2022 (1) TMI 732

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....er referred to as "the Act") relevant to the Assessment Year 2013-2014. 2. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in law and on facts in allowing the appeal of the assessee, i.e. on the issue of depreciation @ 60% on license to use software, without appreciating the fact that the depreciation @ 60% is not allowable on purchase of license which was purchased at a premium, to run the software, which was rightly disallowed by the AO by restricting the said depreciation to 25%. 2. On the facts and in the circumstances of the case and in law, the Ld. C!T(A) erred in [aw and on fact in deleting the capitalization of prelimin....

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.... of computer. 4.1 However the AO was of the view that software license is not the computer. As such software license is part of intangible assets. Hence the AO restricted the depreciation to the extent of 25%. Thus the AO disallowed the excess depreciation of Rs. 1,25,982/- and added the excess depreciation to the total income of the assessee. 5. Aggrieved assessee preferred to appeal before learned CIT (A), who allowed the appeal of the assessee by observing as under: 6.2. I have considered the appellant's submissions and the AO's observations. The Hon'ble Mumbai ITAT in the case of National Collateral Management Services Pvt. Ltd. in ITA No. 2237/Mum/2013 dated 28.09.2016 has held that the computer software a....

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.... the same is allowable at the rate applicable for computer. In this regard we also find support and guidance from the judgment of Hon'ble Madras High Court in case of CIT vs. Computer Age Management Services (P.) Ltd. reported in 109 taxmann.com 134 where in similar facts, the Hon'ble court held as under: 8. The question would be as to whether the software application, which was acquired by the assessee would fall under Entry 5 of Part A of New Appendix I, which states that computers including computer software are entitled to depreciation at 60%. Note 7 of the Appendix defines the expression 'computer software' to mean any programs recorded on CD or disc, tape, perforated media or other information storage devices. ....

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....ses for employees appointed especially for the project, insurance, electricity charges, and security charges. The total expenditure was incurred for Rs. 5,06,40,582/- in two different financial years as detailed below: A.Y. 2012-13 Rs. 2,61,11,000/- A.Y. 2013-14 Rs. 2,45,29,582/- 10.1 However, the assessee claimed that these expenses were claimed as revenue expenses in the respective financial years under the provisions of section 37(1) of the Act. As per the assessee, these expenses were incurred after the commencement of business but before the commencement of the commercial production. Therefore, these expenses are outside the purview of the provisions of section 35D of the Act. 10.2 However, the AO was of the view that....

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....th preparation of feasibility report, preparation of project report, conducting market survey or any other survey necessary for the business of the assessee, engineering services relating to the business of the assessee, legal charges for drafting any agreement between the assessee and any other person for any purpose relating to the setting up or conduct of the business of the assessee or the expenses incurred for setting up the new company. The expenses claimed by the appellant in the nature of revenue expenditure are in the form of travelling expenses, salary expenses etc. as mentioned in the appellant's submission. Besides, this is not the case where the appellant is setting up a new unit. But, it is a case where the appellant is ex....

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....plant, though capitalised in the books of accounts but were claimed as revenue in the computation of income. However, the AO treated such connected expenses as preliminary expenses which were to be amortized over a period of 5 years. 14.1 First of all, we note that the provisions of section 35D are applicable for the expenditures incurred before the commencement of the business or after the commencement of the business in connection with the extension of the undertaking/setting up of new unit. There is no allegation of the AO whether the expenditure were incurred by the assessee were before the commencement of the business or after the commencement of the business in connection with the extension of undertaking/setting up of a new unit. ....