DCIT, New Delhi V. M/s. Visesh Infotecnics Limited, New Delhi

ITA 4025/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3895 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 16-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 4025/DEL/2014 (ASSESSMENT YEAR: 2010 -11) DCIT, CIRCLE-17(1), NEW DELHI. VS VISESH INFOTECNICS LIMITED, 508, ARUNACHAL BUILDING, 19, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAACV4805B (APPELLANT) (RESPONDENT) APPELLANT BY SH.SATYAJIT GOYAL, CA RESPONDENT BY SH. AMIT JAIN, SR.DR DATE OF HEARING 08.01.2018 DATE OF PRONOUNCEMENT 08.01.2018 ORDER PER R.K.PANDA, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 26.03.2014 OF THE LD. CIT(A)-19, NEW DELHI RE LATING TO ASSESSMENT YEAR 2010-11. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO ALLOW DEPRECIATION @ 60% INS TEAD OF 25% ALLOWED BY THE AO. 2.1. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, DE ALER IN SOFTWARE ITA NO. 4025/DEL/2014 PAGE | 2 PRODUCTS AND SYSTEM INTEGRATION, IT ENABLED SERVICE S (IN SHORT ITES) ETC. IT FILED ITS RETURN OF INCOME ON 15.10 .2010 DECLARING TOTAL INCOME OF RS.84,63,098/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION UNDER COMPUTER SOFTWARE & INTELLECTUAL PROPERTY RIGHTS (IN SHORT IPR) OF AN AMOUNT OF RS.10,15,46 ,881/-. HE OBSERVED THAT THE ASSESSEE DURING AY 2004-05 HAS CL AIMED IN THE DEPRECIATION ON IPR @ 25% U/S 32(1) AND SUDDENLY TH E ASSESSEE HAS CLAIMED DEPRECIATION ON THE SAME @ 60 % FROM AY 2005-06 ONWARDS. HE OBSERVED THAT IN AY 2005-06, SUCH DEPR ECIATION WAS RESTRICTED TO 25% AND ON THE SAME LINES FOR THE AY 2006-07 TO 2008-09 AY ALSO, THE DEPRECIATION HAS BEEN RESTRICT ED TO 25%. REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE AND FOLLOWING HIS EARLIER ORDERS, THE AO RESTRICTED THE DEPRECATION T O 25% AS AGAINST 60% CLAIMED BY THE ASSESSEE. 3. IN APPEAL, THE LD.CIT(A) ALLOWED THE CLAIM OF DE PRECIATION @ 60%. 3.1. AGGRAVATED WITH SUCH ORDER OF LD.CIT(A), THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, FIL ED A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09 & ITA NO. 4025/DEL/2014 PAGE | 3 2009-10 VIDE ITA NOS. 6091/DEL/2013 & 6092/DEL/2013 ORDER DATED 11.04.2017 AND SUBMITTED THAT THE APPEALS FIL ED BY THE REVENUE ON THIS VERY ISSUE HAVE BEEN DISMISSED BY T HE TRIBUNAL. THEREFORE, THIS BEING A COVERED MATTER IN FAVOUR OF THE ASSESSEE, THE APPEAL FILED BY THE REVENUE SHOULD BE DISMISSED. 5. LD. DR ON THE OTHER HAND FAIRLY CONCEDED THAT TH E ISSUE STANDS DECIDED AGAINST THE REVENUE BY THE ORDER OF THE TRI BUNAL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 2008-09 & 2009-10 (SUP RA) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE BY OBSERVING AS UNDER:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS UNDISPUTED THAT THE EXPENDITURE INCURRED ON THE DEVELOPMENT OF SOFTWARE AS WELL AS PURCHASE OF SOFTWARE IS CAPITAL IN NATURE AND THE ONLY DISPUTE IS REGARDING THE RAT E OF DEPRECIATION, THAT IS, WHETHER