TaxTMI 
TaxTMI 
2010 (12) TMI 880
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....come Tax (Appeals) erred in confirming the treatment of web-hosting expenses of Rs.1,29,598/-as Capital Expenditure. 3) Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) erred in not granting depreciation on the web-hosting expenses, in spite of being treated as Capital Expenditure." 2. Ground No. 1 pertains to the issue of disallowance made on software expenses of Rs.47,36,199/- on which the A.O. capitalised the amount and allowed depreciation at 60%. The CIT(A), after analysing the nature of expenditure under the Rules in which software also included in depreciation schedule for allowance of depreciation, confirmed the action of the A.O. The learned AR referred to the nature of expenditur....
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....sue of expenditure incurred for software packages wherein the Hon'ble High Court held it as revenue expenditure and deductible. He also referred to the ITAT judgement in the case of ITO vs. Spice Communications Ltd. 35 SOT 78 (Del) that software expenditure incurred requiring regular upgradation and licence charges for use of software are revenue in nature. Similar view was also expressed by the ITAT in the case of Angel Capital and Debt Market Ltd. vs. ACIT 118 TTJ (Mum) 351. In view of this it was the submission of the learned counsel that the expenditure is revenue in nature hence allowable as revenue expenditure. 3. The learned D.R., however, relied on the order of the A.O. to submit that the expenditure has enduring advantage....
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....he computer for its installation and operation. As far as the law and principles are concerned the system software expenditure is considered by the Special Bench in the case of Amway India Enterprises 111 ITD 112 (Del) were and summarised as under:- "The conclusions on the issue under consideration, thus, can be summarized as under:- (i) When the assessee acquires a computer software or for that matter the license to use such software, he acquires a tangible asset and becomes owner thereof. (ii) Having regard to the fact that software becomes obsolete with technological innovation and advancement within a short span of time, it can be said that where the life of the computer software is shorter (say less than 2 years)....
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....tware purchased/expenditure claimed in the interest of justice, we restore the matter back to the file of the A.O. to examine this aspect in the light of the principles laid down by the Special Bench. He should also keep in mind assessee's consistent accounting practice followed and in case similar expenditure was allowed in earlier years, on consistency principle also the expenditure becomes allowable as the assessee is treating the expenditure as differed revenue expenditure having life of one or two years. The A.O. is free to examine and determine the issue both on facts and on law. Needless to say that the assessee should be given an opportunity to explain the nature of the expenditure incurred. The issue is restored to the file of the ....
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....he case of Indian Visit. Com 219 CTR 603 wherein the expenditure was treated as revenue expenditure. 8. The learned D.R., however, relied on the orders of the A.O. and the CIT(A) and supported the contentions of the Revenue. 9. We have examined the issue. As seen from the details of expenditure placed on record in the paper book at page 12 and 13 server hosting expenditure paid on 03.08.2004 was only an amount of Rs.3,750/-. After that there are payments of Rs.52,000/- for configuration setup, maintenance, hosting fee and band width data transfer for first quarter paid/payable on 07.12.2004. Another amount of Rs.57,240/- was paid for 4 GB data transfer to M/s. Net 4 India Ltd. on 01.12.2005. There was charges for revampi....
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....ublicize their activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much large set of people worldwide. The Tribunal has correctly appreciated the facts as well as the law on the subject and has come to the conclusion that the expenditure on the website was of a revenue nature and not of a capital nature. No substantial question of law arises for consideration." 10. In view of this, we are in agreement with assessee's contention that the web hosting expenses does not give rise to any capital asset and the expenditure is in the nature of revenue expenditure. Since ....