Assessee wins on TDS u/s 195 secondment costs and 60% depreciation rate for computer software

The ITAT Chennai ruled in favor of the assessee on two issues. First, regarding TDS u/s 195 on secondment cost payments to US entities, the tribunal held that since the assessee reimbursed salary costs on cost-to-cost basis without profit and already deducted TDS u/s 192 (evidenced by Form 16), no additional TDS u/s 195 was required. Second, on depreciation of computer software, the tribunal allowed 60% depreciation rate instead of AO's restricted 25%, holding that software is integral to computer systems and eligible for the same depreciation rate as computers.

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Issues:
The judgment involves two main issues:
1. Disallowance u/s 40(a)(i) for lack of deduction at source on certain foreign payments made by the assessee.
2. Rate of depreciation on computer software.

Issue 1: Disallowance u/s 40(a)(i) for lack of deduction at source on certain foreign payments made by the assessee:

In the Assessment Year 2010-11, the revenue appealed against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance made under section 40(a)(i) of the IT Act for payment of secondment cost to M/s. Caterpillar US without deduction of tax at source u/s. 195 of the IT Act. The revenue contended that the payments were for managerial services and should have been subject to TDS. However, the assessee argued that the payments were reimbursed on a cost-to-cost basis without any profit element, and tax was deducted at source u/s 192. The Tribunal found in favor of the assessee, citing previous decisions and finality of the issue in the assessee's favor. The Tribunal held that the payments did not require TDS u/s 195 since tax was already deducted u/s 192, and dismissed the revenue's appeal.

Issue 2: Rate of depreciation on computer software:

Regarding the depreciation on computer software, the assessee claimed a depreciation rate of 60%, while the Assessing Officer restricted it to 25% considering it as an intangible asset. The assessee argued that the software was an integral part of the computer system and should be eligible for the same rate of depreciation as the computer system itself. The Tribunal agreed with the assessee, citing the decision of the High Court of Madras, and upheld the higher depreciation rate of 60%. The revenue's appeal against this decision was dismissed.

Conclusion:
The Tribunal dismissed the revenue's appeal regarding the disallowance under section 40(a)(i) and upheld the higher depreciation rate of 60% on computer software. The cross-objections by the assessee challenging the validity of reassessment proceedings were deemed academic and dismissed.

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