DCIT, New Delhi V. M/s. Interzign solutions Pvt. Ltd., New Delhi

ITA 1934/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3567 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY AWASTHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1934/DEL/2010 ASSESSMENT YEAR : 2006-07 DCIT, CIR.11 (1), NEW DELHI. VS. M/S INTERZIGN SOLUTIONS PVT. LTD., 69, 2 ND FLOOR, MARKET, GREATER KAILASH I, DELHI 48. PAN : AAACI6928C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY AWASTHI, SR. DR REVENUE BY : SHRI ASHOK SIKKA, ADVOCATE ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 23 RD FEBRUARY, 2010 FOR ASSESSMENT YEAR 2006-07. GROUN DS OF APPEAL READ AS UNDER:- 1. THE ORDER OF LD. CIT (A) IS WRONG, PERVERSE, IL LEGAL AND AGAINST THE PROVISIONS OF LAW, LIABLE TO BE SET ASI DE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF R S.17.28 LACS ON ACCOUNT OF EXPENSES FOR WEB HOSTING AND OTH ER RELATED EXPENSES. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. ITA NO.1934/DEL/2010 2 2. THE ASSESSEE DURING THE YEAR HAS INCURRED AN EXP ENDITURE OF RS.86,44,169/- FOR WEB HOSTING AND OTHER RELATED EX PENSES AND THESE EXPENSES WERE DEBITED UNDER THE HEAD MISCELLANEOUS EXPENSES . HOWEVER, THE ASSESSEE CLAIMED ONLY 20% OF SUCH EXPENSES ON YEARLY BASIS. THE ASSESSING OFFICER DID NOT AGREE WITH SUCH SUBMISSIONS OF THE ASSESSEE AND HE DISALLOWED THE SAID EXPENDITURE BEING CAPITAL IN NATURE WHICH WAS TO GI VE ENDURING BENEFIT TO THE ASSESSEE. AS SUCH, THE SAID AMOUNT WAS ADDED TO TH E LOSS RETURNED BY THE ASSESSEE THEREBY THE LOSS RETURNED OF RS.34,55,204/ - WAS ASSESSED AT A LOSS OF RS.17,26,370/-. BEFORE THE CIT (A) IT WAS CLAIMED THAT THE ENTIRE EXPENSES WERE ALLOWABLE, HOWEVER, THE ASSESSEE HAS CLAIMED 1/5 TH EXPENDITURE ONLY AND THE ASSESSING OFFICER WAS WRONG IN DISALLOWING THE CLAI M OF THE ASSESSEE. REFERENCE WAS MADE TO THE FOLLOWING DECISIONS:- I) EMPIRE JUTE CO. LTD. 124 ITR 1 (SC) II) INDIAN GINNING & PRESSING CO. LTD. 252 ITR 577 (GUJ) III) CIT VS. INDIAN VISIT.COM (P) LTD. 3. LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSE E. THE REVENUE IS AGGRIEVED, HENCE, IN APPEAL. 4. LD. DR, RELYING ON THE ORDER OF THE ASSESSING OF FICER, PLEADED THAT THE ASSESSING OFFICER HAS RIGHTLY TREATED THE SAID EXPE NDITURE AS CAPITAL AND THE SAID EXPENDITURE HAD GIVEN THE ENDURING BENEFIT TO THE A SSESSEE, THEREFORE, HE PLEADED THAT THE CIT (A) HAS WRONGLY DELETED THE AD DITION AND HIS ORDER SHOULD BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTO RED. 5. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR TH AT THOUGH THE EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE IN NATURE, BUT 1/5 TH WAS CLAIMED BY THE ASSESSEE BY TAKING A PRUDENT DECISION AS THE ASSESS EE WAS ALREADY INCURRING LOSS. HE CONTENDED THAT ACCORDING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDIAN VISIT.COM (P) LTD. 176 T AXMAN 164 (DEL) THE EXPENDITURE OF WEB HOSTING HAS BEEN HELD TO BE AN EXPENDITURE OF REVENUE IN NATURE. HE, THEREFORE, PLEADED THAT LD. CIT (A) HA S RIGHTLY DECIDED THE ISSUE AND ITA NO.1934/DEL/2010 3 HIS ORDER SHOULD BE UPHELD. HE CONTENDED THAT IF T HE ORDER OF THE CIT (A) IS UPHELD, THE ASSESSEE IS SATISFIED AND IS NOT CLAIMI NG THE ENTIRE EXPENDITURE DURING THE YEAR. 6. WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE. TH