TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 427
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.... Ld. CIT(A) erred in law and on facts in deleting the disallowance of Rs. 5,44,00,853/- on account of depreciation claimed on special software. 2) On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax (Appeals) ought to have upheld the disallowance made by the Assessing Officer. 2.1. Briefly stated, the assessee-company is engaged in providing outsourcing services for finance, accounts, human resources and supply chain management and data centre to Vodafone India Limited and its Indian subsidiaries. In the course of the assessment, the Assessing Officer inter alia noticed that the assessee-company (VSSL) has shown a total addition to computers on account of computer softwares amounting to Rs. 15,54,31,008/-. The Assessing Officer noticed that the assessee has claimed depreciation @ 60% on such computer softwares It was observed by the Assessing Officer that the aforesaid purchases were made mainly on SAP product which is a customized product having software just a minor component of it. This product was stated to be delivered to the assessee along with loads of other technical services and know how to operate and utilize such specialized product f....
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....re (P.) Ltd. 72 taxmann.com 199 (Ahmedabad - Trib.) wherein it was held that licenced software is also eligible for depreciation @ 60%. In view of the issue has already been adjudicated in this fashion, we do not see any perceptible reason to interfere with the order of the CIT(A). the appeal of the revenue is thus bereft of any merits. 2.4. In the result, the appeal of the Revenue in ITA No.1468/Ahd/2016 for AY 2011-12 is dismissed. 3. We shall now turn to the cross-appeal of the assessee in ITA No.1923/Ahd/2016 for AY 2011-12. 3.1. As per its appeal, the assessee has impugned the order of the CIT(A) in confirming the action of the Assessing Officer in upholding the disallowance of 'rent equalization reserve' amounting to Rs. 41,69,148/- treating the same as mere provision in the books. 3.2. When the matter was called for hearing, the Ld.AR for the assessee submitted that the assessee has made a provision amounting to Rs. 41,69,148/- in respect of rent equalization expenses and debited the same to profits & loss account and claimed the same as deduction while computing taxable income. The Assessing Officer however has disallowed the aforesaid expenses on the ground that it is ....
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....e Hon'ble Supreme Court in Core Healthcare Ltd. (2008) 298 ITR 194 (SC) and the issue was adjudicated in favour of the assessee. 6.2, The Ld.DR for the Revenue, on the other hand, relied upon the order of the Assessing Officer. 6.3. While we proceed to deal with the controversy, we take note of the order of CIT(A) in this regard. The CIT(A) has dealt with the issue as under:- "4.2 I have carefully considered the contentions as well as the case laws relied upon by the appellant and the observation of the A.O. The similar issue was raised before the DRP, Ahmedabad in the case of Vodafone West Ltd.(earlier known as Vodafone Essar Gujarat Ltd.) for A.Y.2009-10. The facts and the issue raised were similar as per grounds of appeal no.2. The finding of the DRP are as follows :- "15.3 We have carefully considered the facts of the case and contentions of the AO as incorporated in the draft assessment order. We have also gone through the various oral and written submission made by the assessee's representative. The assessee has incurred interest expenditure during the year in respect of various ECB loans obtained for acquisition of capital assets. The assessee has acquired capital ....
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....ion 8 has no relevancy to Section 36(1)(iii). It has relevancy to the aforementioned enumerated sections. Therefore, in our view Explanation 8 has no application to the facts of the present case..... Section 36(1)(iii) is attracted when the assessee borrows the capital for the purpose of his business. It does not matter whether the capital is borrowed in order to acquire a revenue asset or & capital asset, because of that the section requires is that the assessee must borrow the capital for the purpose of his business....." The above principles were subsequently followed by Hon'ble Supreme Court in the case of United Phosphorous Ltd. (299 ITR 9) and Vardhman Polytex Ltd. V CIT (349 ITR 690). Hence, respectfully following the above judgments of Hon'ble Supreme Court, we hold that interest expenditure incurred by the assessee on ECB used for acquisition of capital assets is eligible for deduction under section 36(1)(iii) of the Act. Accordingly, we direct the AO to delete the proposed addition of interest expenditure incurred by assessee. Hence, this ground of assessee is allowed." Agreeing with the findings of the DRP as mentioned above as well as relying on the judgme....