2011 (6) TMI 924 - AT - Income Tax

Summary

Issues involved: Appeal against order u/s 263 of the Income Tax Act for A.Y. 2006-07 regarding classification of software for depreciation.

Summary:
The appeal was filed against the order u/s 263 of the Income Tax Act by the assessee, challenging the reclassification of software under computers for depreciation purposes. The CIT observed that the assets were licenses classifiable as intangible assets subject to depreciation at 25%, instead of the claimed 60%. The CIT found the AO's decision erroneous and prejudicial to the interest of revenue, setting aside the order for reconsideration.

The assessee contended that the depreciation on computer software at 60% was in accordance with the law and did not prejudice revenue interests, especially considering eligibility for deduction u/s 10A of the Income Tax Act. The contention was supported by the fact that the Act itself prescribed a 60% depreciation rate for computer software. The Tribunal agreed with the assessee, stating that the AO's decision was not erroneous or prejudicial to revenue interests, especially since any excess depreciation would not result in additional tax due to the exemption u/s 10A.

The Tribunal concluded that the AO's order was not erroneous or prejudicial to revenue interests, ultimately allowing the assessee's appeal. The decision was made on 3rd June, 2011.