OUGH THE ASSESSING OFFICER HAS WRITTEN IN HIS ORDER THAT THESE EXPENDI TURES ARE CAPITAL IN NATURE AND HAVE GIVEN ENDURING BENEFIT TO THE ASSESSEE, BUT HE HAS NOT PINPOINTED ANY SPECIFIC EXPENSE TO DESCRIBE OR EXPLAIN THAT THE EX PENDITURE INCURRED BY THE ASSESSEE WAS CAPITAL IN NATURE. AS AGAINST THAT TH E ASSESSEE IS CLAIMING ONLY 1/5 TH OF THE TOTAL EXPENDITURE. THESE EXPENDITURES ARE FOR WEB-HOSTING AND THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TOUR AND TRA VEL OPERATION. THESE EXPENDITURES ARE TO FACILITATE THE BUSINESS OF THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT ANY CAPITAL ADVANTAGE HAS BEEN DERIVED BY THE ASSESSEE FROM THOSE EXPENDITURE. PROBABLY, IN ORDER TO CURTAIL HUGE LO SS, THE ASSESSEE MAY HAVE DECIDED TO DEBIT ONLY 1/5 TH OF THE TOTAL EXPENDITURE. IN THE CASE OF EMPIRE J UTE COMPANY LTD., THE HONBLE SUPREME COURT HAS OBSERVE D THAT IF THE ADVANTAGE CONSISTS MERELY FOR FACILITATING THE ASSESSEES TRA DING OPERATIONS OR ENABLING THE MANAGEMENT OF THE ASSESSEES BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL UNT OUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THUS ENDURING BENEFIT ITSELF CANNOT MAKE S UCH AN EXPENDITURE CAPITAL IN NATURE. WHAT IS TO BE SEEN IS WHAT IS THE REAL INT ENT AND PURPOSE OF THE EXPENDITURE AND AS TO WHETHER THERE IS AN ACCRETION TO THE FIXED CAPITAL OF THE ASSESSEE. BY INCURRING EXPENDITURE ON WEB-HOSTING, THERE IS NO CHANGE IN FIXED CAPITAL OF THE ASSESSEE ALTHOUGH THE WEBSITE MAY PR OVIDE AN ENDURING BENEFIT TO THE ASSESSEE, THE INTENT AND PURPOSE BEHIND THE WEB SITE IS NOT TO CREATE AN ASSET, BUT ONLY TO PROVIDE A MEANS FOR DISSEMINATIN G THE INFORMATION ABOUT THE ASSESSEE AND THIS TYPE OF EXPENDITURE HAVE BEEN HEL D TO BE REVENUE IN NATURE BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDIAN VISIT.COM (P) LTD. (SUPRA). THEREFORE, WE SEE NO INFIRMITY IN THE ORD ER OF THE CIT (A) VIDE WHICH THE AMOUNT CLAIMED BY THE ASSESSEE HAS BEEN HELD TO BE ALLOWABLE. THE ASSESSEE AT ITS OPTION HAS CLAIMED ONLY 1/5 TH OF THE ENTIRE EXPENDITURE AND THE CLAIM OF THE ITA NO.1934/DEL/2010 4 ASSESSEE IS NOT MORE THAN THAT. THEREFORE, WE FIND NO MERIT IN DEPARTMENTAL APPEAL AND THE SAME IS DISMISSED. 7. BEFORE PARTING, IT MAY BE MENTIONED HERE THAT TH E ALLOWABILITY OF 1/5 TH OF EXPENDITURE DURING THE YEAR HAS BEEN UPHELD ON THE GROUND THAT THESE EXPENDITURES WERE NOT IN THE NATURE OF CAPITAL EXPE NDITURE AND WERE INCURRED DURING THE YEAR UNDER CONSIDERATION. SUCH DELETION FOR THE YEAR UNDER CONSIDERATION DOES NOT MEAN THAT THE BALANCE AMOUNT CAN BE CLAIMED BY THE ASSESSEE IN SUCCEEDING YEARS AS THE ALLOWABILITY OR OTHERWISE THEREOF HAS TO BE CONSIDERED INDEPENDENTLY FOR THE REASON THAT THE AS SESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE EXPENSES OF REVENUE NATURE ARE INCURRED IN THE YEAR UNDER CONSIDERATION. THEREFOR E, THE PRESENT ORDER CANNOT BE TAKEN AS A DECISION THAT DEFERRED REVENUE EXPENDITU RE HAS BEEN ALLOWED FOR THE YEAR CONSIDERATION. 8. WITH THESE OBSERVATIONS WE DISMISS THE APPEAL FI LED BY THE REVENUE. . THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.07.20 10. SD/- SD/- [B.C. MEENA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 16 TH JULY, 2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES