JUDGMENT :

P.S Dinesh Kumar, J.

These appeals are by the Revenue challenging the order dated 21.08.2020 in ITA Nos.994 & 995/Bang/2019 for the Assessment year 2015-2016 and 2016-17 passed by the ITAT, "B" Bench, Bangalore Income Tax Appellate Tribunal, "B" Bench, Bangalore have been admitted to consider following questions of law:

1. Whether on the facts and circumstances of the case, the order passed by Tribunal is perverse in nature in holding that assessing authority was not right in making disallowance of expenditure claimed by assessee as salaries and marketing expenditure for development of new software platform without observing that the same is capita! in nature and said expenditure was towards creating of an intangible asset for deriving enduring benefit?

2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that expenditure claimed by assesses as salaries and marketing expenditure for development of new software platform is Revenue expenditure without observing that nature of expenditure is capital in nature and as payment made was towards creating capital asset which is a new product of assessee-company?

2. Heard Shri. M.Diiip, learned Standing Counsel for the appellants-Revenue and Shri. Aravind Kamath, learned Senior Advocate for the respondent-Assessee.

3. The questions of law involved in both these appeals are one and the same. Hence, they are considered and disposed of by this common judgment.

4. Undisputed facts of the cases are that Assessee is a Company engaged in the business of rendering customized internet advertising services for advertisers which could be used on the Desktop. In order to develop its software, Assessee had incurred expenditure of Rs. 6,06,30,146/- during the year 2015-16 and Rs. 20,80,24,899/- during 2016-17.

5. Assessing Officer has recorded in his order that the Assessee was developing a software for advertisement. If the said software platform was developed, it would have given enduring benefit to Assesses. On this premise, he treated the expenditure as capital in nature. The CIT(A) Commissioner of Income Tax (Appeals) has confirmed the order of the AO Assessing Officer. The ITAT has reversed the finding recorded by Assessing Officer and allowed the Appeals.

6. Shri. M. Dilip for the Revenue submitted that the CEO and the H.R. Manager had confirmed the fact that the Assessee was developing a new software. The said software would have given enduring benefit to the Assessee. Therefore, the Assessing Officer was right in holding that the expenditure was capital in nature. The ITAT has reversed the finding on the ground that the Assessee had abandoned the product. On the principle of law once the expenditure is made towards development of a software, the same must be construed as capital expenditure.

7. Shri. Aravind Kamath submitted that Assessee had indeed sought to develop a good software platform. However, the same was compatible only with the Desktop. In view of rapid change in the advertisement field Desktops have been substituted for mobile phones. The application had no future and the Assessee was forced to abandon the project. In the bargain, the Assessee has lost huge sums of money. Supporting the impugned order, he submitted that since the project was abandoned, the expenditure made in that behalf must be treated as revenue in nature.

8. We have carefully considered the submissions of learned counsels on both sides.

9. It is not disputed that the Assessee had invested money to develop a software platform for the Desktops. It is also not disputed that due to rapid change in the technology, the application sought to be developed by Assessee had become obsolete and the Assessee abandoned fur