CIT Vs. BONANZA PORTFOLIO LTD

JUDGEMENT

(1.) The Assessee company (Respondent herein) is engaged in the business of stock broking and earning commission income from share transactions from clients being a member of the National Stock Exchange and Bombay Stock Exchange. It filed its original return of income declaring income of Rs. 8,19,15,021/- on 25th September, 2008. Thereafter, the revised return was filed on 20th May, 2008 declaring total income of Rs. 7,27,01,919/-. In the revised return, the Assessee had amortized expenditure amounting to Rs. 1,15,16,377/- incurred on advertisements, ad films and website expenses over a period of 5 years. The department initiated scrutiny assessment proceedings and issued notice under Section 143(2) of the Income Tax Act, 1961 ("the Act" for short) on 16th September, 2008. The Assessing Officer (AO) proceeded to compute the assessment under Section 143(2) of the Act on a total income of Rs. 8,56,87,742/-. The AO noted that the expenditure on advertisement, ad films and website expenses were in the nature of capital expenses since they resulted in the earnings to the Assessee for a number of years. Consequently, he computed income as per the original return where such an expenditure had been amortized for a period of five years. Resultantly, AO made additions of Rs. 92,13,102/- and made assessment on total income of Rs. 8,56,87,742/-. AO also disallowed depreciation claimed by the Assessee @ 60% on computer peripherals like printers, scanners etc stating that the depreciation @ 60% was allowable only in the case of computers and computer software and was not applicable on computer peripherals. He accordingly disallowed the deduction of Rs. 341,313/- on this count. The Assessee preferred an appeal before the CIT(A) which was allowed on both the counts. Consequently, CIT(A) deleted all the additions made by AO. Aggrieved with the order of CIT(A), the revenue preferred an appeal before ITAT which came to be dismissed vide impugned order dated 29th November 2010. The revenue is in appeal before us against the said order of the Tribunal.

(2.) Vide our order dated 11th July, 2011, we have at the previous stage held that as far as expenditure on advertisement is concerned, the said expenditure incurred on advertisements for sale promotion was of revenue in nature. In this regard we refer to our decision in ITA No. 1820 of 2010 titled The Commissioner of Income Tax v. Citi Financial Consumer Fin. Ltd. (decided on 30th March, 2011). With regard to the expenditure incurred on website, we rely upon the judgment of this Court in CIT v. Indian Visit. Com (P) Ltd., 2008 219 CTR(Del) 603 and hold the same to be of revenue in nature. Similarly, with regard to depreciation @ 60% on computer peripherals, we rely upon the judgment of this Court in Commissioner of Income Tax v. Citicorp Maruti Finance Ltd. (ITA 1712/2010 and ITA 1714/2010 decided on 9th November 2010) and held that the computer peripherals are entitled to depreciation @ 60%.

(3.) Vide the said order dated 11th July, 2011, notice was issued to the Respondent only to the limited question as to whether the expenditure incurred on ad film is to be treated as capital or revenue in nature.