DEPRECIATION IS TO BE ALLOWED AT THE RATE O F 25% OR AT THE RATE OF 60%. IF WE WERE TO PERUSE THE DEFINITIONS OF COMPUT ER SOFTWARE AND INTELLECTUAL PROPERTY RIGHTS, IT WILL BE EVIDENT TH AT COMPUTER SOFTWARE AND INTELLECTUAL PROPERTY RIGHTS ARE ALTOGETHER TWO DIF FERENT TYPES OF ASSETS. APPENDIX I OF THE INCOME TAX RULES TREATS COMPUTER SOFTWARE AS A TANGIBLE ASSET WHEREAS INTELLECTUAL PROPERTY RIGHTS ARE TREA TED AS INTANGIBLE ASSETS. IT IS UNDISPUTED THAT THE SOFTWARE PURCHASED DEVELO PED IN-HOUSE CAN BE TREATED AS INTELLECTUAL PROPERTY RIGHT ONLY WHEN TH E SAID SOFTWARE IS REGISTERED IN THE NAME OF THE PERSON APPLYING FOR S UCH REGISTRATION AS PER THE PROVISIONS OF THE PATENTS ACT, 1970 (AS AMENDED BY (PATENT ITA NO. 4025/DEL/2014 PAGE | 4 (AMENDMENT) ACT, 2005), THE COPYRIGHT ACT, 1957 OR ANY OTHER RELEVANT ACT. IT IS UNDISPUTED THAT THE ASSESSEE COMPANY HAS NOT GOT REGISTERED THE SOFTWARE PURCHASED OR DEVELOPED IN-HOUSE AS A PATEN T OR A COPYRIGHT AND, THEREFORE, THE QUESTION OF IT ACQUIRING THE STATUS OF INTELLECTUAL PROPERTY RIGHT DOES NOT ARISE. IT IS ALSO PERTINENT TO NOTE THAT THE INCOME TAX ACT, 1961 AND THE INCOME TAX RULES, 1962 PRESCRIBE THE R ATE OF DEPRECIATION ON COMPUTER SOFTWARE AT THE RATE OF 60% FROM 01/04/200 3, PRIOR TO WHICH THE RATE OF DEPRECIATION WAS 25% ONLY. HENCE, AS PER TH E RATE PRESCRIBED BY THE INCOME TAX RULES, THE ASSESSEE IS ENTITLED TO D EPRECIATION AT THE RATE OF 60% AND THE ACTION OF THE ASSESSEE IN CLAIMING THE DEPRECIATION ON THE BASIS OF THE AMENDED RATE OF DEPRECIATION ON SOFTWA RE CANNOT BE FAULTED WITH AND THE SAME CANNOT BE RESTRICTED TO 25% MEREL Y ON THE GROUND THAT DEPRECIATION WAS CLAIMED AT THE RATE OF 25% TILL AS SESSMENT YEAR 2003- 2004. ALTHOUGH, THE ASSESSEE HAS CLASSIFIED THE SOF TWARE UNDER COMPUTER SOFTWARE AND INTELLECTUAL PROPERTY RIGHTS, IT IS V ERY WELL SETTLED THAT NOMENCLATURE CANNOT BE CONCLUSIVE AND DECISIVE REGA RDING THE NATURE OF TRANSACTION AND IT IS THE SUBSTANCE OF THE MATTER W HICH SHOULD BE LOOKED INTO RATHER THAN THE FORM OR THE NOMENCLATURE BY WH ICH THE SAME MIGHT HAVE BEEN CALLED. THEREFORE, WE FIND NO REASON TO I NTERFERE WITH THE FINDINGS OF THE LD. CIT (APPEALS) IN BOTH THE YEARS UNDER APPEAL AND WE UPHOLD THE SAME WHILE DISMISSING THE GROUNDS RAISED BY THE DEPARTMENT. 7. SINCE THE FACTS OF THE IMPUGNED APPEAL ARE IDENT ICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESS EES OWN CASE IN THE PRECEDING YEARS, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIB UNAL, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AL LOWING THE CLAIM OF DEPRECIATION @ 60% AS AGAINST 25% ALLOWED BY THE AO . ITA NO. 4025/DEL/2014 PAGE | 5 ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAIS ED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF I.E. ON 08.01.2018. SD/- SD/- (BEENA A.PILLAI) (R.K .PANDA) JUDICIAL MEMBER ACCOU NTANT MEMBER DATE:-08 TH JANUARY, 2018 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI