Plintron Mobility Solutions Pvt. Ltd. Vs ITO (ITAT Chennai)
Software Payment Not Royalty as Assessee Purchased Copyrighted Article; ITAT Deletes Section 40(a)(i) Disallowance Because Software Purchase Was Not Royalty; Higher Depreciation on Software Allowed as ITAT Rejects Treatment as Intangible Asset; ITAT Grants Relief on Software Depreciation and TDS Because Purchase Was of Copyrighted Article.
The assessee filed an appeal against the order of the Commissioner of Income Tax (Appeals)-3, Chennai, for Assessment Year 2014-15. The Tribunal first considered a delay of 12 days in filing the appeal. The assessee explained that the delay was unintentional and resulted from administrative activities connected with merger-related work. Finding the explanation to constitute reasonable cause, the Tribunal condoned the delay and admitted the appeal for adjudication.
The assessee, engaged in providing software solutions, had filed its return declaring total income of ₹79,54,530. The assessment under Section 143(3) determined total income at ₹2,09,01,140 after making, among other additions, disallowance of excess depreciation on computer software amounting to ₹69,14,390 and disallowance under Section 40(a)(i) for payments made to a non-resident for purchase of software on which tax had not been deducted under Section 195. The CIT(A) confirmed both additions.
The assessee had purchased software such as Windows, MS Office, Solaris and other operating systems amounting to ₹1,92,79,450 and claimed depreciation at 60% under Rule 5 of the Income-tax Rules, 1962. The Assessing Officer restricted the depreciation to 25% by treating the software licence as an intangible asset similar to patents and licences.
