CIT Vs Cognizant Technology Solutions India Pvt Ltd (Madras High Court)
The Madras High Court dismissed the Revenue’s appeal challenging the Income Tax Appellate Tribunal’s order which had quashed the reassessment proceedings against the assessee for AY 2002–03 and upheld the claim of depreciation on computer software at 60%. The Revenue raised two substantial questions of law: first, whether the reopening of assessment under Section 147 was valid; and second, whether depreciation on computer software could be allowed at 60% when the specific amendment prescribing that rate was stated to be applicable prospectively from AY 2003–04.
The Court noted that the assessee had filed its return on time and the original assessment was completed under scrutiny on 17.03.2005, during which the claim of depreciation at 60% on computer software was accepted after examination of records and discussions with authorised representatives. Subsequently, the Commissioner exercised revisionary powers under Section 263, but only in relation to computation of exemption under Section 10B, without disturbing the depreciation claim.
A notice under Section 148 was later issued on 03.03.2009, close to the expiry of six years, solely on the ground that depreciation on software ought to have been restricted to 25%. The Court held that there was no allegation of failure by the assessee to make full and true disclosure. The reassessment was based entirely on the same return, financial statements, and depreciation details already on record. Relying on principles affirmed in CIT v Kelvinator of India Ltd., the Court observed that a scrutiny assessment carries a presumption of due application of mind.
