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TMI Blog2004 (7) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... t represent surplus arising out of sales realisation held that it should not form part of total turnover while computing deduction u/s 80HHE of the Act. He further found that the assessee on its own has included in the total turnover exchange gain towards difference in exchange actually realised. This factual finding of the learned CIT(A) was not specifically challenged before us, hence we do not see any merit in the ground of the Revenue. This ground also fails. Depreciation on certain old assets written off in the books - The learned CIT(A) observed that the assessee had not received any money in wake of the discarding of the assets, therefore, the assets continue to form a part of the block. Therefore, the assessee was justified in claiming depreciation on the same. While arriving at this conclusion he placed reliance on the decision of the Tribunal, Ahmedabad Bench, in the case of Inductotherm (India) Ltd. vs. Dy. CIT [ 1999 (6) TMI 45 - ITAT AHMEDABAD-C] , wherein it was held that the claim regarding depreciation is in accordance with law. We have considered the arguments from both sides and perused the material available on record. We do not find any infirmity in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems are costly; (iii) Once the software is purchased, it is used over the years; and (iv) The Finance Act, 1999, specifically provides to allow expenses on Y2K software as revenue expenditure, which means that the same would not be allowable but for this amendment. 3. Before the CIT(A), the assessee contended that it is engaged in the business of export out of India of computer software or its transmission from India to a place outside the country, in addition to providing technical services outside India in connection with development of production of software. As per the practice, the assessee charged to the P&L a/c expenditure incurred on application software which had become obsolete, but the AO has treated it of capital nature and allowed only depreciation thereon. It argues that new versions of software programmes are coming out daily and the software technology is changing so rapidly that software of today becomes obsolete tomorrow. It was further contended that the state of the art in software technology has to be constantly updated so that no software package wears the requisite degree of durability to qualify as an enduring capital asset. The magnitude of expenditure is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-ephmerality to share the requirements and qualifications of an enduring capital asset. The rapid stride in science and technology in the field should make us a little slow and circumspect in too readily pigeon-holing an outlay such as this a capital.' The Jaipur Bench of Tribunal in the case of Business Information Processing Services vs. Asstt. CIT (2000) 67 TTJ (Jp) 131 has held that expenses on development of computer software are revenue in nature. The times are fast changing and computer system has emerged as a very important component during this fast changing era when day-by-day the systems are developed in a new way and softwares are needed like a raw material for use. As regards the AO's reliance on the amendment inserted in s. 36 by the Finance Act, 1999, I am of the view that the said amendment has allowed the capital expenditure on hardware to make non-Y2K compliant system into compliant system, whereas software consists of programmes which a computer uses for the task on the basis of logic supplied by the user and the software programme also requires changes if the logic for the desired result is being changed. Respectfully following the judgment of their L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the Revenue. This ground also fails. 7. With regard to ground No. 3 pertaining to depreciation of Rs. 15,32,824 on certain old assets written off in the books on the premise that the assets had not been put to use during the year, the assessee contended before the CIT(A) that it had written off Rs. 61,31,294 in the books on 31st Dec., 1995, towards certain fixed assets such as xerox machines, UPS machines, computers, etc. as they had become unusable, but the depreciation was claimed on the same as they continue to form a part of block of fixed assets. It was further explained that it is the practice to write off computer related items in the books once they become obsolete as the extent of obsolescence in respect of these types of items is quite high in information technology industry. The assessee admitted to have actually used these assets. The assessee invited the attention of the CIT(A) to the provisions of s. 43(6)(c)(B) of the Act to state that the written down value in the case of any block of assets means the aggregate of the written down values of all assets falling within that block of assets at the beginning of the previous year as reduced by monies payable in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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