TaxTMI 
TaxTMI 
2023 (1) TMI 1120
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.... dated 16.12.2013 passed by the CIT(A) partly allowing the appeal against the Assessment Order, dated 27.12.2011 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for the Assessment Year 2009-10. 3. The Appellant has raised following grounds of appeal: "1) The learned Commissioner of Income Tax (Appeals) erred holding that the provisions of Section 14A of the Act were applicable in the case of the Appellant, since the dividend from shares/units of mutual funds is subjected to tax in the hands of the payer under section 115-O/ 115-R of the Act and as the Appellant receives an amount after the tax has been paid, it cannot be said that such dividend income is not chargeable to tax under the Act and, hence, the provisions of Section 14A are not attracted in the case of the Appellant. 2) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing an amount of Rs.9,73,508/- under Section 14A of the Act computed in accordance with the provisions of sub-clause (iii) of Rule 8D. Having regard to the facts and circumstances of the case and the provisions of law, the Appellant submits....
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....d 27.12.2011. The Assessing Officer, inter alia, made (a) addition of INR 99,670/- holding the same to be receipts not accounted for in the books of account for the relevant previous year, (b) disallowance of INR 9,73,508/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (hereinafter referred to as "the Rules") holding the same to be expenditure incurred to earn exempt income, and (c) disallowance of depreciation of INR.1,77,764/- holding the same to be excess depreciation claimed by incorrectly applying the rate of 60% in respect of application software instead of the applicable rate of 25%. The Assessing Officer also added the amount disallowed under Section 14A of the Act while computing Book Profits under Section 115JB of the Act. 5. Being aggrieved, the Appellant carried all the above issues in appeal before the CIT(A). However, the CIT(A) declined to grant any relief and vide order dated 16.12.2013 dismissed all the grounds raised by the Appellant in this regard. 6. Being aggrieved, the Appellant are now in appeal before us challenging the order passed by CIT(A) on the grounds specified in paragraph 2 above. Ground No. 1 to 5 7. Ground 1 to 4 ....
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.... the material on record. On perusal of the financial statements of the Appellant for the financial year ended 31.03.2009 relevant to the Assessment Year 2009-10, we find that the averments made by the Ld. Authorised Representative for the Appellant are factually correct as the Appellant is a debt free company having sufficient own capital for making investments. The Hon"ble Delhi High Court in the case of ACB India Ltd. (supra) has held that only investments yielding exempt income during the relevant previous year are to be considered while computing the average value of investment for the purpose of Rule 8D(2)(iii) of the Rules. However, in the present case the Assessing Officer has taken into consideration the entire Investments. Accordingly, we set aside the addition of INR 9,73,508/- made under Section 14A of the Act. The Assessing Officer is directed to re-compute disallowance under Section 14A read with Rule 8D(2)(iii) of the Rules by taking into consideration only the investments yielding exempt income during the relevant previous year as per the judgment of Hon"ble Delhi High Court in the case of ACB India Ltd. (supra). In view of the above Ground No. 1 to 4 raised by the A....
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....ssessee was entitled to depreciation at 25%. 7. As noticed above, the assessee is in the business of registrar and transfer agent as licensed by the SEBI handling large volume of market sensitive data and information, which is available only through general customized application software. The assessee acquired software licenses capitalized during the relevant years in the books of accounts and claimed depreciation at 60%. In paragraph 20 of the order passed by the Tribunal, the nature of items, on which, the assessee claimed depreciation at 60%, has been listed out and they are 17 in number, from which, we find that substantial amount of server licences, which have been obtained by the assessee are customized and some of which are single user licenses. 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. 9. ....
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....cular article would fall within the description by the force of words used, it is impermissible to ignore the word description. Thus, going by the usage of the equipment purchased by the petitioner, we have to take a decision." 12. As held in the above decision, if a particular article would fall within the description by the force of the words used, it is impermissible to ignore the word 'description' and going by the usage of the equipment purchased by the assessee, a decision has to be arrived at. We find that there is no error in the decision arrived at by the Tribunal by taking note of the specific entry in contra distinction with the general entry. Therefore, the first substantial question of law has to be necessarily answered against the Revenue." (Emphasis Supplied) 16. That the Hon"ble Madras High Court had held that rate of 60% shall be applicable in the case of application software. In view of the same, we hold that the Appellant is entitled to claim depreciation at the rate of 60% in respect of application software. The disallowance of depreciation amounting to INR 17,764/- is, therefore, deleted. Accordingly, Ground No. 6 raised by the Appellant is allowed. ....
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....% in respect of application software, and therefore, disallowance of depreciation amounting to INR 7,105/- is deleted. ITA No.2595/AHD/2015 (Assessment Year 2011-12) 22. We would now take up appeal for the Assessment Year 2011-12. By way of this appeal the Appellant/Assessee has challenged the order dated 21.07.2015 passed by the CIT(A) partly allowing the appeal against the Assessment Order, dated 30.12.2013 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for the Assessment Year 2011-12. 23. The Appellant has raised following grounds of appeal: "1) The learned Commissioner of Income Tax (Appeals) erred in holding that the investments in growth schemes of mutual fund units, which do not yield any exempt income, are to be considered for computing the average value of investments as per the provisions of sub- clause (iii) of Rule 8D, for the purpose of computing the disallowance under Section 14A of the Act. 2) Without prejudice to the Appellant's contention that no expenditure is allocable to the earning of exempt dividend income and in any event, the Appellant submits that the disallowance computed at Rs 14,51,960/- is arbit....
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.... in Ground No. 6 of the appeal for the Assessment Year 2009-10. Accordingly, in view of our finding/adjudication in paragraph 16 above, Ground No. 3 raised by the Appellant is allowed. We hold that the Appellant is entitled to claim depreciation at the rate of 60% in respect of application software, and therefore, disallowance of depreciation amounting to INR 65,318/- is deleted. Ground No. 4 26. Ground No. 4 relates to net foreign exchange gain of INR 8,93,939/-During the assessment proceedings vide letter dated 15.11.2013 the Appellant raised additional claim in respect of net foreign exchange gain of INR 8,93,939/- credited to the Profit & Loss Account. However, the Assessing Officer disregarded the same while the CIT(A), in appeal preferred by the Appellant, refused to entertain the claim holding as under: "11. Ground No.11 is with regard to the claim raised by the Appellant during the course of the assessment proceedings vide letter dated November 15, 2013, that the net foreign exchange gain of Rs.8,93,939/- on the capital advance paid to Dilo Gmbh towards purchase of machinery, which was credited to the Profit and Loss Account of the Appellant, was required to be excluded....