GOFRUGAL TECHNOLOGIES PVT. LTD.,,CHENNAI vs. DCIT, CC-2(1),, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-6, Chennai dated 01.08.2019 relevant to the assessment year 2011-12. The only effective ground raised in the appeal of the assessee is that the ld. CIT(A) has erred in confirming the restriction of the claim of depreciation on computer software to 25% as against 60% claimed by the assessee.

Brief facts of the case is that the assessee is engaged in the business of development and export of software in the name of “M/s. Go Fruggal Software Technologies Private Limited” at Chennai. The assessee filed its return of income for the assessment year 2011-12 declaring an income of Rs.99,86,43,940/- and the case was selected for scrutiny and the assessment was completed u/s.143(3) r.w.s. 144C of the Income Tax Act, 1961 on 02.03.2015 assessing an income of ₹.99,87,44,180/- after making various additions. After passing rectification order dated 24.01.2018, the income of the assessee was revised to ₹.100,33,93,986/-.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the computer software would fall only under “Computers including computer software” and not under know- how, patents, copyrights, trademarks, licenses, franchises and any other business or commercial rights of similar nature and the ld. CIT(A) has erroneously held that purchase of software license is only an intangible asset. By relying on the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Computer Age Management Services in TCA Nos. 409, 410 & 412 of 2019 dated 08.07.2019, the ld. Counsel for the assessee prayed for allowing depreciation @ 60%. On the other hand, the ld. DR supported the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. We have perused the case law relied on by the assessee in the case of CIT v. Computer Age Management Services (supra), wherein, the assessee acquired software licenses, capitalized during the relevant years in the books of accounts and claimed depreciation at 60% and the Tribunal has held that the assessee is eligible to claim depreciation at 60%. By following the decision in the case of CIT v. Cactus Imaging India Pvt. Ltd. 406 ITR 406 (Mad) and also considering the decision in the case of Bimetal Bearings Ltd. v. State of Tamil Nadu [reported in (1991) 80 STC 167], the Hon’ble Jurisdictional High Court confirmed the order of the Tribunal. The ld. DR could not controvert the above decision of the Hon’ble High Court by filing any higher court decision having modified or reversed. Accordingly, we direct the Assessing Officer to allow depreciation on software licenses at 60%. Thus the ground raised by the assessee is allowed.

The assessee also raised a ground in ground 10 that the ld. CIT(A) erred in confirming the order passed by the Assessing Officer on a non- existing company (GoFrugal Software Technologies Private Limited) which amalgamated with another company (Gofrugal Technologies Private Limited) as on the date of the assessment. However, at the time of hearing, the ld. Counsel for the assessee made an endorsement in the grounds of appeal that the ground is “not pressed”. Accordingly, the ground raised in ground No. 10 is dismissed as not pressed.

In the result, the appeal filed by the assessee is partly allowed.