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TMI Blog2015 (8) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... was incurred for the services rendered by the major consultant on day to day basis. In absence of rebuttal of these submissions of the assessee by the department, we are of the view that the Learned CIT(Appeals) has rightly treated the claimed expenditure as Revenue in nature on the basis that the Assessing Officer has treated the same as capital in nature without examining the material aspects of the claim as to whether the expenditure brought into existence any asset/s or the used period of the expenditure. - Decided against revenue. Computer repair/maintenance expenditure - Revenue v/s capital expenditure - Held that:-CIT(Appeals) has rightly deleted the disallowance with this finding that expenditure incurred on computer repair/maintenance are revenue in nature. The same is upheld.- Decided against revenue. Disallowance of deduction claimed u/s 36(1)(vii) on account of bad debts written off - CIT(A) deleted addition - Held that:- CIT(Appeals) has allowed the claimed deduction with this finding that after calling for the details required, if the Assessing Officer was satisfied that the amounts in question were offered for taxation in the earlier years and the accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned CIT(Appeals) was justified in holding the expenditure incurred on legal and professional/consultancy as Revenue in nature which were held as capital expenditure by the Assessing Officer? iii) As to whether the Learned CIT(Appeals) was justified in holding the expenditure incurred on computer repair/maintenance as Revenue expenditure against the capital expenditure held by the Assessing Officer? 2. The facts in general are that the assessee is a wholly owned subsidiary of Bennett Coleman Co. Ltd. The assessee company is engaged in the business of providing information technology services; internet related services and systems and also owns, operates and manages the web portal www. Indiatimes. Com. The company provides comprehensive information relating to news, entertainment, sports, health and astrology, life style etc. through its various channels on the website. The company also provides chats, e-mail and message boards. With increase in internet penetration, online advertising on the net is also source of revenue. E-commerce in the form of option of airline tickets and sale of products online such as books, music, gifts, jewellery etc. are major revenue earners for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39). The submissions of the assessee remained that it had debited ₹ 2,47,43,627 as software development expenditure to the profit and loss account in the year, however, while filing its return of income, the assessee had added back ₹ 1,65,49,995 as capital expenditure out of ₹ 2,47,93,627 since the same represented expenditure of capital nature. The balance sum of ₹ 81,43,632 represented Revenue expenditure under sec. 37(1) of the Act. It was submitted that expenses are incurred in the course of business and relating to earning income. The expenditure incurred was only to up date the website. It was not incurred for acquiring an asset. It was contended that the expenditure incurred was not of permanent character. It was submitted that the expenditure was incurred to keep the services going on as well as to keep pace with technology development in this field. The benefit of the expenditure incurred was only for a week or for a limited period. The Learned CIT(Appeals) has discussed the break up of the expenditure incurred at ₹ 81,43,632 as under: (Rs.) (a) Designing of Microsites 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al for the assessment year 2004-05 and ground No. 2 of the appeal for the assessment year 2005-06 are accordingly rejected. 8. Issue No.2: The Revenue has raised this issue in ground No.2 of the appeal for the assessment year 2004-05 and in ground No. 3 of the appeal for the assessment year 2005-06. The Assessing Officer had disallowed the claimed expenditure of ₹ 1,25,14,127 in assessment year 2004-05 and ₹ 44,43,704 in the assessment year 2005-06 incurred on legal and professional consultancy claimed as revenue expenditure. The Assessing Officer was of the view that the claimed expenditure was capital expenditure. The contention of the assessee remained that the claimed expenditure was incurred for payment to the professionals for development/maintenance and improvement of website and software. 9. In support of the grounds involving the issue, Learned DR has placed reliance on the assessment order. The Learned AR on the other hand tried to justify the First Appellate Order. 10. Having gone through the orders of the authorities below, we find that the Learned CIT(Appeals) in the assessment year 2005-06 has discussed the issue in para Nos. 42 to 46 of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was incurred on computer repair/maintenance. The Learned CIT(Appeals) has deleted these disallowances with this finding that it was Revenue in nature. 12. In support of the grounds, the learned CIT(DR) has basically placed reliance on the assessment order. The Learned AR on the other hand tried to justify the First Appellate Order on the issue and reiterated similar submissions made by him in support of the issue No.1 decided hereinabove. He placed reliance on the decisions cited therein as well in relation to issue No.1. 13. Following the ratio laid down in the cited decisions hereinabove while addressing the issue No.1 by the Learned AR, we hold that the Learned CIT(Appeals) has rightly deleted the disallowance with this finding that expenditure incurred on computer repair/maintenance are revenue in nature. The same is upheld. The issue No.3 is decided in favour of the assessee. The related ground No.3 of the appeal for the assessment year 2004-05 and ground No.4 of the appeal for the assessment year 2005-06 are accordingly rejected. 14. Besides the above three common issues, the Revenue has also raised two more other issues in the appeal for the assessment year 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sented income as they related to earlier online advertisements or other Revenue relating to the websites owned and operated by the company and had been included as income in the earlier years. It was submitted that the assessee company brought to the notice of the Assessing Officer that after the amendment to sec. 36(1)(vii) of the Act, the CBDT had issued a Circular No. 551 dated 23.1.1990, wherein they had clarified and confirmed that after the amendment the claim of bad debts will be allowed in the year in which debt is written off as irrecoverable in the accounts. The Learned CIT(Appeals) has allowed the claimed deduction with this finding that after calling for the details required, if the Assessing Officer was satisfied that the amounts in question were offered for taxation in the earlier years and the accounts of the debtors were written off as claimed by the AR, no disallowance was called for. Under the facts, the issue is covered in favour of the assessee by the cited decisions, hence, we do not find infirmity therein in the First Appellate Order in this regard and the same is upheld. The related ground No. 4 of the appeal for the assessment year 2004-05 is thus rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred in the instant assessment year. 1.3 That the upholding the disallowance, the Learned CIT(Appeals) has overlooked the judgment of the Hon ble jurisdictional High Court in the case of CIT vs. Ram Pistons Rings Ltd. (ITR 133/1991) and the judgment of Hon ble Gujarat High Court in the case of Saurashtra Cement Chemical Ind. Ltd. vs. CIT reported in 213 ITR 523 wherein it has been held that merely because an expenditure relates to a transaction of an earlier years , it does not become a liability payable in the earlier years unless it can be said that the liability was determined and crystallized in the year. In fact, the Learned CIT(Appeals) has failed to appreciate the judgment of Hon ble Delhi High Court in the case of CIT vs. Vishnu Industrial Gases Pvt. Ltd. wherein it has been held that the question as to the year in which a deduction is allowable may be material when the rate of tax chargeable is different in different years and therefore, the tax was levied at a uniform rate, it is material whether the deduction is allowed in one assessment year or another. 1.4 That the Learned CIT(Appeals) has further misapplied the decision of Delhi Tribunal in the case of DC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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