COMMISSIONER OF INCOME TAX vs. ESPN SOFTWARE INDIA PVT LTD

IN THE HIGH COURT OF DELHI AT NEW DELHI . ITA 1571/2010 . COMMISSIONER OF INCOME TAX ..... Appellant Through: Mr. Sanjeev Sabharwal, Advocate. . versus . . ESPN SOFTWARE INDIA PVT LTD ..... Respondent Through: Mr. Prakash Kumar, Advocate. . . . . CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN . . O R D E R 08.10.2010 . In this appeal preferred under Section 260A of the Income Tax Act, 1961 (for brevity, ?Act?) the following substantial question of law is sought to be raised:- 1. Whether ITAT/CIT(A) erred in holding that penalty under Section 271(1)(c) is not leviable on disallowance of web development expenditure and disallowance of excess depreciation? . ITA1571/2010 page 1 of 3. . . . We have heard Mr. Sanjeev Sabharwal, learned counsel for the revenue and Mr. Prakash Kumar, learned counsel for the respondent- assessee. The singular issue that emerges for consideration whether the initiation of the proceedings by the Assessing Officer under Section 271(1)(c) of the Act was justified and as a corollary the imposition of penalty was tenable. The tribunal after analyzing the facts and referring to the various decisions has held as follows: ?7. From the above, it is evident that two diametrically divergent views are existent on the issue as to whether software expenses are capital expenses or revenue expenses. That being so, undoubtedly, the issue has been a debatable one. In the present case, the assessee claimed expenses on ?web development?. This claim was made on the basis of judicial pronouncements in favour of the assessee.? . Mr. Sanjeev Sabharwal, learned counsel for the revenue fairly stated that if the reasons given by the tribunal in paragraph 6 of the impugned order are appreciated, it will be clear that the issue is a debatable one. . . ITA1571/2010 page 2 of 3. . . It is well settled in law that once it is debatable issue, the penalty is not be imposed. In view of the aforesaid, we do not perceive any merit in the present appeal and accordingly, the same is dismissed without any order as to costs. . CHIEF JUSTICE . . MANMOHAN, J . OCTOBER 08, 2010 . . js . . . . . . . . . . . . . . . . . . . . ITA1571/2010 page 3 of 3. . . 9 $