M/S.HEALTH BRIDGE ADVISORS PRIVATE LIMITED, MUMBAI V. ITO 10(1)(1), MUMBAI

ITA 4577/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5297 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 23-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: VISHWAS MAHANDALE
• Keywords: Depreciation; Audit objection; Revenue expenditure; Capital expenditure; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO . 4577 / MUM . /2018 ( ASSESSMENT YEAR : 20 12 13 ) M/S. HEALTH BRIDGE ADVISORS PVT. LTD. MUKUND M. CHITALE & CO., C.AS 2 ND FLOOR, KAPUR HOUSE, PARANJAPE B. SCHEME, ROAD NO.1, VILE PARLE (EAST) MUMBAI 400 057 PAN AACCH3776M . APPELLANT V/S INCOME TAX OFFICER WARD 10(1)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI VISHWAS MAHANDALE REVENUE BY : SHRI CHAITANYA ANJARIA DATE OF HEARING 19 .0 8 .2019 DATE OF ORDER 05.11.2019 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A) DATED 27 . 4 .20 18 , AND PERTAINS TO ASSESSMENT YEAR 2012 - 13 . 2. T HE GROUNDS OF APPEAL RAISED ARE THAT LEARNED CIT(A) ERRED IN SUSTAINING THE ORDER OF THE ASSESSING OFFICER WHEREBY THE ASSESSING 2 M/S. HEALTH BRIDGE ADVISORS PVT. LTD. OFFICER HAS DISALLOWED THE ASSESSEES CLAIM OF APPLICATION SOFTWARE EXPENDITURE AND WEBSITE DEVELOPMENT CHARGES AS REVENUE EXPE NDITURE THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF HEALTHCARE CONSULTANCY SERVICES. THE ASSESSMENT IN THIS CASE WAS REOPENED ON THE REVENUE AUDIT OBJECTION REGARDING ALLOWANCE OF APPLICATION SOFTWARE EXPENDITUR E AMOUNTING TO ` 1,43,650 , AND WEBSITE DEVELOPMENT CHARGES AMOUNTING TO RUPEES 2,16,140 AS REVENUE EXPENDITURE. ACCORDINGLY THE ASSESSMENT WAS REOPENED. DURING THE COURSE OF REASSESSMENT THE ASSESSING OFFICER DID NOT ACCEPT THE ARGUMENTS OF THE ASSESSEE AN D HELD THAT THESE EXPENDITURE ARE CAPITAL IN NATURE. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE IS ONLY ENTITLED FOR THE DEPRECIATION ON THEM. 3. U PON ASSESSEES APPEAL , THE LEARNED CIT(A) CONFIRMED THE SAME . A GAINST THIS ORDER , THE ASSESSEE IS IN APP EAL BEFORE THE ITAT . 4. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE EXPENDITURE ON ACCOUNT OF WEBSITE DEVELOPMENT CHARGES IS REVENUE IN NATURE. IN THIS REGARD , HE PLACED RELIANCE UPON THE HONBLE SUPREME COURT DECISION IN THE CASE OF ALEMBIC CHEMICAL WORKS CO. LTD. V/S CIT, [1989] 43 TAXMAN 312 (SC). T HE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT ITAT , KOLKATA B ENCH , IN ITO V/S ALL INDIA TECHNOLOGIES LTD., [2017] 88 3 M/S. HEALTH BRIDGE ADVISORS PVT. LTD. TAXMANN.COM 786 (KOL.) (TRI B.), FOLLOWING THE AFORESAID DECISION OF THE HONBLE SUPREME COURT HAS DECIDED THE SIMILAR ISSUE BY OBSERVING AS UNDER: 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, INTER ALIA , BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ALEMBIC CHEMICAL WORKS CO. LTD . V. CIT [1989] 43 TAXMAN 312/ 177 ITR 377 , WHEREIN IT WAS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON WEBSITE DEVELOPMENT WAS OF A REVENUE NATURE AND NOT OF A CAPITAL NATURE. IT WAS HELD 