2015 (11) TMI 1897 - AT - Income Tax

Depreciation at 60% on telecom/computer equipment - whether telecom/computer equipment cannot be classified as computer including computer software - HELD THAT - This issue is covered in respondent assessee s own case for the asst. year 2008-09 2014 (9) TMI 45 - ITAT BANGALORE held that a computer system would encompass a collection of devices including input and output support devices that perform functions including but not limited to logic arithmetic data storage and retrieval communication and control. CIT(A) has not erred in allowing the depreciation at 60% on telecom/computer equipment Disallowance of deduction u/s 10A - assessee is not engaged in manufacturing and export of any article or thing or computer software as required for the purpose of computation of deduction u/s 10A - CIT(A) deleted addition - HELD THAT - The issue is covered by the earlier order of this Hon ble Tribunal in the assessee s own case for the assessment year 2008-09 2014 (9) TMI 45 - ITAT BANGALORE wherein as seen that the assessee satisfies the twin conditions of export of computer software and repatriation of exports proceeds in convertible foreign exchange as prescribed in section 10A of the Act. We therefore concur with the finding of the learned CIT (A) that the assessee is entitled for deduction u/s.10A. Disallowance of deduction u/s 80JJAA - assessee is not involved in telecom services and such services cannot be termed as IT enabled services - CIT(A) deleted addition - HELD THAT - As decided in assessee own case as the facts of the assessee in the case on hand are similar to the facts of the above cited case of Texas Instruments India P. Ltd. 2006 (12) TMI 405 - ITAT BANGALORE deduction u/s.80JJAA of the Act is allowed on the basis of the following facts - i) The business of the assessee falls within the definition of the term industrial undertaking ; ii) The assessee is engaged in providing Information Technology enabled services (computer software); iii) The assessee has claimed deduction of only those payments made to workmen who are not employed in supervisory capacity. In view of the above we uphold the decision of the learned CIT (A) in allowing the assessee deduction u/s.80JJAA of the Act. Accordingly the ground raised at S.No.3 by revenue is dismissed. Disallowance of deduction u/s 35D - expenditure incurred on stamp duty increases the authorized share capital and is not an item of expenditure expressly allowable u/s 35D - CIT(A) deleted addition - HELD THAT - This ground of appeal is restored to the file of AO with a direction to verify whether as a result of this expenditure the share capital is increased or not. In case share capital is increased to treat the same as capital expenditure and if not the share capital is increased to treat as Revenue expenditure.

Summary

Issues Involved:
1. Depreciation on telecom/computer equipment
2. Deduction u/s 10A
3. Deduction u/s 80JJAA
4. Deduction u/s 35D

Depreciation on Telecom/Computer Equipment:
The appeal challenged the CIT(A)'s decision to allow depreciation at 60% on telecom/computer equipment, arguing that such equipment cannot be classified as 'computer including computer software.' The Tribunal referred to a previous decision where it was held that a computer system encompasses a collection of devices capable of logic, arithmetic, data storage, retrieval, communication, and control. Following the precedent, the Tribunal dismissed the appeal by the Revenue.

Deduction u/s 10A:
The issue revolved around the CIT(A)'s allowance of exemption u/s 10A of the Income-tax Act. The Tribunal cited a previous order where it was established that the assessee's activities of developing content and converting procured content into mobile-readable format qualified as 'Content Development' or 'Data Processing,' making the assessee eligible for deduction u/s 10A. Relying on the earlier decision, the Tribunal dismissed the appeal by the Revenue.

Deduction u/s 80JJAA:
The challenge was against the CIT(A)'s decision to allow the deduction u/s 80JJAA. The Tribunal referred to a previous case involving similar facts where it was concluded that the assessee satisfied the conditions for the deduction as the business fell within the definition of 'industrial undertaking' and only payments to 'workmen' not in supervisory roles were claimed. Following the precedent, the Tribunal upheld the CIT(A)'s decision to allow the deduction u/s 80JJAA and dismissed the appeal by the Revenue.

Deduction u/s 35D:
The appeal contested the CIT(A)'s decision to allow the stamp duty incurred in increasing the share capital. The Tribunal directed the issue back to the AO to verify if the expenditure resulted in an increase in share capital. If so, it should be treated as capital expenditure; otherwise, it should be treated as revenue expenditure. The appeal by the Revenue was partly allowed in these terms.

This detailed analysis of the judgment covers the issues involved comprehensively, outlining the arguments presented, the Tribunal's considerations, and the final decisions rendered for each issue.