From now, money spent on the content of websites will be exempt from tax. A division bench of the Mumbai Income-tax Appellate Tribunal(ITAT) passed this order on an appeal filed by Sedgwick Parekh Health Management, now known as United Healthcare India, the Indian arm of a global healthcare major. According to ITAT, such expenditure can be allowed as revenue business expenditure.
An order by the ITAT, a quasi-judicial body on tax matters, is binding on assessing officers unless reversed by a high court. The company went in appeal after the assessing officer disallowed the expenditure by way of fees to nutrition experts and writers who provided and maintained the content of the company’s website on health and nutrition. The assessing officer held this expenditure as capital expenditure and stated that it was taxable.
Tax lawyer Jignesh R Shah, who represented the company, took the opposite view holding that it is a revenue business expenditure. According to him, the website content changes from time to time. Besides, this was an interactive website where company’s experts were answering people’s questions on health and nutrition. Hence there was no capital asset coming into existence, Mr Shah argued.
The division bench of the ITAT agreed with Mr Shah’s stand on the issue and allowed the expenditure on the website, holding that it was not capital in nature. The ITAT held that the expenditure was on services rendered by different professionals in running the website in a functional manner.
These expenses have not been incurred for setting up the “income earning apparatus” of the company but for “running and maintaining” the income earning apparatus. This is the first time the issue of taxability on the content of website has come up before the Income-tax Appellate Tribunal.
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