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2013 (11) TMI 1267 - AT - Income TaxNature of Cost - Product development cost - Revenue or Capital - Held that:- The expenditure incurred by the assessee in the development of software is capital in nature - Following Millennium Infocom Technologies Limited. Versus Assistant Commissioner Of Income-tax, Circle - 6(1), New Delhi. [2008 (1) TMI 437 - ITAT DELHI-E] and Empire Jute Co. Ltd. Vs.CIT [1980 (5) TMI 1 - SUPREME Court] - The assessee was enjoying benefits from the sale of software to different customers - The prototype of the software remains with the assessee - The assessee is only giving copy of the software without disclosing the intricate method of developing the same to its prospective customers. Depreciation on expenditure incurred in the development of computer software – Held that:- Depreciation @ 60% has been provided on computer software and hardware - The CIT(A) on the one hand has given its findings that the assessee has not shown any asset in its balance sheet, therefore, the assessee is not entitled for depreciation @ 60%, on the other hand, the CIT(A) has allowed depreciation @ 25% to the assessee treating it as copy right or intangible asset - Once it is held that the expenditure incurred by the assessee for the development of the software is capital in nature, the software developed by the assessee is an asset of the assessee. Relying upon Tata Consultancy Services Vs. State of Andhra Pradesh [2004 (11) TMI 11 - Supreme Court ] - computer software is a tangible asset - As per clause III (5) of New Appendix I read with Rule 5 of the Income Tax Rules, 1962, rate of depreciation as applicable to computer software is 60% - thus the assessee is entitled to claim depreciation @ 60% on expenditure incurred in the development of computer software being capital in nature – Decided partly in favour of Assessee.
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