INTERNATIONAL JOURNAL HOUSE, Jaipur V. DCIT, Jaipur

ITA 888/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5507 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA
• Assessee Lawyers: M IQBAL
• Keywords: Depreciation; Opportunity of being heard; Revenue expenditure
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 888/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 M/S INTERNATIONAL JOURNAL HOUSE, A-95, JANTA COLONY, JAIPUR. CUKE VS. D.C.I.T., CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAAFI 5197 C VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI SIDDARTH RANKA & SHRI M IQBAL (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI O.P. BHATEJA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 17/02/2016 MN?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 19/02/2016 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 23/09/2013 PASSED BY THE LEARNED CIT(A)-II, JAIPUR FOR A.Y. 2008-09. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD LOWER AUTHORITIES ERRED IN DISALLOWING AMOUNT INCURRED OF RS. 6,57,169/- ON ACCOUNT OF ITA 888/JP/2013_ M/S INTERNATIONAL JOURNAL HOUSE VS DCIT 2 WEBSITE DEVELOPMENT AND WRONGLY HELD IT TO BE CAPITAL EXPENSES AND ALLOWING ONLY 25% AS DEPRECIATION. 1.1 THAT THE LD APPELLATE AUTHORITY GROSSLY ERRED I N NOT CONSIDERING THE DETAILED SUBMISSION FILED SUPPORTED BY VARIOUS AUTHORITIES BEFORE THE LD ASSESSING OFFI CER AND AT THE APPELLATE STAGE THAT EXPENSES INCURRED A RE OF REVENUE NATURE AND NOT IN THE NATURE OF CAPITAL. 1.2 THAT ADDITION/DISALLOWANCE BEING UNJUSTIFIED BAD IN LAW DESERVES TO BE DELETED. 2. THE SOLE GROUND OF THE ASSESSEES APPEAL IS AGAIN ST CONFIRMING THE ADDITION OF RS. 6,57,169/- ON ACCOUNT OF WEBSITE DEVELOPMENT BY TREATING THE CAPITAL EXPENSES. THE ASSESSEE IS ENGA GED IN THE BUSINESS OF PUBLICATION AND SELLING OF BOOKS AND MAGAZINES I N FIELD OF SEMI PRECIOUS AND PRECIOUS STONES. THE RETURN FOR A.Y. 20 08-09 WAS FILED ON 26/09/2008 DECLARING TOTAL INCOME OF RS. 85,49,370/ -. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 6,57,169/- UNDER THE HEAD WEBSITE EXPENSES, W HICH WAS NIL IN THE PREVIOUS YEAR. THE ASSESSING OFFICER GAVE REASO NABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE, WHICH WAS REPLIED BY THE A SSESSEE VIDE LETTER DATED 17/12/2010, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE 3 TO 7 OF THE ASSESSMENT ORDER. AFTER CONSI DERING THE ITA 888/JP/2013_ M/S INTERNATIONAL JOURNAL HOUSE VS DCIT 3 ASSESSEES REPLY AND CASE LAWS CITED BY THE ASSESSEE , THE LD ASSESSING OFFICER HAS HELD THAT THE ASSESSEE GOT HIS WEBSITE C OMPLETELY REVAMPED BY REDESIGNING AND STARTED GENERATING REVENUE IN TH E FORM OF ADVERTISEMENT PUBLISHED ON THE WEBSITE, WHICH WERE NOT THERE IN THE PRECEDING YEAR BECAUSE TILL THEN HE HAD NOT REDESIG NED. PLAIN READING OF THE CONTRACT NOTE MADE, IT IS VERY CLEAR THAT THE WO RK DONE ON THE DEVELOPMENT OF THE WEBSITE WILL NOT BE INCURRED IN TH E FUTURE AT LEAST FOR SOME NEXT YEARS. THE SERVICES AS PER THE CONTRACT N OTE DESIGNING, REDESIGNING, BUILDING, INSTALLING LINK CHECK, CUSTO M GRAPHICS AND MULTILINGUAL SUPPORT ETC. ARE ONETIME EXPENSES AND HAVE ENDURING EFFECT ON THE WEBSITE. THE WORK DONE IN PHASES. BY IN VESTING RS. 6,57,169/- IN FIRST PHASE FOR ITS DEVELOPMENT THE WE BSITE BECAME SUCH A POWERFUL TOOL FOR EARNING. AFTER CONSIDERING THE ASS ESSEES SUBMISSION, THE LD ASSESSING OFFICER HELD THAT IT IS ENDURING