Development expense for website is revenue
expenditure and amount advanced for it if become unrecoverable is allowable as
“Bad Debt”
Case ; DCIT vs M/s Edelweiss Capital Ltd.
Section :28 of
the Income-Tax Act ,1961
Facts
The ITAT , Mumbai in this case was of the
view that if the expenditure on the development websites,
the expenditure could not have been regarded as capital expenditure since the website is put up for
the purposes of day-to-day running of the business
and even if one were to view that some enduring benefit is
obtained by the assessee, the benefit cannot be said to accrue to the assessee
in the capital field.
A website is
something where full information about the assessee’s business is given and it
helps the assessee’s customers in dealing with it. A website constantly needs updating, otherwise it
may become obsolete. It helps in the smooth and efficient running of the
day-to-day business. The expenditure would have been allowable as
revenue expenditure; as a corollary, when the website did not materialize, the
amounts advanced to the companies who were engaged to develop the websites, when they became irrecoverable,
can be written off and claimed as loss incidental to the business. The loss is
thus allowable as business loss in terms of section 28 of the Act
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