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31 ITA no. 5774/Del/2014, 6128/Del/2014 M/s. Michelin India Pvt. Ltd.

Ground No.2.2 of ITA No. 3167/Del/2017, A.Y. 2010-11 Taxpayer's appeal

32. Taxpayer has challenged grant of depreciation on computer software @ 25 % as against taxpayer's claim of 60% in the return of income on the ground that AO/ CIT(A) have erred in considering the license fees paid towards the computer software purchase as an intangible assets i.e. acquisition of right to use the application. The Ld. AR for the taxpayer contended that depreciation @ 60% on the license fee paid to Oracle is towards computer software provided by Oracle to facilitate inventory management, order management, sub-contract management etc. and is eligible for depreciation @ 60% as per Appendix 1 of the Rule 5 of Income Tax Rules which include computer software in the depreciation of computer. Because software contained in a disk is tangible property by itself. Since the taxpayer's ownership of limited right over the computer software purchased from Oracle by making payment of license fee is a tangible assets, it is entitled for depreciation @ 60% as per definition of "Plant" given in new Appendix 1 of Rule 5 effective from A.Y. 2006-07 of the Income Tax Rule, 1962.