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Assessment Year: 2003-04 On perusal of the profit and loss account of the assessee it is noticed that the assessee had debited an amount of Rs. 7,03,36,291/- as software charges. In the assessment order the Assessing Officer after discussing the issue in detail disallowed an amount of Rs.2,62,50,350/- being capital expenditure and thereafter allowed depreciation at 60% on the said amount. As per Appendix 1 of [Rule (5)] of the Income Tax Rules, 1962, as amended with effect from 01.04.2003, from A. Y. 2003-04 onwards, on "computer including computer software" depreciation has to be allowed to the tune of 60%. With the inclusion of computer soil-ware in the depreciation chart as stated above, the entire expenditure of Rs. 7,03,36,291/- should have been capitalized and depreciation at 60% or 30% as applicable should have been allowed depending on the date of installation. Thus the assessee 's claim of software charges of Rs. 4,40,85,941/- is not allowable and the assessee 's income to the extent of Rs. 2,71,42, 796/- has escaped the assessment as worked out as under: -