Sundry Creditors written off by debiting to software account was not income as the software purchased was of no use and no depreciation was claimed
ABCAUS Neutral Case Law Citation:
ABCAUS 3681 (2023) (03) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition of sundry creditors written off in the books of account.
The assessee explained that it had purchased a software from the creditor whose outstanding balance has been written off as the software so purchased was of no use to the company.
The Tribunal observed from the ledger account of the of software that the assessee had purchased its license from the vendor. The assessee had paid approx. 25% advance and the balance amount was outstanding against the vendor.Â
The Tribunal further observed that as explained by the assessee, the software was not as per specification and the assessee could not use the same, the outstanding balance amount was not paid but written-off by reducing / debiting the same against software account.  In other words, the sundry creditor balance had been written-off by way of reduction of the software account.
The Tribunal observed that from the depreciation chart, it could be seen that the assessee had not claimed depreciation on software.
On the basis of above facts, the Tribunal opined that the write-off was nothing but could be considered as the rejection/sales return of the software and could not be considered to be assessee’s income.Â
Accordingly, this addition was deleted.
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