Income Tax Appellate Tribunal - Delhi
Hcl Comnet Systems And Services Ltd., ... vs Assessee on 30 September, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: "C" NEW DELHI
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
ITA No: 5906/Del/2010
Assessment Year : 2006-07
HCL Comnet Systems and Services Ltd. vs. CIT, Delhi IV
806, Siddharth, 96, Nehru Place New Delhi
New Delhi
(Appellant) (Respondent)
Appellant by : Shri Ajay Vohra, Adv.
Shri Neeraj Jain, Adv.
Mrs. Pinky Kapoor, Adv.
Respondent by : Shri R.I.S.Gill, CIT, D.R.
ORDER
PER SHAMIM YAHYA, ACCOUNTANT MEMBER
This appeal filed by the assessee is directed against the order u/s 263 of the I.T.Act of Ld.CIT, Delhi IV dated 30.9.2010 and pertains to A.Y. 2006-07.
2. In this case Ld.CIT noted that on examination of income tax assessment records of the assessee for A.Y. 2006-07 it transpired that assessee classified software under computers and claimed depreciation ITA 5906/Del/2010 Page 2 of 4 M/s HCL Comnet Systems & Services Ltd.
A.Y. 2006-07 @ 60%. Ld.CIT observed that these assets were licenses classifiable as intangible asset, subject to depreciation @ 25%. Thus in his opinion mistake resulted in incorrect allowance of depreciation and consequent under-assessment of income. Ld.CIT further observed that AO was absolutely silent as to why he allowed assessee's claim in this regard. Ld.CIT concluded that twin conditions have been satisfied that the order of AO is both erroneous and prejudicial to the interest of Revenue. Therefore he set aside the order of the A.O. for reconsideration of the matter.
3. Against the above order assessee is in appeal before us.
4. We have heard the rival contentions in the light of materials produced and precedents relied upon. Ld.Counsel of the assessee contended that ld.CIT has erred in setting aside AO's order without establishing as to how allowing depreciation on computer software @ 60% which is in accordance with the clear provisions of law makes the order erroneous and prejudicial to the interests of the revenue. It has further been contended that the ld.CIT has also not appreciated the fact that the profits of the undertakings of the assessee were eligible for deduction u/s 10A of the Income Tax Act. Whatever disallowance if any is made on account of depreciation the same would be exempt u/s 10A and hence there will be no prejudice to the interests of the revenue. Ld.D.R. on the other hand relied upon the orders of ld.CIT. ITA 5906/Del/2010 Page 3 of 4
M/s HCL Comnet Systems & Services Ltd.
A.Y. 2006-07
5. We have carefully considered the issue. We find that the issue under consideration is depreciation of computer software, and effective from A.Y. 2003-04. Computer software has to be treated as part of computer only and depreciation is allowable on the same @ 60%. Depreciation claim of assessee is appearing in page 37 of the paper book. 60% depreciation has been claimed on computers. By way of a note it has been mentioned that computer includes input/output devices, UPS and systems software. In page 41 of the paper book the details of assets capitalized on software items has been disclosed as ORA401CA.OFO.V9.264 bit software. We find ourselves in agreement with the contention of the assessee that 60% rate of depreciation has been prescribed in the Act itself on computer software, hence allowing such a depreciation which is in accordance with the law can not make the AO's order erroneous and prejudicial to the interest of Revenue.
6. We further find S.263 deals with AO's order which is erroneous in so far as it is prejudicial to the interest of revenue. In the present case it is noted that the assessee undertaking is eligible for deduction u/s 10A of the I.T.Act, hence even for arguments sake it is found that depreciation has been provided in excess there would not be any tax accruing on the same as the profits relating to it are exempt u/s 10A of the I.T.Act.
ITA 5906/Del/2010 Page 4 of 4
M/s HCL Comnet Systems & Services Ltd.
A.Y. 2006-07
7. In this view of the matter we are of the opinion that AO's order can not be said to e erroneous and prejudicial to the interest of the revenue. Hence we set aside the order of Ld.CIT and decide the issue in favour of assessee.
8. In the result the assessee's appeal stands allowed.
Order pronounced in the Open Court on 3rd June, 2011.
Sd/- Sd/-
(I.P. BANSAL ) (SHAMIM YAHYA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 3rd June, 2011
*manga
Copy of the Order forwarded to:
1. Appellant;
2. Respondent;
3. CIT;
4. CIT(A);
5. DR;
6. Guard File
By Order
Dy. Registrar
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