The Cuttack Bench of the Income Tax Appellate Tribunal (ITAT), observed that expenditure incurred towards Computer Software and Stationery are Revenue in nature.
The assessee in the present appeal is Yazdani International Pvt Ltd.
Revenue expenditure can be defined as the summation of all expenses incurred by a business through the course of production of its goods and services. They are considered significant for generating revenue in a given accounting period.
It must be noted here that revenue expenditure does not boost the profit-generating capacity of a business. However, it comes in handy in maintaining the operational activities and helps to manage assets better. Typically, the benefits resulting from revenue expenditure do not extend beyond an accounting year.
This is an appeal filed by the revenue against the order of the CIT(A), for the assessment year 2012-13. The assessee has filed cross objection in the appeal filed by the revenue.
Sunil Mishra, Authorized Representative appeared for the assessee and M.K.Gautam, Departmental Representative appeared for the revenue.
The Departmental Representative submitted that the Assessing Officer had disallowed Rs.2 lakhs representing the software development expenses on the ground that the said expenditure was capital in nature. It was the submission that the CIT(A) has deleted the addition holding the same to be revenue in nature and that the order of the CIT(A) be reversed.
It was the submission of the Counsel for the assessee that the said expenditure was in respect of various computer software and stationery and the expenditure towards upgradation of software for filing of return before the ROC and website design. It was the prayer that the order of the CIT(A) be confirmed.
The Bench comprising Arun Khodpia, Accountant Member and George Mathan, Judicial Member observed that “A perusal of the ledger account clearly shows that the expenditure incurred towards computer software and stationery which are nothing but revenue in nature. This being so, the findings of the CIT(A) are confirmed and ground of the revenue stands dismissed.”
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