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2021 (3) TMI 714 - AT - Income TaxExcess claim of depreciation on software expenses - Commissioner deleted the addition - HELD THAT - We find that the issue before us is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal in assessee's own case 2020 (5) TMI 84 - ITAT DELHI for the immediate preceding assessment year 2012-13 wherein the Bench declined to interfere with the order of the first appellate authority wherein held the nature of the software acquired were licenses, which do not confer any enduring right and could be used for the duration as acquired for by the licensor. The taxpayer's objective was to use computer software to maximize its performance and streamline efficiency. The Hon'ble Bombay High Court in the case of M/s. I-Flex Solutions Ltd 2014 (3) TMI 1162 - BOMBAY HIGH COURT held that there is no reason to differentiate the computer and the software as the latter is an integral part of the former. The software cannot be seen in isolation delinked from the computers. The issue of depreciation @ 60% on the software is now a settled issue beyond any perplexity. Hence, we decline to interfere with the order of the ld. CIT(A). Revenue's appeal is dismissed.
Issues:
1. Disallowance of excess claim of depreciation on software expenses. Analysis: The appeal was filed by the assessee challenging the order passed by the Commissioner (Appeals) for the assessment year 2013-14. The main issue was whether the disallowance of excess claim of depreciation on software expenses amounting to ?14,17,240 was justified. The Assessing Officer observed that the assessee had claimed depreciation on software assets at 60% instead of the allowable 25%, resulting in the excess claim. The disallowance was added back to the income of the assessee. The assessee contested this disallowance before the Commissioner (Appeals), relying on precedents and decisions. The Commissioner (Appeals) allowed the appeal, citing similar cases where depreciation at 60% was permitted. The Revenue then appealed to the Tribunal against this decision. During the Tribunal proceedings, the Departmental Representative argued for upholding the Assessing Officer's order of allowing depreciation at 25%. The counsel for the assessee highlighted two issues: the rate of depreciation on software and a claim for deduction on account of ESOP. The counsel referenced previous cases where similar issues were decided in favor of the assessee. After considering the submissions and precedents, the Tribunal found that the issue was in favor of the assessee based on a previous decision in the assessee's own case for the assessment year 2012-13. The Tribunal declined to interfere with the Commissioner (Appeals) decision, citing settled precedents and observations regarding the nature of software licenses and the eligibility for depreciation at 60%. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the Commissioner (Appeals) decision. In conclusion, the Tribunal upheld the Commissioner (Appeals) decision to allow the excess claim of depreciation on software expenses, based on settled precedents and the nature of the software assets. The appeal by the Revenue was dismissed, affirming the decision in favor of the assessee.
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