Indian Kanoon - Search engine for Indian Law

24. The second issue raised by the assessee is with regard to the rate of depreciation to be allowed on computer software. The plea of the assessee before us was that as per the entry in Appendix-1 to the Income Tax Rules, 1962 (in short 'Rules') i.e. reference to Part B - intangible assets, it is provided that know-how, patents, copy rights, trade marks, licenses, franchises or any other business or commercial rights of similar nature are to be taken as intangible assets. As against the entry No.5 in Part A, tangible assets reads as computers including the computer software. Further, the claim of the assessee was that the software was licensed software rather than owned software and once when there was specific entry for copy rights, licenses or other business or commercial rights of similar nature, the general entry for computer software should be understood for owned software, which once purchased and there was no question of renewal of license. Reliance in this regard was placed on series of decisions by the learned Authorized Representative for the assessee, but special reliance was placed on the ratio laid down by the Delhi Bench of the Tribunal in Sony India Pvt. Ltd. Vs. Addl.CIT (2011) 56 DTR 156 (Delhi). It was pointed out by the learned Authorized Representative for the assessee that in case of license for use of ITA Nos.1125, 1126/PN/2011 ITA Nos.718, 719/PN/2012 ITA Nos.946, 947/PN/2012 Semco Electric Pvt Ltd.

computer software, it was held that the license was an intangible asset as per Part B of Appendix-1 to Rules, which prescribes uniform rate of 25% for depreciation on all intangible assets. In the Schedule to Income Tax Rules, under Part A in block of assets and plant & machinery at serial No.5, it is provided that depreciation at 60% would be allowed on computers including computer software. The said definition to include computer software was introduced w.e.f. assessment year 2006-07. Under Part B i.e. intangible assets, it is provided that know-how, patents, copy rights, trade marks, licenses, franchises or any other business or commercial rights of similar nature are to be allowed depreciation @ 25%. While interpreting the term license for use of computer software, the Delhi Bench of the Tribunal in Sony India Pvt. Ltd. Vs. Addl.CIT (supra), had held that the same was an intangible asset. The ratio laid down by the Delhi Bench of Tribunal was with regard to license for use of computer software. The Act itself recognized the distinction between the computer software perse and the license, wherein the computer along with computer software is termed as a tangible asset and the license is covered as intangible asset. The Delhi Bench of Tribunal has held that the license for use of computer software is an intangible asset entitled to depreciation @ 25%. However, in the facts of the present case before us, the nature of acquisition of computer software is not clear whether the assessee has purchased computer software perse or has obtained license for use of any computer software. In case the asset acquired by the assessee is in the form of computer software, then the same is entitled to the depreciation @ 60% and in case, it is the license for use of computer software, then the assessee is only entitled to depreciation @ 25% as claimed in the return of income. In order to establish the nature of acquisition by the assessee in the field of computer software, we deem it fit to restore the issue back to the file of Assessing Officer, who shall determine the same and consequently, allow the depreciation on the same. The assessee shall furnish the necessary evidence ITA Nos.1125, 1126/PN/2011 ITA Nos.718, 719/PN/2012 ITA Nos.946, 947/PN/2012 Semco Electric Pvt Ltd.

(iii) defines export turnover and it lays down that the consideration in respect of export of articles or things or computer software received in or brought into India by the assessee, in convertible foreign exchange, in accordance with the sub-section (3) is to be taken as export turnover, but it does not include freight, telecommunication charges or insurance attributable to the delivery of articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. Thus, for claiming the deduction under section 10B of the Act, the meaning of the term 'export turnover' has been prescribed in clause (iii) under Explanation 2 to section 10B of the Act, which includes the consideration to be received in respect of export of articles or things and the computer software, but it does not include certain expenditure incurred outside India in foreign exchange in providing technical services outside India. The Assessing Officer had invoked the said provision for holding that the consultancy fees of Rs.1.31 crores is to ITA Nos.1125, 1126/PN/2011 ITA Nos.718, 719/PN/2012 ITA Nos.946, 947/PN/2012 Semco Electric Pvt Ltd.