High Court upholds revenue expenditure on ads & website, allows 60% depreciation on peripherals

The High Court dismissed the revenue's appeal, affirming that the expenditure on advertisements, ad films, and website expenses was revenue in nature. Additionally, the Court upheld the allowability of depreciation at 60% on computer peripherals, contrary to the Assessing Officer's disallowance. The judgment provided detailed reasoning based on legal precedents, resulting in a favorable outcome for the assessee in both disputed issues.

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Issues:
1. Nature of expenditure on advertisements, ad films, and website expenses.
2. Allowability of depreciation @ 60% on computer peripherals.

Analysis:
1. The primary issue in this case revolved around the nature of expenditure incurred by the assessee on advertisements, ad films, and website expenses. The Assessing Officer (AO) contended that these expenses were capital in nature as they resulted in earnings over multiple years. Consequently, the AO made additions to the total income of the assessee based on the original return filed by the company. However, the CIT(A) allowed the appeal filed by the assessee, leading to the deletion of all the additions made by the AO. The High Court, in its judgment, referred to previous decisions and held that the expenditure on advertisements and websites was revenue in nature. The Court relied on various judgments to support its decision, emphasizing that the expenditure was related to the ongoing business of the assessee and did not provide enduring benefits. Therefore, the Court dismissed the appeal, affirming that the expenditure in question was revenue expenditure.

2. Another significant issue in this case was the allowability of depreciation @ 60% on computer peripherals claimed by the assessee. The AO disallowed the depreciation on computer peripherals like printers and scanners, arguing that the 60% rate was only applicable to computers and computer software, not peripherals. However, the CIT(A) allowed the deduction, leading to a favorable outcome for the assessee. The High Court, in its judgment, relied on a previous decision to support the allowability of depreciation at the rate of 60% on computer peripherals. The Court emphasized that computer peripherals were entitled to depreciation at the specified rate, contrary to the AO's contention. Consequently, the Court dismissed the appeal, upholding the decision in favor of the assessee.

In conclusion, the High Court dismissed the appeal filed by the revenue, affirming that the expenditure on advertisements, ad films, and website expenses was revenue in nature and that depreciation @ 60% on computer peripherals was allowable. The judgment provided detailed reasoning supported by relevant legal precedents, ultimately leading to a favorable outcome for the assessee in both aspects of the case.

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