Tribunal grants appeal for depreciation claim on Content Management Software.

The Tribunal allowed the appeal, directing the AO to permit the depreciation claim on Content Management Software (CMS) owned and used by the assessee. The alternate claim for treating the expenditure as revenue under section 37(1) was not addressed as the depreciation claim was allowed. The decision in favor of the assessee was pronounced on 08.07.2020.

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Issues:
1. Disallowance of depreciation on Content Management Software (CMS) claimed under section 32 of the Income Tax Act, 1961.
2. Allowance of expenditure incurred for development of software as revenue expenditure under section 37(1) of the Act.

Analysis:

Issue 1: Disallowance of Depreciation on CMS
- The assessee, a company engaged in publication and software trading, filed its return for AY 2015-16, claiming depreciation on CMS.
- The AO disallowed the depreciation as the software was not owned by the assessee, leading to a reduced claim of depreciation.
- The assessee contended that CMS was developed and owned by them, used for internal purposes and services to the Income Tax Department.
- The AR argued that the software supported content creation, version control, and was used for managing the ITAT's website.
- The AR emphasized that the software was proprietary, capitalized in books, and met the requirements of section 32 for depreciation.
- The Tribunal found the AO's denial unjustified, as the ownership and usage of CMS by the assessee were established.
- The claim of depreciation was allowed, and the alternate claim under section 37(1) was not adjudicated due to the depreciation allowance.

Issue 2: Allowance of Expenditure as Revenue
- The AR raised an alternate claim for treating the expenditure as revenue under section 37(1) before the CIT(A).
- The CIT(A) dismissed this claim, stating it was not part of the original assessment order or appeal.
- The AR argued citing the NTPC Ltd case that the issue was justifiably raised before the CIT(A).
- The Tribunal did not address this claim due to allowing depreciation, rendering the alternate claim academic.
- The subsequent year's depreciation claim by the assessee was not disturbed by the Revenue, supporting the assessee's position.

Conclusion:
- The Tribunal allowed the appeal, directing the AO to permit the depreciation claim on CMS.
- The alternate claim for revenue expenditure under section 37(1) was not addressed due to the allowance of depreciation.
- The decision was pronounced on 08.07.2020 in favor of the assessee.

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