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Showing contexts for: computer includes computer software in Harita Fehrer Limited, Chennai vs Acit Salary Circle Ii , Chennai on 31 January, 2023Matching Fragments
12. Issue No.2 - Disallowance of depreciation on software 12.1 The assessee claimed depreciation @ 60% on 'Software'. The Ld. AO held that as per depreciation schedule Rule 5, such depreciation @ 60% is allowed on 'computers including software'. The word 'including' implies that only computer systems having inbuilt software i.e., computer systems sold along with incorporated/embedded software is eligible for depreciation @ 60%. However, the assessee has purchased software independent of the computer/hardware which would be eligible for normal depreciation of 15% as applicable to Plant and Machinery. Accordingly, the differential depreciation of Rs.5.07 Lacs was disallowed and added back to the income of the assessee. The Ld. CIT(A) confirmed the disallowance against which the assessee is in further appeal before us.
12.2 We do not concur with the observations of Ld. AO that the software which is in-built into the computer system would alone be eligible for higher rate of depreciation since the expression used is 'computers including software'. The literal interpretation of the same would be that computers or any other software purchased by the assessee would have same rate of depreciation on the logic that software would primarily be used along with computer system. However, there is no requirement that the same should be in-built into the computer system. The same may be independently purchased by the assessee and could be used along with computer system. Nevertheless, the same would remain computer software only which would have same rate of depreciation as applicable to a computer system. The decision of Special Bench of Delhi Tribunal in Amway India Enterprises vs. DCIT [111 ITD 112 (Delhi)] supports our view. It could also be seen that similar rate of 60% has already been allowed by revenue to the assessee in all the other years and this dispute has been raised in this year only. Therefore, we direct Ld. AO to allow depreciation at higher rate of 60%. The corresponding grounds raised by the assessee stand allowed.