Deduction allowable on expenses for ‘Software Upgradation’: ITAT Delhi [Read Order]

The Income Tax Appellate Tribunal, Delhi in a recent decision held that the assessee-company is entitled to deduction in respect of expenses incurred by him in respect of upgradation of Software since the same is revenue in nature. The Tribunal was considering an appeal filed by the NDTV, a leading News channel in India.

Coming to the facts of the case, the assessee-company NDTV, engaged in the business of Television, News Broadcasting etc. the Assessing Officer rejected the return filed by the assessee-company for the relevant previous year by disallowing claim of software expenditure along with various other claims. The Assessing Officer observed that the amount spent on software expenditure is capital in nature.

On appeal, preferred by the assessee-company, the Commissioner of Income Tax (Appeals) accepted the submissions of the assessee-Company and held that the expense on upgradation of accounting software constitutes revenue receipt and therefore, should be allowed as deduction. Other claims were disallowed by the CIT(A) and therefore, both the assessee-company and the Revenue approached the Appellate Tribunal.

The Appellate Tribunal while remanding the matter to the Assessing Authority by directing to consider the matter a fresh, decided the issue of disallowance of software expenses. While confirming the order of the Commissioner of Income Tax (Appeals), the Tribunal observed that” Ld.CIT(A) has allowed this expenditure as revenue in nature. While doing so he observed that the assessee itself has characterised certain software purchase on its own as capital assets. He observed that certain software needs regular upgradation or change as per the requirement of fast changing broadcasting industry and that his predecessor has allowed similar expenditure on upgradation of software as revenue in nature. We find no infirmity in this finding of the Ld.CIT(A).”

Read the full text of the order below.