2019 (6) TMI 755 - HC - Income Tax

High Court admits appeal on software depreciation, dismisses Foreign Exchange Fluctuations Gain issue

THE PRINCIPAL COMMISSIONER OF INCOME TAX 4 Versus ZYDUS HOSPIRA ONCOLOGY P. LTD.

The High Court admitted the appeal challenging the disallowance of depreciation on software. The Court found merit in admitting the appeal and considered ... Disallowance of Foreign Exchange Fluctuations Gain - HELD THAT:- No substance in the second proposed question as the same is squarely covered by the decision in the case of Priyanka Gems [2014 (3) TMI 938 - GUJARAT HIGH COURT] . Present appeal stands dismissed qua second question Depreciation u/s. 32(1) on addition of software - HELD THAT:- APPEAL is ADMITTED so far as first question is concerned - “Whether the Appellate Tribunal has erred in law and on facts in upholding the decision of the CIT(A) on Dis-allowance of Depreciation u/s. 32(1) on addition of software?' Issues Involved:Challenging the impugned order dated 9/7/2018 passed by the Income Tax Appellate Tribunal on two questions:1. Disallowance of Depreciation u/s. 32(1) on addition of software of Rs. 54,42,321/-2. Disallowance of Foreign Exchange Fluctuations Gain of Rs. 1,88,73,120/-Analysis:Issue 1: Disallowance of Depreciation on SoftwareThe appellant challenged the decision of the CIT(A) regarding the disallowance of depreciation under section 32(1) on the addition of software amounting to Rs. 54,42,321/-. The High Court noted that a similar question had previously arisen for the same assessee, leading to the admission of a previous appeal. The Court found merit in admitting the present appeal concerning the disallowance of depreciation on software. The substantial question of law for consideration was whether the Appellate Tribunal erred in upholding the CIT(A)'s decision on the disallowance of depreciation under section 32(1) on the software addition.Issue 2: Disallowance of Foreign Exchange Fluctuations GainRegarding the second question on the disallowance of Foreign Exchange Fluctuations Gain of Rs. 1,88,73,120/-, the High Court referred to a previous decision in the case of Commissioner of Income Tax Versus Priyanka Gems. The Court found no substance in the second proposed question as it was squarely covered by the decision in the Priyanka Gems case. Consequently, the present appeal was dismissed with respect to the second question. The Court directed that the appeal be heard along with Tax Appeal No.1319 of 2018, which was admitted for final adjudication on the disallowance of depreciation on software under section 32(1) of the Income Tax Act, 1961.