Software Expenses on Upgradation allowed as Revenue Expense

Addl. CIT Vs TV Today Network Ltd. (ITAT Delhi)

The issue under consideration is whether the software expenses are allowed as revenue expenditure?

the assessee company was engaged in the business of broadcasting, telecasting, relaying transmitting, distributing audio, video and other programmes of software for television, radio and other media. During the assessment AO has disallowed software expenses by treating it as a capital expenditure. The assessee explained that these are the upgradation or purchase of the application software and revenue expenditure in nature because there is no enduring benefit available to the assessee. The learned assessing officer rejected the explanation of the assessee and granted assessee 60% of the depreciation holding that software expenditure is a capital expenditure in nature.

ITAT states that, software expenditure incurred by the assessee is an application software for upgradation. The assessee has not incurred any expenditure on acquiring any asset of enduring nature. ITAT further relied upon the decision of the Hon’ble Delhi High Court in case of Ashahi Glass Works Limited. In view of this ITAT do not find any infirmity in the order of the CIT-A in deleting the above disallowance. Accordingly Appeal filed by the department has been dismissed.

FULL TEXT OF THE ITAT JUDGEMENT

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