Depreciation and capital gain implication

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Vijay Joshi (Querist)
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17 January 2014 Dear experts,

we are a pvt. ltd company providing online astrology services, like people place orders through our website and we provide solution on the basis of astrology and receive payment through dabit/credit cards/net banking..

now we are going to acquire a famous astrology website..and my question is whether this cap exp. is eligible for depreciation??? and if yes than in which head..apllicable rates under income tax and cos act..

what is the tax implications in hand of seller.. Please guide me

Thanks and regards

Nikhil Kaushik

Nikhil Kaushik (Expert)
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22 January 2014 Dear Vijay,

let me first qualify my opinion stating that taxation of website development/purchase expenses is still a subject of debate.

My view is that in your case, you should book the said expense as a intangible asset. Depreciation under income-tax shall be @ 25%.

please refer Makemytrip (India) Pvt Ltd vs DCIT Circle [2012] 19 taxmann.com 137 (Delhi). it has persuasive value in your case.

Please note that annual maintenance expense shall be charged to Profit & loss account straightaway..

With regards to Accounting, Please refer to AS - 26.

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Vijay Joshi

Vijay Joshi (Querist)
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22 January 2014 Dear Sir

thanks for your support...now i am clear, we have two option..first is to write off in p&l account and other is to show it as cap exp. and claim dep @25%,i think first option is in line with AS-26.

now my query is whether it is capital gain in the hands of seller of website?????

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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22 January 2014 Dear Vijay,

That shall depend on how the seller accounted for the expenses incurred on the website..so that you need check how it reflects in the seller books...