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This appeal of the Revenue is directed against the order passed by the ld. CIT(A) V, Chennai dated 20.10.2010 relevant to the assessment year 2007-08, whereby the Department has challenged the action of the ld. CIT(A) in allowing the assessee's appeal claiming allowance of depreciation by adopting the rate of 60% in respect of digital content, when claim was made in respect of rights acquired to broadcast digital movies and as per new Appendix I to the IT Rules, 60% depreciation is available in respect of computers including computer software. Computer software is defined in note 7 to the appendix as a computer program recorded on any disc, tape, perforated media or other information storage device, whereas a digital movie is not a computer program though it may be recorded in a media defined in the notes mentioned.

3. The assessee filed appeal and challenged the action of the Assessing Officer for not allowing deduction under section 10B, but during the course of appeal proceedings, stated that since tax holiday period has expired by the assessment year 2006-07, so no such deduction is available hence this ground was withdrawn by the assessee and dismissed by the first appellate authority.

/Mds/11 3.1 As regards ground No.2, which pertains to restriction of claim of depreciation at 60% in respect of digital content acquired by the assessee for broadcasting feature films and allowing 25% depreciation, the assessee in appeal, contended that such part disallowance made by the Assessing Officer is neither proper nor justified because the assessee is entitled to depreciation at the rate of 60% because the above item is covered by item III(5) [i.e. computers including computer software] of article A (tangible assets) of Appendix I to Income Tax Rules, depreciation rate of 60% is given against such item and in the notes under Appendix l to r, the digital components covers in its definition as computer software received by it for its business activity for broadcast digital movies. Therefore, the assessee has debited the cost of such computer software received by it for its business activity of broadcasting as a tangible fixed asset and claimed depreciation at 60% as per IT Rules. Hence, the Assessing Officer may be required to direct to treat the right acquired in the form digital contents as a tangible fixed asset and allow depreciation at 60% as applicable to computer software. Reference was also given to relevant clauses of Accounting Standard (AS) 26 on the subject of intangible asset are noteworthy and could not refers to such clauses, it was submitted that an asset may incorporate both tangible and intangible elements and it is the predominant element that decides the character of the asset to be tangible or intangible. Moreover, an intangible asset may be contained in a physical substance too. If that physical substance is significant without which the activity cannot be carried on to reap future benefits, then it loses its character of intangible asset and becomes tangible. It was thus, submitted before the first appellate /Mds/11 authority that the depreciation as per IT Act has been worked out to be `.2,18,30,403/- as per tax audit report. However, depreciation of `.2,01,98,665/- only has been claimed mistakenly in the computation of total income filed with the return. Hence, additional allowance of `.16,31,738/- also to be allowed due to this mistake apparent on record. It was, thus requested to direct the Assessing Officer to allow the same.

6. The ld. Counsel for the assessee submitted that digital contents is a software entered in the relevant schedule refers to computer including computer software and the Hon'ble Supreme Court in the case of the assessee though under central excise matter, information technology software and document of title conveying the right to use information technology software, vide order dated 09.05.2006, has held that the goods under import are admittedly data recorded on tapes and under the existing notification No. 20/99 any kind of data in a machine readable form and capable of being manipulated by means of an automatic data processing machine would be covered by the term "information technology software and for the detailed reason given in the said judgement, the Hon'ble Supreme Court in assessee's own case reported in 2006-TIOL-44-SC-CUS has concluded to decide the issue in favour of the assessee. So far as Tribunal's /Mds/11 decisions cited by the ld. DR are concerned, those are not relevant at all, therefore not applicable. It was thus pleaded for confirmation of the impugned order.