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Ground No. 4 of Cross objection

11. This ground of Cross objection is filed against the decision of ld. CIT(A) in upholding the addition for Rs. 7,61,800/- on the ground that Rs. 19,04,500/- debited to P & L account represented expenditure incurred on the acquisition of computer software and only entitled to depreciation @ 60%.

12. During the course of assessment, the assessing officer noticed that assessee has claimed an amount of Rs. 19,04,502/- debited towards software charges under the head miscellaneous expenses. The assessing officer has treated the purchase of software as capital expenditure and allowed deprecation @ 60% and added the difference amount of Rs. 7,61,800/- to the total income of the assessee. The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) is reproduced as under:-

"Decision;

10.4 1 have carefully considered the Assessment Order and submission filed by Appellant. The Assessing Officer has observed that appellant, has debited Rs 19,04,502 being Software Charges paid towards purchase of license fee, customization and trading charges for new software purchased from them. The Assessing Officer referred to depreciation schedule and contended that computer including computer software is eligible for depreciation @ 60% hence after allowing depreciation on such software, Assessing Officer made net addition of Rs 7,61,800. The appellant has argued that it has purchased application software and such technology is rapidly changes hence such software are not for enduing benefit and allowable as revenue expenditure. The appellant relied upon decision of CIT V/s Asahi India Safety Glass Limited (supra). I.T.A. 3069 & 3070 & CO. 210 & 211/Ahd/2015 A.Y. 2008-09 & 2010-11 Page No 18 DCIT vs. M/s. Acalmar Oils & Fats Ltd. (Now merged with Adani Wilmar Ltd.) On careful consideration of entire facts, it is held that appellant is entitled to depreciation @ 60% on computer and computer software from A.Y. 2003-2004. The depreciation chart as provided in Income Tax Rules does not make any distinction between application software or other software and clearly depicts that assessee is entitled to depreciation @ 60%. Even the decision of CIT V/s Asahi India Safety . Glass Limited relied upon by appellant pertains to assessment year prior to A.Y. '2003-2004 and same is not applicable in year under consideration. Considering these facts, Assessing Officer was justified in holding that software expenditure cannot be allowed as revenue expenditure and appellant is entitled to depreciation @ 60% on such expenditure. However, as appellant is granted depreciation on Software expenditure of Rs 19,04,502, closing block of " Software" in the case of appellant is increased by addition of.Rs 7,61,800 and Assessing Officer is directed to allow depreciation as per provisions of Income Tax Act in subsequent assessment years. In the result, this ground of appeal along with additional ground of appeal is partly allowed."