Recently, ITAT Delhi Bench in Deputy Commissioner of Income-tax vs. E.India Biz.Com (P.) Ltd held that expenditure incurred on development of web and portal charges and depreciation is to be allowed, even if there is no receipt during year.During a relevant assessement year, if the assesse had shown nil receipt but claimed deduction of expenses on account of web and portal charges and also depreciation, the same will be allowed.

 Facts of the case:

The assessee is a company having main objectives in the business to introduce, develop, promote and market services, packages and products relating to e-commerce, communication and realise consultancy income thereof. For the year under consideration, the main source of the company was through rendering consultancy services related to logistic commerce, communication information, education, entertainment technologies and other services related thereto.

The assessee has shown nil receipt for the year under consideration. However, it has debited expenses on account of portal and web charges. The Assessing Officer disallowed whole of these portal and web charges and also disallowed depreciation for no business for the year and also disallowed 10 per cent of the other expenses. The Commissioner of Income-tax (Appeals) granted the relief to the assessee against which the Revenue went for an appeal.

 It was held that:

The major issue in respect of disallowance of web and portal charges is covered in favour of the assessee by the decision of the hon’ble jurisdictional High Court in the case of CIT v. Indian Visit.com (P.) Ltd.

It was held that it is clear that just because a particular expenditure may result in an enduring benefit would not make such an expenditure of a capital nature. What is to be seen is what is the real intent and purpose of the expenditure and as to whether there is any accretion to the fixed capital of the assessee. In the case of expenditure on a website, there is no change in the fixed capital of the assessee. Although the website may provide an enduring benefit to an assessee, the intent and purpose behind the purpose for a website is not to create an asset but only to provide a means for disseminating the information about the assessee. The same could very well have been achieved and, indeed, in the past, it was achieved by printing travel brochures and other published materials and pamphlets. The advance of technology and the wide spread use of the internet has provided a very powerful medium to companies to publicize their activities to a larger spectrum of people at a much lower cost. Websites enable companies to do what the printed brochures did but, in a much more efficient manner as well as in a much shorter period of time and covering a much larger set of people worldwide.

With regard to the depreciation, The Assessing Officer disallowed the depreciation by holding that no business was carried out. The Commissioner of Income-tax (Appeals) allowed the appeal of the assessee by holding that the assessee was carrying on the business and therefore there was no question of disallowance of depreciation. The learned Commissioner of Income-tax (Appeals) rightly allowed the claim of the assesse.