DCIT, CHENNAI v. M/s. NMS Works Software Pvt Ltd., CHENNAI

ITA 1030/CHNY/2011 | 2006-2007
Pronouncement Date: 21-09-2011 | Result: Dismissed

Appeal Details

RSA Number 103021714 RSA 2011
Assessee PAN AABCN2551M
Bench Chennai
Appeal Number ITA 1030/CHNY/2011
Duration Of Justice 3 month(s) 15 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. NMS Works Software Pvt Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-09-2011
Assessment Year 2006-2007
Appeal Filed On 06-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A.NOS. 1030 & 1031/MDS/2011 (ASSESSMENT YEARS : 2006-07 & 2007-08) THE DEPUTY COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-IV(4) CHENNAI 34. VS. M/S. NMS WORKS SOFTWARE PVT. LTD. NO.244 OLD NO.713 CARE CENTRE ANNA SALAI CHENNAI 600 006. PAN AABCN 2551 M (APPELLANT) (RESPONDENT) APPELLANT BY : DR. I. VIJAYAKUMAR IRS C IT-DR RESPONDENT BY : SHRI G. BASKAR ADVOCATE DATE OF HEARING : 20 TH SEPTEMBER 2011 DATE OF PRONOUNCEMENT : 20 TH SEPTEMBER 2011 O R D E R PER DR. O.K. NARAYANAN VICE-PRESIDENT THESE TWO APPEALS ARE FILED BY THE REVENUE. THE RE LEVANT ASSESSMENT YEARS ARE 2006-07 AND 2007-08. THE APPE ALS ARE DIRECTED AGAINST THE ORDERS PASSED BY THE COMMISSIO NER OF INCOME-TAX (APPEALS)-V AT CHENNAI ON 10.2.2011 AND ARISE OUT OF ITA 1030 & 1031/11 :- 2 -: THE ASSESSMENTS COMPLETED UNDER SEC.143(3) OF THE I NCOME-TAX ACT 1961. 2. THE COMMON GROUND RAISED IN BOTH THESE APPEALS IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN D IRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON SOFTWARE OWNED AND USED BY THE ASSESSEE. ACCORDING TO THE REVENUE TH IS IS NOTHING BUT AMORTIZATION OF SOFTWARE DEVELOPMENT EXPENDITUR E. IT IS THE CASE OF THE REVENUE THAT AMORTIZATION OF EXPENDITUR E IS NOT RECOGNIZED UNDER THE INCOME-TAX ACT. 3. WE HEAD BOTH SIDES AND CONSIDERED THE MATTER IN DETAIL. 4. THE ASSESSEE IS A COMPANY ENGAGED IN SOFTWARE DEVELOPMENT. THE ASSESSEE FILED LOSS RETURNS FOR BOTH THE ASSESSMENT YEARS UNDER APPEAL. IN THE COURSE OF A SSESSMENT PROCEEDINGS THE CLAIM OF DEPRECIATION WAS DISALLOW ED BY THE ASSESSING AUTHORITY AND ADDITIONS WERE MADE CONVERT ING LOSS RETURNS INTO INCOME RETURNS. THE CLAIM OF DEPRECIA TION MADE BY THE ASSESSEE WAS DISALLOWED BY THE ASSESSING AUTHOR ITY ON THE GROUND THAT THE DEPRECIATION CLAIMED BY THE ASSESSE E WAS ONLY AMORTIZATION OF SOFTWARE DEVELOPMENT EXPENDITURE WH ICH IS NOT PERMISSIBLE IN THE ACT. THE ASSESSING OFFICER CAME TO THE ABOVE ITA 1030 & 1031/11 :- 3 -: CONCLUSION IN THE LIGHT OF THE NOTES PROVIDED BY TH E ASSESSEE TO ITS BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT. 5. THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THE OTHER HAND HELD THAT THE ASSESSEE HAS CAPITALIZED THE CO NCERNED SOFTWARE IN ITS ACCOUNT AND HAS CLAIMED DEPRECIATIO N AS PER THE PROVISIONS OF THE COMPANIES ACT 1956. IT IS IN TH E ABOVE CIRCUMSTANCES THAT THE ASSESSEE HAS CLAIMED DEPRECI ATION UNDER THE INCOME-TAX ACT AS WELL. HE FURTHER OBSERVED T HAT AS PER THE EXPLANATION 5 TO SEC.32(1) DEPRECIATION SHOULD BE ALLOWED ON A CAPITAL ASSET EMPLOYED IN THE BUSINESS OF THE ASSES SEE IF IT IS DUE AS PER LAW WHETHER IT WAS CLAIMED OR NOT CLAIMED BY THE ASSESSEE. HE FOUND THAT THE CONDITIONS FOR CLAIMIN G DEPRECIATION ARE SATISFIED IN THE PRESENT CASE AS THE ASSET IS O WNED BY THE ASSESSEE AND IT WAS USED FOR THE PURPOSES OF ITS BU SINESS. HE ACCORDINGLY DELETED THE DISALLOWANCE. 6. ON GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE INCLINED TO AGREE WITH THE CONCLUSION ARRIVE D AT BY THE COMMISSIONER OF INCOME-TAX (APPEALS). IT IS A FACT THAT THE CONCERNED SOFTWARE DEVELOPMENT EXPENDITURE HAVE BEE N CAPITALIZED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT FORMING PART OF ITS BLOCK OF ASSETS. THE ASSESSEE BEING A COMPANY IT HAS ITA 1030 & 1031/11 :- 4 -: PROVIDED FOR DEPRECIATION AS PER THE COMPANIES ACT. IT IS ON THE BASIS OF THE ABOVE FACTS THAT THE ASSESSEE HAS CLAI MED DEPRECIATION WHILE COMPUTING ITS TAXABLE INCOME. W E FIND THAT THE ASSESSING AUTHORITY HAS BEEN OVERWHELMED BY THE NOT ES ON ACCOUNTS PROVIDED BY THE ASSESSEE IN RESPECT OF SOF TWARE DEVELOPMENT EXPENDITURE AND JUMPED INTO THE CONCLUS ION THAT THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE WAS IN F ACT AMORTIZATION OF SOFTWARE DEVELOPMENT EXPENDITURE. THE ASSESSING OFFICER HAS ERRED IN HIS FINDINGS. THE C OMMISSIONER OF INCOME-TAX (APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 7. IN RESULT THESE TWO APPEALS FILED BY THE REVENU E ARE LIABLE TO BE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY THE 21 ST OF SEPTEMBER 2011 AT CHENNAI. SD/- SD/- (GEORGE MATHAN) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI DATED THE 21 ST SEPTEMBER 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR