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TMI Blog2012 (3) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 Explanation 2 of Section 10A(9A) of the Act read with Notification number 890(E) dated March 29, 2000 issued by Central Board of Direct Taxes, defines software for the purpose of Section 10A of the Act to include Website. 4. Without prejudice to the above, under the facts and circumstances of the case and in law, the Ld. CIT(A) should have allowed the deduction of Rs. 1,540,000 incurred during the year on website development and its maintenance/upgradation as revenue expenditure, instead of treating it as capital expenditure instead of treating it as capital expenditure and allowing depreciation as intangible assets. 5. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the jurisdictional high court decision in the case of Commissioner of Income-tax IV v. India-visit.com Private Limited (219 CTR 603) wherein the expenditure on website have been allowed as revenue expenses under Section 37(1)of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 counsel for the assessee submitted that intangible assets include know-how, patents, copy rights, trade marks, licence, franchise and any other business or commercial right of similar nature. The learned AR of the assessee referring to the meaning as per Oxford Dictionary submitted that what intangible means "unable to be touched or grasped; not having physical presence; difficult or impossible to define or understand; vague and abstract". Referring to AS-26 issued by the Institute of Chartered Accountants of India, an intangible asset is neither identifiable nor monetary asset without physical substance, held for use in the production or supply or goods or services, for rental to others or for administrative purposes. Website is a collection of web pages which are designed using computing languages such as HTML. As the websites are accessible through internet enable peripherals and cannot be touched or felt, it falls within the definition of intan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement 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 intangible asset. 5. Aggrieved by the order of the CIT(A) the assessee is in appeal on the ground that depreciation on development of website cost has not been allowed as software whereas the Revenue is in appeal on the ground that deprecation @ 25% has been allowed treating the same as intangible asset. 6. Before us the learned AR of the assessee submitted that in Assessment Year 2001-02 the assessee had claimed depreciation @ 25% on development cost of the website. For the year under consideration the assessee claimed depreciation @ 25% at Rs. 24,00,777/-. It was further submitted that total depreciation was claimed at Rs. 35,04,023/- which included depreciation on website development @ 25%, which has been disallowed by the Assessing Officer. He further submitted that as per old Appendix-I applicable for Assessment Years 2003-04 to 2005-06, intangible assets fall under Part-B and are eligible for depreciation @ 25%. In earlier Assessment Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 dismissed. 9. Now coming to the issue raised by the assessee in ground Nos. 1 to 3 which relates to treating the website as software. For this purpose, the assessee has placed reliance on Central Board of Direct Taxes Notification No. 890(E) dated 26.09.2000. The said Notification has been issued under clause (b) of item (i) of Explanation 2 to section 10A, clause (b) of item (i) of Explanation 2 of section 10B and clause (b) of Explanation to section 80HHE of the Income-tax Act, 1961. The said Notification has been issued for the purposes of sections 10A, 10B and 80HHE, which has been noted by the Board. For the purpose of these sections, website services are included in the computer software. Notified definition for the purposes of sections 10A, 10B and 80HHE is for the specific purpose of those sections and cannot be imported for the purposes of deprecation under sec. 32 or Old Appendix-I applicable for Assessment Years 2003-04 to 2005-06. Moreover, website cannot be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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