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. TO THE SIMILAR EFFECT IS THE DECISION OF MUMBAI BENCH OF THIS T RIBUNAL IN THE CASE OF DY. CIT V. EDELWEISS CAPITAL LTD. [IT APPEAL NO. 3971 (MUM.) OF 2009], WHEREIN IT WAS HELD THAT THE EXPENDITURE INCURRED ON WEBSITE COULD NOT BE VIEWED AS CAPITAL EXPENDITURE BECAUSE THE WEBSITE WAS PUT UP FOR THE PURPOSES OF DAY - TO DAY RUNNING OF THE BUSINESS. IT WAS ALSO HELD THAT EVEN IF SOME ENDURING BENEFIT WAS OBTAINED BY THE ASSESSEE BY WAY OF DEVELOPMENT OF WEBSITE, SUCH BENEFIT COULD NOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE IN THE CAPITAL FIELD. AT THE TIME OF HEARING BEFO RE ME, THE LD. D.R. HAS NOT BROUGHT TO MY NOTICE ANY DECISION, WHEREIN A DIFFERENT VIEW IN FAVOUR OF THE REVENUE HAS BEEN TAKEN ON THIS ISSUE. I, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) IN DELETING THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF WEBSITE DEVELOPMENT EXPENSES INCURRED BY THE ASSESSEE BY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ALEMBIC CHEMICAL WORKS CO. LTD. ( SUPRA ) AND THAT OF THE TRIBUNAL IN THE CASE OF EDELWEISS CAPI TAL LTD. ( SUPRA ) AND UPHOLDING THE SAME ON THIS ISSUE, I DISMISS THE GROUND RAISED BY THE REVENUE. 5. A S REGARDS APPLICATION SOFTWARE EXPENDITURE , THE LEARNED C OUNSEL F OR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PURCHASED THESE 4 M/S. HEALTH BRIDGE ADVISORS PVT. LTD. SOFTWARE FOR THE PERIOD 1 . 8 . 2011 TO 31 . 7 . 2012. THAT THIS WAS USED IN ONE OF THEIR PROJECT S AND THE PERIOD OF LICENSE WAS VALID ONLY FOR ONE YEAR. THE SAID SOFTWARE EVENTUALLY GOT EXPIRED AND THE PROJECT WAS ALSO COMPLETED BEFORE THE YEAR E ND. HENCE , THE LEARNED C OUNSEL PLEADED T HAT TH IS APPLICATION SOFTWARE CANNOT BE TREATED AS CAPITAL EXPENDITURE AND HA S TO BE ALLOWED AS REVENUE EXPENDITURE. PER CONTRA , THE LEARNED D EPARTMENTAL R EPRESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW . 6. U PON CAREFUL CONSIDERATION , I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED C OUNSEL OF THE ASSESSEE. AS REGARDS THE WEBSITE DEVELOPMENT CHARGES , THE SAME HAS TO BE TREATED AS REVENUE EXPENDITURE ON THE TOUCHSTONE OF HONBLE SUPREME COURT DECISION IN THE CASE OF ALEMBIC CHEMICAL WORKS CO. LTD. (SUPRA), AS RIGHTLY FOUND BY ITAT , KOLKATA BENCH, IN THE DECISION ABOVE . A S REGARDS THE APPLICATION SOFTWARE EXPENDITURE , THE FACTS NARRATED ABOVE CLEARLY SHOW THAT THE SAME WAS VALID FOR THE PROJECT OPERATIONAL DURING THE YEAR ONLY . HENCE , THERE IS NO QUESTION OF THE ASSESSEE DERIVING ANY ENDURING BENEFIT. ACCORDINGLY THE ABOVE EXPENDITURE HA S TO BE ALLOWED AS REVENUE EXPENDITURE. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT , I SET ASIDE THE ORDERS OF AUTHORITIES BELOW AN D DECIDE THE ISSUE IN FAVOUR OF ASSESSEE. 5 M/S. HEALTH BRIDGE ADVISORS PVT. LTD. 7. IN THE RESULT , THE APPEAL BY THE ASSESSEE STANDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 05.05.2019 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER MUMBAI, DATED: 05.05.2019 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI