Appeal dismissed on depreciation & software license fees by ITAT

The appeal challenging the deletion of disallowance of depreciation on computers was dismissed by the ITAT, upholding the CIT(A)'s decision. The ITAT found the evidence provided by the assessee regarding the computer purchase to be genuine and in compliance with the Income-tax Act, 1961. Similarly, the appeal contesting the disallowance of revenue expenditure towards software license fees was rejected by the ITAT, as the expenses were incurred in a different financial year. Both appeals were dismissed based on the judgment pronounced on 23.03.2015.

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Issues involved:
1. Deletion of disallowance of depreciation on computers.
2. Disallowance of proportion of revenue expenditure towards software license fees.

Detailed Analysis:

Issue 1: Deletion of disallowance of depreciation on computers
The Revenue challenged the First Appellate Order on the grounds that the assessee failed to prove the genuineness of the purchase of new computers on which depreciation was claimed. The key contention was whether the deletion of disallowance of Rs. 30,82,560 made on account of depreciation on computers was justified. The Senior DR argued that the assessee could not establish the existence of the company from which it claimed to have purchased the computers. Despite various opportunities during the assessment proceedings, the onus of proving the genuineness of the claim was not met by the assessee. However, the AR defended the First Appellate Order by providing detailed evidence of the computer purchase, including invoices, VAT registration, and payment details through cheques. The ITAT noted that the assessee had fulfilled the requirements of ownership and use of the computers for business purposes, as per Section 32 of the Income-tax Act, 1961. Relying on precedents, the ITAT upheld the CIT(A)'s decision to delete the disallowance, emphasizing the genuineness of the transaction based on the evidence provided. Thus, the appeal challenging the deletion of disallowance of depreciation on computers was dismissed.

Issue 2: Disallowance of proportion of revenue expenditure towards software license fees
The assessee contested the disallowance of a proportion of revenue expenditure incurred towards payment of software license fees, arguing that the license fee was valid for a period outside the relevant assessment year. The ITAT found that the claimed expenses of Rs. 32,58,667 were denied by the authorities as they pertained to a different financial year. The software licenses purchased by the assessee were annual licenses used over one year, not renewed the following year. The disallowance was made on a proportionate basis considering the period of usage spanning financial years. The Assessing Officer and CIT(A) upheld the disallowance based on this reasoning. The ITAT distinguished a previous decision cited by the assessee, emphasizing that it did not cover the specific issue at hand. Consequently, the appeal challenging the disallowance of revenue expenditure towards software license fees was rejected. In conclusion, both appeals were dismissed as per the judgment pronounced on 23.03.2015.

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