific expenditure was held to be not for business purpose. Therefore, in our considered view, the ad hoc disallowance was rightly deleted by the Commissioner of Income-tax (Appeals). The expenditure incurred on the development of web and portal charges itself shows that the assessee was carrying on the business. - Decided against Revenue.

Summary

Issues:
1. Disallowance of web and portal charges.
2. Disallowance of depreciation.
3. Ad hoc disallowance of expenses.

Analysis:
1. The appeal involved the disallowance of web and portal charges debited by the assessee. The Revenue contended that the expenses were not allowable. However, the authorized representative argued that a similar issue was decided in favor of the assessee by the Delhi High Court in a previous case. The Tribunal noted that the High Court had ruled that such expenditures are revenue in nature, citing a Supreme Court decision. Consequently, the Tribunal dismissed this ground of the Revenue's appeal, relying on the High Court's decision.

2. The second issue concerned the disallowance of depreciation amounting to &8377;44,324 by the Assessing Officer on the grounds of no business activity. The Commissioner of Income-tax (Appeals) reversed this disallowance, stating that the assessee was indeed conducting business. After considering both sides, the Tribunal upheld the Commissioner's decision, emphasizing that the assessee was actively engaged in business operations, thus finding no merit in the Revenue's appeal on this ground.

3. The third issue revolved around an ad hoc disallowance of 10% of certain expenses. As no specific expenditure was identified as non-business related, the Commissioner of Income-tax (Appeals) had deleted this ad hoc disallowance. The Tribunal concurred with the Commissioner's decision, highlighting that the expenses, including those for web and portal charges, indicated the assessee's business activities. Consequently, the Tribunal dismissed the Revenue's appeal on grounds three and four.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the decisions of the Commissioner of Income-tax (Appeals) on the grounds related to web and portal charges, depreciation disallowance, and ad hoc expense disallowance. The general nature of the first and fifth grounds did not require separate adjudication.