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Showing contexts for: computer includes computer software in Penta Media Graphics Ltd., Chennai vs Dcit, Chennai on 8 May, 2020Matching Fragments
The Appellant relies on Appendix I to the Income Tax Rules where under computers, including computer software are entitled to depreciation at the rate of 60%. 'Computer Software' is defined in the Appendix to mean a computer programme recorded on any disc, tape, perforated media or other information storage devise. It was claimed that the digital content developed by the appellant is essential 'Computer software" in so far as it related to the computer programme that has been recorded on a storage device such as a disc. Further, it was stated that the content developed utilized in the multimedia and entertainment industry and, by its very nature, is a series of software programmes recorded on storage devices.
6.2 Rule 5 permits the percentages specified in the second column of the Table in Appendix I (IT Rules 1962), on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year. Part A of the Appendix I deal with the rates for tangible assets. This table (III. Machinery and Plant (5)) prescribes depreciation @ 60% for computers including computer software. Computer software has not been ITA Nos.1406 & 1407/Chny/2015 :- 11 -:
developed by assessee is merely intangible asset which entitles assessee for depreciation @ 25% while assessee is contending that the same is computer software and the assessee is eligible for depreciation @ 60%. In any case the effect will be tax neutral as overall depreciation spread over several years will ultimately cannot exceed in all cumulatively cost of the asset. The assesse has contended that it has developed software relating to animation graphics and special effects, based on which several animation films have been produced by it , even some nominated for the Oscar Awards. The computer animation and special effects in the form of computer software are referred to as 'digital content', stored in the hard disc of the computer. Thus, the assessee is claiming that 'digital content' developed by it is essentially computer software in so far as it related to the computer program that has been recorded on a storage device such as a disc. The assessee has claimed that the content developed is utilized in the multimedia and entertainment industry and , by is very nature, is a series of software programme recorded on storage device. As per Rule 5 to Income-tax Rules, 1962, the depreciation in respect of block of assets shall be calculated at percentages specified in Appendix 1 to Income-tax Rules, 1962 on written down value of such block of assets as are used for purposes of the business or profession of the assessee at any time during the previous year . In Appendix 1 to Income-tax Rules, 1962 at Part A under clause III- Machinery and Plant at sub-clause 5 , it is specified that Computers including computer software shall be eligible for depreciation @ 60%. The said also refer to Note Number 7 which clarify that 'Computer ITA Nos.1406 & 1407/Chny/2015 :- 18 -:
" PART A TANGIBLE ASSTS ** ** III Machinery and Plant *** *** (5) Computers including Computer Software (see note 7 below this table) (60) "
ITA Nos.1406 & 1407/Chny/2015 :- 19 -:
Note 7 stipulates 'Computer Software" means any computer program recorded in any disc, tape, perforated media or other information storage device. "
Thus, as per note 7, computer software has been given restricted coverage to 'computer program...' vis-à-vis customs notifications referred to by Hon'ble Supreme Court in the aforestated case in assessee's own case , wherein the said custom notifications referred to 'Information Technology software' means any representation of instructions, data, sound or image including source code and object code , recorded in a machine readable form , and capable of being manipulated or providing interactivity to a user , by means of an automatic data processing machine to be covered by the term 'Information Technology Software' . Thus, the coverage under customs laws was very wide while we are dealing with 1961 Act read with 1962 Rules and coverage of the term computer software is restrictive to computer program which is recorded in any disc , tape , perforated media or other information storage device. Thus, as could be seen that the assesee has developed Digital Content which is held by assessee as an asset and is used in various films etc after being manipulated. This in our considered view cannot be equated with a computer program but what is held by assessee is a digital content which is used by assessee in various films etc. . The computer animation and special effects are digital content which are stored in the hard disc of the computer. This digital content developed by assessee is utilized in the ITA Nos.1406 & 1407/Chny/2015 :- 20 -: