ITAT allows Taxmann Publication claim of Depreciation on Intangible CMS Software [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi directed the Assessing Officer (AO) to allow the assessee, Taxmann Publication to claim depreciation on the intangible CMS software.

The Assessee, Taxmann Publication Pvt. Ltd is a company which is stated to be engaged in the business of publication of books on taxation, corporate laws, and trading in software.

Assessee electronically filed its return of income for Assessment Year 2015-16 declaring a total income of Rs.69,03,560/-. The case was selected for scrutiny and thereafter assessment was framed under Section 143(3) of the Income Tax Act, 1961, and the total income was determined at Rs. 1,14,53,530/-.

Aggrieved by the order of AO, the assessee carried the matter before the CIT(A) who vide order dismissed the appeal of the assessee.

During the course of assessment proceedings, on the basis of the details furnished by the assessee, it was noticed that the assessee had developed “WebMaster Software” and on which the assessee had claimed depreciation.

The sole issue for adjudication is with respect to the denial of a claim of depreciation on the expenditure incurred on the development of software and an alternative claim that alternatively, the expenditure is allowed as revenue expenditure under Section 37(1) of the Act.

The assessee contended that the CMS Software has been developed by it, owned by it and it is used for the purpose of business by updating and managing the Income Tax Act and the other Acts and Rules published by assessee each year.

The Authority headed by the Vice President, Sushma Chowla held that AO was not justified in denying the claim of depreciation under Section 32 of the Act.

“We, therefore, direct the AO to allow the claim of depreciation. Since we have held the assessee to be eligible for claiming depreciation, the alternate claim of allowing the entire expenditure under Section 37(1) is rendered academic and therefore, not adjudicated. Thus, the ground of the assessee is allowed,” the ITAT said.