Inability to Generate Income from Software Not a Ground to Deny Depreciation Claim: ITAT rules in favour of Rapipay [Read Order]

Income - Software - Depreciation - Claim - ITAT - Rapipay - TAXSCAN

Infavour of RapipayFinvest, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled that the inability to generate income from software is not a ground to deny a depreciation claim.

The Assessee is engaged in the business of general finance and investment, by filing its return of income on 31.11.2013 declared income of Rs. “Nil” and paid taxes on book profit of Rs. 3,11,038/- under section 115JB of the Income Tax Act, 1961. 

The Commissioner deleted the disallowance on account of purchase shown of Rs. 2,76,75,720/- as the nature of work done by the supplier for the Assessee, it does not fall under the exception clause u/s 194C and thus liable for disallowance u/s 40(a)(ia) of the Act.

that the Assessing Officer disallowed the expenses of printing voter list to the tune of Rs.2,76,75,720/- mainly becausethe notice was sent to Mind Tree Exports Pvt. Ltd., with whom the Assessee agreed/contract and to M/s. VakrangeeSoftwares Ltd., with whom the Assessee has made a sub-contract, was received back and later on confirmation from M/s. Mindtree Export Pvt. Ltd. was received only on 29.02.2013 i.e. after the date fixed on 15.02.2016 therefore, the transaction remained unconfirmed.

From the above, it can be seen that the expenses booked by the Assessee company are in the name of M/s. VakrangeeSoftwares Ltd. is bogus in the absence of any documentary evidence regarding transportation.  Further, no agreement aboutthe outsourcing of printing work has been submitted by the Assessee which relates to the printing of voter list, outsourced to M/s. VakrangeeSoftwares Ltd. .

A Coram comprising of Shri Anil Chaturvedi, AM and Shri N K Choudhry, JM observed that the holding company was duly authorized for sub-contracting to the Subsidiary company and the breach of terms and conditions of the contract between parties will not change the nature of revenue generated from the said transactions.

The ITAT deleted the disallowance of expenses of Rs. 1,81,25,931/- made by the AO. While dismissing the appeal, the Tribunal upheld the findings of the Commissioner on the issue at hand.

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