In a recent ruling, the Kolkata bench of the Income Tax Appellate Tribunal observed that the expenses incurred in respect of website development are in the nature of “revenue expenditure” and therefore the same do not form part of the taxable income.
The assessee-company, in the instant case, is engaged in business of Website Development. The assessing officer rejected the return filed by the assessee by disallowing the amount spent on account of Website Development Expenses by treating the same as capital in nature.
On appeal, the Commissioner of Income Tax (appeals) deleted the addition and therefore, the Revenue preferred an appeal before the Appellate Tribunal.
The Tribunal noticed that the case of the assessee is squarely covered by the decision of the Apex Court in Alembic Chemical Works Co. Limited, in which it was held that the expenditure incurred by the assessee on Website Development was of a revenue nature and not of a capital nature. In the same decision, the Court made an observation that that although the Website might provide an enduring benefit to an assessee, the intended purpose behind the Website was not to create an asset but only to provide a means for disseminating the information about the assessee. The Tribunal further noted that the same decision has been applied by the Mumbai tribunal in the case of DCIT –vs. – M/s. Edelweiss Capital Limited.
In the light of the above decisions, the Tribunal confirmed the order of the CIT(A)who deleted the addition made by the assessing officer.
Read the full text of the order below.
