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2021 (8) TMI 1379 - AT - Income TaxDepreciation on computers disallowed u/s 40(a)(ia) - HELD THAT:- Issue decided in favour of assessee as relying on Tally Solutions Pvt. Ltd case [2020 (12) TMI 1160 - KARNATAKA HIGH COURT] Section 40(a)(i) and (ia) provides for disallowance only in respect of expenditure, which is revenue in nature, therefore, the provision does not apply to a case of the assessee whose claim is for depreciation, which is not in the nature of expenditure but an allowance. The depreciation is not an outgoing expenditure and therefore, provisions of section 40(a)(i) and (ia) are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under section 40(a)(i) and (ia) would be made. Depreciation is a statutory deduction available to the assessee on a asset, which is wholly or partly owned by the assessee and used for business or profession. Depreciation is an allowance and not an expenditure, loss or trading liability. Commissioner (Appeals) has held that the payment has been made by the assessee for an outright purchase of Intellectual Property Rights and not towards royalty and therefore, the provision of section 40(a)(i) is not attracted in respect of a claim for depreciation. Decided in favour of the assessee.
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