AHAGURU EDUCATION TECHNOLOGY PRIVATE LIMITED,CHENNAI vs. DEPUTY COMMISSIONER OF INCOME TAX,CORPORATE CIRCLE 1(1), CHENNAI

ITA 1993/CHNY/2026Status: DisposedITAT Chennai23 September 2026AY 2023-2411 pages
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What were the facts?

The assessee, AHAGURU EDUCATION TECHNOLOGY PRIVATE LIMITED, filed its return of income for Assessment Year 2023-24 disclosing Nil income. The Assessing Officer (AO), through the e-Assessment Unit, completed the assessment at a total income of Rs. 3,20,27,842/-. The AO disallowed 50% of business promotion expenditure amounting to Rs. 1,96,05,400/-, citing lack of evidence of payments and unproven nexus with income. Additionally, the AO restricted depreciation on software used for training and education to 15% from the claimed 40%. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the assessee's appeal, upholding the AO's disallowance and restriction.

What did the Tribunal hold?

The Tribunal held that the reasoning of the lower authorities that expenditure cannot be allowed in the absence of proportional increase in income is not acceptable, as expenditure incurred wholly and exclusively for business purposes is allowable irrespective of income generation. However, the onus is on the assessee to prove the genuineness of expenditure with invoices and mode of payment, which the assessee failed to do. The Tribunal restored Ground No. 1 to the file of the Assessing Officer for verification of evidence regarding the incurring of business promotion expenditure, thus partly allowing the ground. For Ground No. II, concerning depreciation on computer software, the Tribunal noted the assessee's contention that educational material created in-house is stored on information storage devices, constituting computer software, and that salaries paid to teachers for its creation were capitalized. This also requires verification by the Assessing Officer. Therefore, Ground No. II was also restored to the file of the Assessing Officer for due verification, partly allowing the appeal.

What were the issues?

1. Whether the disallowance of 50% of business promotion expenditure is valid, considering the assessee's claim that payments were made through banking channels and the expenditure was recognized via journal entry, and whether the nexus with increased consultancy project income from Rs. 68,04,110 in FY 2021-2022 to Rs. 9,24,05,900 in FY 2022-23 is sufficient. The assessee argued that the ledger account was submitted, payments were legitimate and recorded, and ad-hoc disallowance is invalid, citing case laws like Shri Shashi Kant Loyalka vs. The ACIT and DCIT vs. Carl isle Trading & Manufacturing India Private Limited. The revenue contended that the assessee failed to discharge the onus of proving the genuineness of expenditure by filing details as called for by the AO. 2. Whether the depreciation on computer software, described as educational material created by the appellant and stored on information storage devices accessible online, should be allowed at 40% as claimed, or restricted to 15%. The assessee argued that self-generated software involves expenses like salaries to teachers, and the Income Tax Act does not distinguish between purchased or in-house developed software, claiming depreciation as per the depreciation schedule, not Rule 5(2). The revenue argued there was no evidence of incurring costs for computer software and the assessee failed to prove in-house development for business use, justifying the 15% restriction as plant and machinery.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(3),Section 144B,Section 10A,Section 9(1)(vi)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI

Pronounced: 23.09.2026

PER INTURI RAMA RAO, ACCOUNTANT MEMBER :

This appeal filed by the Assessee directed against the order of the Learned Commissioner of Income Tax(Appeals)[NFAC], dated 30.03.2026 passed u/s.250 of the Income Tax Act, 1961 for the Assessment Year 2023-24. 1 AHAGURU EDUCATION TECHNOLOGY PRIVATE LIMITED

2.

The Assessee raised the following grounds of appeal : “I. Adhoc addition under business promotion expenses (consultancy project income)

1.

The nexu

The order continues below.

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