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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 ..... uter 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 the company. The assessee is also into value added services on the mobile and has entered into revenue sharing arrangements with all mobile telephone service providers across all circles in India. 3. Issue No.1: The assessee claimed Rs. 81,43,440 in assessment year 2004-05 and Rs. 1,00,69,946 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance sum of Rs. 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 Rs. 81,43,632 as under: (Rs.) (a) Designing of Microsites 2,78,040 (b) Purchase of "off the shelf operating software" 8,49,767 (c) Payment of usage fee to Lifetree convergence limited. 27,08,256 (d) Website updation & maintenance 43,07,569 Total 81,43,632 6. The Learned CIT(Appeals) has deleted the disallowance on the basis of First Appellate Order on the issue decided in the assessment year 2005-06. In the assessment year 2005-06, similar disallowance of Rs. 1,60,09,046 was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed 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 First Appellate Order. We find that consultation fee technical was divided into two kinds of payment. Firstly, payments to professionals (of two kinds) one category is major consultant and the other is smaller retainers) and secondly payments to resource partners such as Applitech Tender CT, Legal Pandits, Unitel India etc. In the arrangement with resource partner, the assessee company utilizes the resources and the website of some independent entrepreneurs on Revenue sharing models. The payment from the clients/customers for particular services is collected by the necessary company and such customer is transferred to the respective sites of the resource partners for services. In the end t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance 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 2004-05. These issues are regarding (No.1 - deletion of disallowance by Learned CIT(Appeals) on account of deduction claimed under sec. 36(1)(vii) of the Act on account of bad debts written off, and (2) deletion of disallowance by the Learned CIT(Appeals) on account of expenditure incurred on subscription fees paid to Internet Online Association claimed as Revenue expenditure by the assessee company and held as capital expenditure by the Assessing Officer. 15. At the outset of hearing, the Learned AR pointed out that the issue regarding deduction of bad debts is covered in favour of the assessee as the bad debts written off during the assessment year under consideration were shown in the income of the preceding assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Ground No.5: 18. The Assessing Officer disallowed Rs. 10 lacs claimed on account of expenditure incurred on subscription fee paid to Internet & Online Association as Revenue expenditure by the assessee, treating the same as capital expenditure. The Learned CIT(Appeals) has deleted the disallowance holding it as Revenue in nature. 19. In support of the ground, the Learned DR placed reliance on the assessment order whereas the First Appellate Order, has been justified by the Learned AR. 20. We find that the issue raised in this ground No. 5 of the appeal is related to the issue raised in ground No.1 of the appeal i. E. expenditure incurred on software/website development expenses claimed by the assessee as Revenue in nature. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 DCIT vs. Vijay Gopal Jindal to confirm the disallowance and hence, the disallowance so confirmed is untenable. 1.5 That in any case and without prejudice and assuming for the sake of an argument that the disallowance so made was not eligible in the instant financial year relevant to assessment year 2005-06, the same may kindly be directed to be allowed in the preceding assessment year namely 2004-05". 23. The sole issue involve in the above grounds is as to whether the Learned CIT(Appeals) was justified in upholding the disallowance of expenditure of Rs. 1,00,48,790 incurred by the assessee on marketing rights by holding the same to be prior period expenditure, hence, not allowable in the present year. 24. In support of the ground, the Learned AR submitted that the am ..... X X X X Extracts X X X X X X X X Extracts X X X X
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