PRL Developers Private Limited Vs ACIT Circle (ITAT Mumbai)
ITAT Allows 60% Depreciation on Computer Software by Following Earlier Decision; Sales Promotion Expenses Allowed as ITAT Holds AS-7 Inapplicable to Real Estate Developer; Share Premium Addition Deleted Because AO Could Not Substitute Assessee’s Valuation Method; ITAT Deletes Multiple Additions After Finding Depreciation, Sales Expenses and Share Valuation Claims Sustainable.
The assessee filed an appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2016-17 arising from an assessment completed under Section 143(3) of the Income-tax Act, 1961. The assessee, a wholly owned subsidiary of Piramal Realty Pvt. Ltd., is engaged in real estate development and follows the project completion method for recognizing revenue. During the assessment, the Assessing Officer (AO) made additions relating to depreciation on computer software, sales promotion expenses, and share premium under Section 56(2)(viib). The CIT(A) upheld the assessment order. Before the Tribunal, the assessee did not press the grounds relating to additional evidence and violation of natural justice.
Depreciation on Computer Software
The assessee claimed depreciation at 60% on two software purchases. The AO restricted the depreciation to 25% on the ground that the software constituted an intangible asset purchased independently of computer hardware. The Tribunal noted that the issue was covered by its earlier decision in the assessee’s own case, wherein depreciation at 60% had been allowed and accepted by the Revenue. Following its earlier order, the Tribunal held that the assessee had correctly claimed depreciation at 60% and deleted the disallowance of ₹84,40,051.