E XPENSE IS HAVING ENDURING BENEFIT TO THE ASSESSEE, IT IS NOT REVENUE EXPENDITURE, WHICH REQUIRED TO BE CAPITALIZED. ACCORDINGLY, SHE ALLOWED DEPRECIATION @ 25% AND REMAINING AMOUNT HAS BEEN ADDED IN THE INCOME O F THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD CONFIRMED THE ADDITION BY OBSERVING THAT THE AR COULD NOT CON TROVERT THE FINDINGS ITA 888/JP/2013_ M/S INTERNATIONAL JOURNAL HOUSE VS DCIT 4 OF THE A.O.. THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IS CONSIDERED TO BE FAIR AND REASONABLE AND DOES NOT C ALL FOR ANY INTERFERENCE. THE APPELLANT FAILS ON THIS GROUND. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS ARGUED THAT THIS ISSUE HAS BEEN COVERE D BY THE VARIOUS ITATS AS WELL AS VARIOUS HIGH COURTS ORDERS, WHO HAD HELD THAT ALL EXPENDITURE ON WEBSITE UP-GRADATION IS A REVENUE EXP ENDITURE. HE RELIED ON THE VARIOUS CASE LAWS, PARTICULARS THE DEC ISION IN THE CASE OF CCIT VS. O. K. PLAY INDIA LTD. [2012] 346 ITR 57 (P& H) WHEREIN PURCHASE OF COMPUTER SOFTWARE WAS HELD TO BE REVENUE IN NATURE. IN THE CASE OF CIT VS. AMWAY INDIA ENTERPRISES [2012] 346 ITR 341 (DEL) WHEREIN SOFTWARE EXPENDITURE HELD AS REVENUE EXPENDIT URE. IN THE CASE OF CIT VS. RAYCHEM RPG LTD. (2012) 346 ITR 138 (BOM) HAS HELD THAT EXPENDITURE INCURRED ON ENTERPRISE RESOURCE PLANNI NG PACKAGE SOFTWARE FACILITATED ASSESSEES TRADING OPERATIONS OR ENABL ING MANAGEMENT TO CONDUCT ASSESSEES BUSINESS MORE EFFICIENTLY OR MOR E PROFITABLY BUT IT WAS NOT IN NATURE OF PROFIT MAKING APPARATUS, SOFTWAR E EXPENDITURE WAS ALLOWABLE AS REVENUE EXPENDITURE. THEREFORE, HE PRAYE D TO REVERSE THE ORDER OF THE LD CIT(A). ITA 888/JP/2013_ M/S INTERNATIONAL JOURNAL HOUSE VS DCIT 5 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS A FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PUBLICATION OF JOURNAL FOR GEMS AND JEWELLERY IN THE YEAR UNDER CONSIDERATION AND HA S REPUTATION IN JEWELLERY MARKET IN AND OUTSIDE THE INDIA. THE ASSESS EE HAD UPDATED WEBSITE AS PER NEED OF REGULAR BUSINESS AS PER REQUI REMENT OF LATEST TREND IN THE MARKET. PARTICULARLY THE FASHION CHANG ES VERY FAST AND MORE AND MORE PEOPLE BECOMING COMPUTER SAVVY TO HAVE LAT EST DESIGN IN JEWELLERY BEING AVAILABLE ON VARIOUS SITES. THEREFORE , THE ASSESSEE HAD INCURRED THESE EXPENSES FOR UP-GRADATION OF WEBSITE. IN COMPUTER TECHNOLOGY, HAS BECOME ABSOLUTE VERY FAST, THEREFOR E INSTANT UP- GRADATION IS REQUIRED. THE ASSESSEE ALSO INCURRED EX PENSES UNDER THIS HEAD, WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER AND HAD NOT HELD AS ENDURING BENEFIT FROM IT AND ALLOWED AS REVE NUE EXPENDITURE IN PAST AND IN SUBSEQUENT YEAR ALSO. THIS EXPENDITURE I S NOT A NATURE OF PROFIT MAKING APPARATUS BUT FOR IMPROVING THE EFFIC IENCY OF THE WEBSITE, THEREFORE, IT IS A REVENUE EXPENDITURE. THE CASE LAWS CITED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS AND C IRCUMSTANCES OF THE ITA 888/JP/2013_ M/S INTERNATIONAL JOURNAL HOUSE VS DCIT 6 CASE OF THE ASSESSEE. ACCORDINGLY, WE REVERSE THE OR DER OF THE LD CIT(A). 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/02/2016. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 19 TH FEBRUARY, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S INTERNATIONAL JOURNAL HOUSE, JAIP UR. 2. IZR;FKHZ @ THE RESPONDENT- THE D.C.I.T., CIRCLE-5, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 888/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR