Case Law Details
DCIT Vs Axsys Health Tech Limited (ITAT Hyderabad)
Held that there is no concept of deferred revenue expenditure but the assessee is entitled to depreciation on the assets so capitalized and put to use for the software services related to health care.
Facts-
AO noted that the assessee was initially engaged in the business of running a Hospital and was formerly known as Dr Ramayyas Pramila Hospitals Ltd up to the FY 1999-2000. During the FY 1999-2000, the assessee changed its main objects clause to provide for the development and marketing of health-care-related software services. The assessee set up a 100% export-oriented unit at Hyderabad called ‘Axsys Health Tech’ as a new division of the company. During the same year, assessee entered into a technology transfer agreement with Dr Pradeep Ramayya, a Director and shareholder of the assessee company for the transfer of Technology & Technical know-how along with all the rights and licences in relation to the Product.
AO noted from the profit and loss account of the assessee that an amount of Rs.2,19,65,000/- was debited under the head R& D expenditure written off. From schedule ‘D’ of Fixed Assets, he noted that an amount of Rs.10,98,25,000/- is shown as Research & Development Expenditure under the head Intangible Assets. Rejecting the various explanations given by the assessee and relying on the various decisions the AO disallowed the amount of Rs.2,19,65,000/- debited by the assessee under the head R&D expenditure written off. CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
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