ACIT Vs Indiabulls Ventures Ltd ( ITAT Delhi)
ITAT Upholds 60% Software Depreciation Because Computer Software Qualifies Under Income Tax Rules; ITAT Modifies CIT(A) Order Because Directions for Earlier Years Exceeded Appellate Powers; Revenue Appeal Fails Because ITAT Upholds Software Depreciation and ESOP Relief; Software Depreciation Allowed at 60% While Actual Cost Verification Left to AO.
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] dated 20.12.2016 for Assessment Year 2012-13. The appeal raised two issues: deletion of the disallowance of excess depreciation on software amounting to ₹68,71,008 and the direction to the Assessing Officer (AO) to consider an additional claim of deduction of ₹1.79 crore towards employee compensation (ESOP) expenses. The assessee, engaged in the business of stock and share broking on the NSE and BSE, had filed its return declaring income of ₹2,92,27,870. During assessment under Section 143(3), the AO determined the income at ₹3,60,98,880 after disallowing the depreciation claim on software. The AO also rejected the assessee’s additional ESOP deduction claim made through a letter during assessment proceedings, holding that it was not made through a revised return, did not represent revenue expenditure, was only a notional loss, and did not pertain to the relevant previous year. The AO relied on the Supreme Court decision in Goetze (India) Ltd. to reject the claim.
