TMI Blog2023 (1) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. Depreciation on application software - excess depreciation claimed by the Appellant by adopting higher rate of 60% as against the applicable rate of 25% - HELD THAT:- As relying on Computer Age Managements Services Private Limited [ 2019 (7) TMI 1153 - MADRAS HIGH COURT ] rate of 60% shall be applicable in the case of application software. In view of the same, we hold that the Appellant is entitled to claim depreciation at the rate of 60% in respect of application software. The disallowance of depreciation is, therefore, deleted. Admission of additional claims - Net foreign exchange gain - DR denied claim as it was not made in the return of income and was raised for the first time during the assessment proceedings - HELD THAT:- An assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. We hold that the CIT(A) erred in not adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mutual funds is subjected to tax in the hands of the payer under section 115-O/ 115-R of the Act and as the Appellant receives an amount after the tax has been paid, it cannot be said that such dividend income is not chargeable to tax under the Act and, hence, the provisions of Section 14A are not attracted in the case of the Appellant. 2) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing an amount of Rs.9,73,508/- under Section 14A of the Act computed in accordance with the provisions of sub-clause (iii) of Rule 8D. Having regard to the facts and circumstances of the case and the provisions of law, the Appellant submits that the unwarranted disallowance be deleted. 3) The learned Commissioner of Income Tax (Appeals) erred in disregarding the order of his predecessor and in holding that the investments in growth schemes of mutual funds, which do not yield any exempt income, are to be considered for computing the average value of investments as per the provisions of sub-clause (iii) of Rule 8D, for the purpose of computing the disallowance under Section 14A of the Act. 4) Without prejudice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame to be excess depreciation claimed by incorrectly applying the rate of 60% in respect of application software instead of the applicable rate of 25%. The Assessing Officer also added the amount disallowed under Section 14A of the Act while computing Book Profits under Section 115JB of the Act. 5. Being aggrieved, the Appellant carried all the above issues in appeal before the CIT(A). However, the CIT(A) declined to grant any relief and vide order dated 16.12.2013 dismissed all the grounds raised by the Appellant in this regard. 6. Being aggrieved, the Appellant are now in appeal before us challenging the order passed by CIT(A) on the grounds specified in paragraph 2 above. Ground No. 1 to 5 7. Ground 1 to 4 pertains to disallowance of INR 9,73,508/- made under Section 14A of the Act under normal provisions of the Act while Ground No. 5 directed against the addition of the aforesaid amount while computing Book Profits as per the provisions of 115JB of the Act. 8. The Ld. Authorised Representative for the Appellant appearing before us submitted that the Appellant Company is a debt free company not having any secured or unsecured loans. For the Assessment Year 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s yielding exempt income during the relevant previous year are to be considered while computing the average value of investment for the purpose of Rule 8D(2)(iii) of the Rules. However, in the present case the Assessing Officer has taken into consideration the entire Investments. Accordingly, we set aside the addition of INR 9,73,508/- made under Section 14A of the Act. The Assessing Officer is directed to re-compute disallowance under Section 14A read with Rule 8D(2)(iii) of the Rules by taking into consideration only the investments yielding exempt income during the relevant previous year as per the judgment of Hon ble Delhi High Court in the case of ACB India Ltd. (supra). In view of the above Ground No. 1 to 4 raised by the Appellant are partly allowed. 11. We note that the Assessing Officer has computed tax liability under normal provisions of the Act, and therefore, Ground No. 5 raised by the Appellant is disposed off as being infructuous. Ground No. 6 12. Ground No. 6 raised by the Appellant pertains to disallowance of INR.17,764/- made by the Assessing Officer and confirmed by the CIT(A) holding the same to be excess depreciation claimed by the Appellant by adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 of the order passed by the Tribunal, the nature of items, on which, the assessee claimed depreciation at 60%, has been listed out and they are 17 in number, from which, we find that substantial amount of server licences, which have been obtained by the assessee are customized and some of which are single user licenses. 8. The question would be as to whether the software application, which was acquired by the assessee would fall under Entry 5 of Part A of New Appendix I, which states that computers including computer software are entitled to depreciation at 60%. Note 7 of the Appendix defines the expression 'computer software' to mean any programs recorded on CD or disc, tape, perforated media or other information storage devices. 9. The case of the Revenue is that software are licences and that they are intangible assets and would fall under Part B of New Appendix I, which deals with knowhow, patents, copyrights, trademarks, licenses, francises or any other business or commercial rights of similar nature. 10. We find that Part B of New Appendix I is a general entry whereas Entry 5 of Part A of New Appendix I is a specific entry read with Note 7. In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d going by the usage of the equipment purchased by the assessee, a decision has to be arrived at. We find that there is no error in the decision arrived at by the Tribunal by taking note of the specific entry in contra distinction with the general entry. Therefore, the first substantial question of law has to be necessarily answered against the Revenue. (Emphasis Supplied) 16. That the Hon ble Madras High Court had held that rate of 60% shall be applicable in the case of application software. In view of the same, we hold that the Appellant is entitled to claim depreciation at the rate of 60% in respect of application software. The disallowance of depreciation amounting to INR 17,764/- is, therefore, deleted. Accordingly, Ground No. 6 raised by the Appellant is allowed. Ground No. 7 17. Ground No. 7 pertains to addition of INR 99,670/- made by the Assessing Officer treating the same to be receipts not accounted for in the books of accounts by the Appellant. The Ld. Authorised Representative for the Appellant appearing before us submitted that the Appellant does not wish to pursue this ground as the amount involved is small. Accordingly, Ground No. 7 raised by the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Order, dated 30.12.2013 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for the Assessment Year 2011-12. 23. The Appellant has raised following grounds of appeal: 1) The learned Commissioner of Income Tax (Appeals) erred in holding that the investments in growth schemes of mutual fund units, which do not yield any exempt income, are to be considered for computing the average value of investments as per the provisions of sub- clause (iii) of Rule 8D, for the purpose of computing the disallowance under Section 14A of the Act. 2) Without prejudice to the Appellant's contention that no expenditure is allocable to the earning of exempt dividend income and in any event, the Appellant submits that the disallowance computed at Rs 14,51,960/- is arbitrary and grossly excessive and the same requires to be reduced substantially. 3) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in allowing depreciation under Section 32 of the Act on computer software at 25% as against the rate of 60% claimed by the Appellant, on the ground that the Appellant has shown comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to INR 65,318/- is deleted. Ground No. 4 26. Ground No. 4 relates to net foreign exchange gain of INR 8,93,939/-During the assessment proceedings vide letter dated 15.11.2013 the Appellant raised additional claim in respect of net foreign exchange gain of INR 8,93,939/- credited to the Profit Loss Account. However, the Assessing Officer disregarded the same while the CIT(A), in appeal preferred by the Appellant, refused to entertain the claim holding as under: 11. Ground No.11 is with regard to the claim raised by the Appellant during the course of the assessment proceedings vide letter dated November 15, 2013, that the net foreign exchange gain of Rs.8,93,939/- on the capital advance paid to Dilo Gmbh towards purchase of machinery, which was credited to the Profit and Loss Account of the Appellant, was required to be excluded from the Total Income of the Appellant in terms of the provisions of Section 43A of the Act. The recourse available to the assessee to make such a claim is by filing a revised Return of Income. An assessee cannot make a fresh claim for deduction in the course of the assessment proceedings which view has been upheld by the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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