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TMI Blog2013 (6) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 84,76,603/-. 3. The Assessing Officer had initiated penalty proceedings in respect of following additions: 1. Loss on sale of assets ₹ 1,82,060/- 2. Sundry balance written off Rs. 5,35,000/- 3. Disallowance of deferred revenue expenditure ₹ 84,76,603/- 4. Ld. CIT(A), while partly allowing the assessee's appeal, deleted the penalty apropos disallowance of deferred revenue expenditure of ₹ 84,76,603/- which was claimed in entirety as revenue expenditure by assessee. 4.1 Being aggrieved with the order of ld. CIT(A) the Department is in appeal before us and has taken following grounds of appeal: 1. "Whether on the facts and circumstances of the case, the ld. CIT(A) was erred in deleting the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegory of development of software which was capital asset and was eligible for depreciation under the Income Tax Rules. He further pointed out that since the E-Business activity had not started, therefore, assessee was not entitled for depreciation. The AO did not accept the assessee's reply that this business vertical E-Business was in existence even prior to the development of this website and the product line was also the same. He observed that there is no controversy about the expenses of assessee's business or line of business but the development of website was capital in nature being in the form of computer software. He, therefore, disallowed the assessee's claim of ₹ 84,76,603/-, treating the same as capital expenditure as agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 603/- in respect of development of website as revenue expenditure, whereas the AO held the same as capital expenditure. Admittedly, assessee had not preferred any appeal against the order o AO. In the backdrop of these facts, it is necessary to examine the reason why assessee had claimed the amount as revenue expenditure. The assessee's reply dated 25th October, 2010 has been noted by AO at page 3 of his order in which assessee had submitted as under: "The expenses shown under the Deferred Revenue expense consist the amount incurred for the development of a website called 'OniMoney' which pertained to the existing business vertical "E-Business" at that time. This website was meant to enable the end user to apply for Credit Card and retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was incurred because all the expenses were of revenue nature and no expenses was the capital expense." 7.2 Thus, assessee had itself treated the expenditure having enduring benefit but did not capitalize on the ground that website did not construe to be an intangible asset. Therefore, the whole amount was charged to profit and loss account. Thus, assessee had given detailed reasons for claiming the whole amount as revenue expenditure. The same has not been found to be wrong. The assessee had disclosed in the audited balance sheet accompanying its return of income, details pertaining to the claim of this expenditure. Therefore, it cannot be inferred that assessee had furnished inaccurate particulars of income. The AO has relied on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was added back to the income of the assessee, with its consent. It was further noticed that another sum of ₹ 1 lakh had been debited under the head "Income Tax paid" in Schedule X relating to administration and other expenses. In this regard also the assesee claimed that due to oversight, this amount was not added back to the computation of income. Therefore, AO added this amount also to the income of the assessee. In the backdrop of these facts, penalty was initiated. The assessee claimed that it had committed a bona fide mistake and all the facts material to the computation were disclosed. The AO was of the view that there was no difference of opinion that both the claims were not allowable. He held that incorrect computation give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it was a claim advanced on the basis of reasonable belief that it was allowable as revenue expenditure. It is pertinent to note at this juncture that AO had referred to the definition of computer software u/s 10A and also to the CBDT Circular issued in regard to the definition of computer software as contained in Explanation 2(b) to sec. 10A which includes in the definition of computer software customized electronic data or any product or service of similar nature. This circular is relevant only for the purpose of section 10A and the meaning of computer software in common paralence could not be implied to include these services in the computer software. Therefore, reliance placed by the AO on the definition of computer software itself ..... X X X X Extracts X X X X X X X X Extracts X X X X
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