GOFRUGAL TECHNOLOGIES PVT. LTD., CHENNAI V. DCIT, CC-2(1), CHENNAI

ITA 3022/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5006 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 25-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R ANITA
• Assessee Lawyers: LAKSHMI
• Keywords: Depreciation; Rectification of order
• Section: 144C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO.3022/CHNY/2019 /ASSESSMENT YEAR: 2011-12 M/S. GOFRUGAL TECHNOLOGIES PRIVATE LIMITED, SREE NARAYANA COMPLEX NO.11, SARATHY NAGAR, VIJAYA NAGAR, VELACHERY, CHENNAI 600 042 [PAN: AACCA4341F] VS. THE DEPUTY COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 2(1) CHENNAI 600 034 ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MS. LAKSHMI, ADVOCATE /RESPONDENT BY : MS. R. ANITA, JCIT /DATE OF HEARING : 06.02.2020 /DATE OF PRONOUNCEMENT : 19.02.2020 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI DATED 01.08.2019 RELEVANT TO THE ASSESSMENT YEAR 2011-12. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE RESTRICTION OF THE CLAIM OF DEPRECIATION ON COMPUTER SOFTWARE TO 25% AS AGAINST 60% CLAIMED BY THE ASSESSEE. 2. THE APPEAL FILED BY THE ASSESSEE IS DELAYED BY 4 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL, FOR WHICH, THE ASSESSEE HAS FILED A PETITION FOR CONDONATION OF THE DELAY IN THE FORM OF AN AFFIDAVIT, TO WHICH; THE LD. DR HAS NOT RAISED ANY SERIOUS OBJECTION. CONSEQUENTLY, SINCE THE ASSESSEE WAS :- 2 -: ITA NO.3022/CHNY/2019 PREVENTED BY SUFFICIENT CAUSE, THE DELAY OF 4 DAYS IN FILING OF THE APPEAL STANDS CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 3. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF SOFTWARE IN THE NAME OF M/S. GO FRUGGAL SOFTWARE TECHNOLOGIES PRIVATE LIMITED AT CHENNAI. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 DECLARING AN INCOME OF RS.99,86,43,940/- AND THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961 ON 02.03.2015 ASSESSING AN INCOME OF .99,87,44,180/- AFTER MAKING VARIOUS ADDITIONS. AFTER PASSING RECTIFICATION ORDER DATED 24.01.2018, THE INCOME OF THE ASSESSEE WAS REVISED TO .100,33,93,986/-. 3.1 FACTS LEADING TO THE DISALLOWANCE OF EXCESS DEPRECIATION OF .38,05,246/- ARE THAT THE ASSESSEE PURCHASED SOFTWARE LICENSE FOR .35,37,459/- AND GROUPED UNDER INTANGIBLE ASSETS. IN ADDITION THERE WAS AN OPENING WDV OF .73,34,672/- UNDER THIS HEAD. IN ITS DEPRECIATION SCHEDULE, THE ASSESSEE HAS CLAIMED DEPRECATION @ 60% ON SOFTWARE CLAIMING THAT THESE ARE PART OF COMPUTERS INCLUDING SOFTWARE. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT THE SOFTWARE LICENSES ARE INTANGIBLE ASSETS AND ARE ELIGIBLE FOR DEPRECIATION @ 25% ONLY. ACCORDINGLY, THE ASSESSING OFFICER RESTRICTED THE DEPRECIATION TO 25% ONLY AS AGAINST THE CLAIM OF 60% AND THE EXCESS DEPRECIATION OF .38,05,246/- WAS BROUGHT TO TAX. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE. :- 3 -: ITA NO.3022/CHNY/2019 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE COMPUTER SOFTWARE WOULD FALL ONLY UNDER COMPUTERS INCLUDING COMPUTER SOFTWARE AND NOT UNDER KNOW- HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES AND ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE AND THE LD. CIT(A) HAS ERRONEOUSLY HELD THAT PURCHASE OF SOFTWARE LICENSE IS ONLY AN INTANGIBLE ASSET. BY RELYING ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. COMPUTER AGE MANAGEMENT SERVICES IN TCA NOS. 409, 410 & 412 OF 2019 DATED 08.07.2019, THE LD. COUNSEL FOR THE ASSESSEE PRAYED FOR ALLOWING DEPRECIATION @ 60%. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE PERUSED THE CASE LAW RELIED ON BY THE ASSESSEE IN THE CASE OF CIT V. COMPUTER AGE MANAGEMENT SERVICES (SUPRA), WHEREIN, THE ASSESSEE ACQUIRED SOFTWARE LICENSES, CAPITALIZED DURING THE RELEVANT YEARS IN THE BOOKS OF ACCOUNTS AND CLAIMED DEPRECIATION AT 60% AND THE TRIBUNAL HAS HELD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEPRECIATION AT 60%. BY FOLLOWING THE DECISION IN THE CASE OF CIT V. CACTUS IMAGING INDIA PVT. LTD. 406 ITR 406 (MAD) AND ALSO CONSIDERING THE DECISION IN THE CASE OF BIMETAL BEARINGS LTD. V. STATE OF TAMIL NADU [REPORTED IN (1991) 80 STC 167], THE HONBLE JURISDICTIONAL HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL. THE LD. DR COULD NOT CONTROVERT THE ABOVE :- 4 -: ITA NO.3022/CHNY/2019 DECISION OF THE HONBLE HIGH COURT BY FILING ANY HIGHER COURT DECISION HAVING MODIFIED OR REVERSED. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON SOFTWARE LICENSES AT 60%. THUS THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 6. THE ASSESSEE ALSO RAISED A GROUND IN GROUND 10 THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICER ON A NON- EXISTING COMPANY (GOFRUGAL SOFTWARE TECHNOLOGIES PRIVATE LIMITED) WHICH AMALGAMATED WITH ANOTHER COMPANY (GOFRUGAL TECHNOLOGIES PRIVATE LIMITED) AS ON THE DATE OF THE ASSESSMENT. HOWEVER, AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE MADE AN ENDORSEMENT IN THE GROUNDS OF APPEAL THAT THE GROUND IS NOT PRESSED. ACCORDINGLY, THE GROUND RAISED IN GROUND NO. 10 IS DISMISSED AS NOT PRESSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 19 TH FEBRUARY, 2020 IN CHENNAI. SD/- SD/- (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, 19.02.2020 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.