The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) directed re-adjudication after the Assessing Officer ( AO ) disallowed Depreciation claimed on the Opening Written down Value ( WDV ) of Computer Software by the Piramal Enterprises.
In the case at hand, it was contended that the Commissioner of Income Tax ( Appeals ) [CIT (A)] erred in confirming the Assessing Officer’s action of disallowing depreciation on the opening WDV of computers, citing a previous CIT (A) order for the Assessment Year ( A.Y. ) 2004-05.
Furthermore, the CIT (A) was criticized for upholding the AO’s decision to recalculate depreciation on computer software at 25%, instead of the claimed 60% by the appellant. This resulted in the disallowance of excess depreciation amounting to Rs. 2,12,15,269, with the argument that software purchases, separate from computer purchases, were considered “intangible assets”.
The AO based their disallowance on their own order from A.Y. 2004-05, restricting depreciation claims to 25% instead of the 60% claimed for additions made during the year.
Representing the assessee, Mr. Priyank Gala argued that since depreciation had been allowed by the Tribunal for A.Y. 2004-05, subsequent claims by the assessee were consequential. He emphasized that the AO had merely followed their findings from the previous assessment year.
The two-member bench, consisting of S. Rifaur Rahman ( Accountant Member ) and Kuldip Singh ( Judicial Member ), directed the AO to treat software and computers as a single block. The issue was remitted back to the AO with a directive to make a decision within six months from the receipt of the order copy, in accordance with the Tribunal’s findings in the assessee’s own case for A.Y. 2004-05.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
