Tribunal grants higher depreciation rate for software ERP SAP, treating software license as tangible asset.

The Tribunal allowed the assessee's appeal regarding the disallowance of depreciation on software ERP SAP, directing the Assessing Officer to delete the disallowance of depreciation on computer software. The Tribunal held that the software license should be treated as tangible assets for depreciation purposes, entitling the assessee to the higher rate of 60% depreciation, in line with the decision of the Hon'ble Madras High Court. The judgment emphasized the importance of specific entries in determining depreciation rates for assets and supported the assessee's claim.

---

---

Issues:
Disallowance of depreciation on software ERP SAP at a rate of 60% or 25%.

Analysis:
1. The appeal was filed against the order confirming disallowance of depreciation on software ERP SAP. The assessee, engaged in manufacturing, claimed depreciation at 60%, while the assessing officer allowed only 25% as the software was considered an intangible asset. The dispute centered on the nature of the software and its eligibility for higher depreciation.

2. The assessing officer contended that the software was akin to a license, making it an intangible asset eligible for 25% depreciation. The Commissioner of Income-tax (Appeals) upheld this view, stating that the software was application software sold under certain restrictions, akin to a license for a fixed period. Hence, the disallowance of Rs. 3,84,70,669 was confirmed.

3. The assessee argued that as per the depreciation schedule, computer software was eligible for 60% depreciation, without distinction between system and application software. Citing legal precedents, the assessee highlighted cases where software licenses were allowed higher depreciation rates, emphasizing the nature of the software acquired.

4. The Tribunal analyzed the definitions and provisions under the ITAT Rules regarding depreciation rates for tangible and intangible assets. Referring to the decision of the Hon'ble Madras High Court, the Tribunal concluded that the software license acquired by the assessee fell under the definition of computer software eligible for 60% depreciation. The Tribunal emphasized the specific entry in contrast to the general entry under the rules, supporting the assessee's claim.

5. Consequently, following the Madras High Court decision, the Tribunal directed the Assessing Officer to delete the disallowance of depreciation on computer software, allowing the assessee's appeal. The judgment favored the assessee's contention that the software license should be treated as tangible assets for depreciation purposes, entitling them to the higher rate of 60%.

6. In conclusion, the Tribunal's detailed analysis and reliance on legal precedents clarified the nature of the software license acquired by the assessee, leading to the allowance of higher depreciation at 60%. The judgment highlighted the importance of specific entries in determining depreciation rates for assets and upheld the assessee's claim in this case.

---