Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

September 2024

Business expenditure — Capital or revenue expenditure — Software development expenses — Product abandoned on becoming obsolete due to development in technology — No enduring benefit accrued to the Assessee — Expenditure incurred revenue in nature and allowable

By Keshav Bhujle and Ritu Punjabi, Advocates
Reading Time 2 mins

Principal CIT vs. Adadyn Technologies Pvt. Ltd.

[2024] 465 ITR 353 (Kar.)

A.Ys.: 2015–16 and 2016–17

Date of order: 10th April, 2023

S. 37 of the ITA 1961

37. Business expenditure — Capital or revenue expenditure — Software development expenses — Product abandoned on becoming obsolete due to development in technology — No enduring benefit accrued to the Assessee — Expenditure incurred revenue in nature and allowable.

The Assessee was engaged in the business of rendering customised internet advertising services for advertisers which could be used on the desktop. The Assessee had incurred software development expenditure of R6,06,30,146 during A.Y. 2015–16 and R20,80,24,899 during A.Y. 2016–17. In the scrutiny assessment, the Assessing Officer (AO) held that if the software platform was developed, it would give enduring benefit to the Assessee, and therefore, held the expenditure to be capital in nature.

The CIT(A) confirmed the action of the AO. The Tribunal reversed the finding of the AO and allowed the appeals of the Assessee.

The Karn

Read More
Download PDF

You May Also Like

Digital Tax War and Equalisation Levy

Charitable purpose — Exemption — Denial of exemption by AO on grounds that assessee did not furnish proper information to Charity Commissioner, that there was shortfall in provision for indigent patients fund, that assessee had generated huge profits, that hospital did not serve poor and underprivileged class, and assessee paid remuneration to two trustees — Grant of exemption by appellate authorities on finding that orders for earlier assessment years not set aside in any manner or over-ruled by court — No infirmity in order of Tribunal granting exemption