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 ITA Nos. 813 & 987/Ahd/2017          A.Y. 2013-14



16. Ground                   No.2 relates to disallowance of depreciation of

Rs.4,58,137/- on Computer software. The AO disallowed the claim stating that the assessee has only purchased license to use the software and therefore not entitled to claim depreciation at 60%.

16.1 Ld. Counsel submitted that after 1st April, 2003, "computer software" is entitled to depreciation at 60% as per amended provisions of Appendix I of IT Rules, 1962. The rate of 60% applicable in respect of 'computers including computer software' introduced for and from asst. year: 2003-04. It has been classified as a tangible asset w.e.f. 1st April, 2003, under the heading "Plant" in Appendix I to the IT Rules and entitled to depreciation at 60%. Further the expression "computer" has not been defined in the Act. However, it has been defined by under section 2(1)(i) of the Information Technology Act, 2000. As per the said Act, "computer" means any electronics, magnet, optical or other high speed data processing device or system which performs logical, arithmetic and memory functions by manipulation of electronics or magnetic or optical impulses and includes all "input-output processing", "storage", "computer software" or "communication facilities" which are "connected or related to the computer" in a "computer system" or "computer network". It may be mentioned that there is no inbuilt system of power supply in the computer.

16.2. It was also submitted that with the rapid advancement in computer software, the technology acquired in a particular year falls into obsolescence very fast and therefore it requires continuous upgrading.

17. Heard rival submissions, depreciation on computer software is no more res integra as this issue is settled by the Special Bench of ITA Nos. 813 & 987/Ahd/2017 A.Y. 2013-14 the Tribunal in the case of DCIT vs. Datacraft India Limited, (2010) 133 TTJ 0377 (Mum) (SB) wherein it was held that as per the meaning of expression 'computer' could not be restricted only to CPU of computer by pulling out import and output devices from ambit of 'computer'-All input and output devices, which in fact support in receipt of input and outflow of output were also part of 'computer'- When particular hardware or software was used along with computer and when their functions were integrated with computer, such hardware or software would be termed as 'computer'-Items on which Assessee claimed depreciation at rate of 60% by treating them as 'computer' were being used as input or output device of computers-Any device used along with computer and when their functions were integrated with computer came within ambit of the expression 'computer'- Assessee was entitled to avail depreciation at rate of 60% as was applicable to a 'computer'.