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Facts
The assessee claimed depreciation at 60% on computer software, but the AO allowed only 25%. The assessee argued it purchased a license to use the software for business purposes, while the AO considered it an intangible asset eligible for lower depreciation. The CIT(A) allowed the assessee's claim.
Held
The Tribunal held that the depreciation schedule provides for a 60% depreciation rate on computers including software. As the software was used for trading applications in the assessee's business, it was eligible for depreciation at the rate of 60%.
Key Issues
Whether the assessee is eligible for depreciation at 60% on software license, or only at 25% as held by the AO.
Sections Cited
Section 25(2), Section 32(1)(ii)
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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI RAHUL CHAUDHARY
Per : Narendra Kumar Billaiya, Accountant Member:
This appeal by the revenue is preferred against the order of the CIT(A) - Addl/JCIT(A) 3 – Delhi, dated 31/07/2024 pertaining to Assessment Year 2014-15.
The grievance of the revenue read as under:
“1. Whether on the facts and circumstances of the case and in law, the CIT(A) was right in deleting the addition of Rs.6,14,89,096/-made by the AO?
SBICAP Securities Limited 2. Whether on the facts and circumstances of the case and in law, the CIT(A) was right in holding that the software license twill fall under Entry 5 of. Part A of New Appendix I for computers including software when the AO had clearly brought out that the assessee had right to use software license till the period of agreement and payment of license fee making it as intangible assets? 3. The appellant craves leave to add, amend, alter and/or vary any of the grounds of appeal before or at the time of hearing”
3. None appeared on behalf of the assessee in spite of notice therefore, we decided to proceed ex-parte.
4. The DR was heard at length and case records carefully perused.
5. Briefly stated the facts of the case are that during the course of the scrutiny assessment proceedings the AO noticed that the assessee has claimed depreciation at the rate of 60% on computer software. The AO was of the opinion that the assessee is eligible for depreciation at the rate of 25%. Accordingly, the AO asked the assessee to justify its claim of the depreciation at the rate of 60%.
6. In its reply the assessee explained that it has purchased the license to use the software for the purposes of its business.
7. The reply of the assessee did not find any favor with the AO who was of the firm belief that the assessee is eligible only for depreciation at the rate of 25% and accordingly, disallowed the balance.
8. Assessee carried the matter before the CIT(A) and reiterated its claim of depreciation at the rate of 60%.
SBICAP Securities Limited 9. After considering the facts and the submissions the CIT(A) was convinced with the claim and drawing support from the decision of coordinate bench in the case of R K Mark Chemicals India Private Limited in order dated 22/04/2022 allowed the claim of depreciation at the rate of 60%.
Before us the DR strongly supported the findings of the AO. We have carefully considered the orders of the authority below. We find that the depreciation schedule provides separate rates of depreciation for computer with Softwares and intangible assets. The schedule provides depreciation on computers including computer software at the rate of 60%. Computer Software has not been further bifurcated which means that any software whether imbibed in the computer or not but used with the computer is eligible for depreciation at the rate of 60%. As the assessee is engaged in the business of providing share and stock broker services, financial product distribution services and depositary participant services, it purchased the license to use the software and as per the agreement the said product was installed in its computers and was used for trading applications. We are of the considered view that the impugned software is eligible for depreciation at the rate of 60%. Therefore, we do not find any reason to interfere with the findings of the CIT(A) appeal of the revenue is accordingly dismissed.
Order pronounced in the open court on 25.11.2024.