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2022 (1) TMI 288 - AT - Income TaxDisallowance of depreciation of block of computer equipment - AO disallowed depreciation as invoices were not reconciled with the tax audit report - HELD THAT:- CIT(A) called for a remand report from the A.O. and the A.O. in the remand report stated that the invoices for an amount of ₹ 6,18,80,241 were not produced and conveyed his objections for allowing the claim of depreciation. A.O., however, in the remand report stated that there is no objection for allowing depreciation on actual amount of invoices furnished and the CIT(A) may decide the issue based on the records available. CIT(A) rejected the appeal of the assessee for the reason that the invoices produced are not legible. The legible copies of all the invoices in relation to the additions made to the computer equipments are placed on record (refer pages 185 to 195 of the paper book). Therefore, in the interest of justice and equity, we are of the view that the matter needs to be verified by the A.O. afresh. Hence, the issue raised as regards to the disallowance of depreciation on addition made on block of computer equipments is restored to the files of the A.O. The A.O. is directed to examine the invoices in respect of ₹ 6,18,80,241 and if found in order, the A.O. is directed to grant depreciation on the same. It is ordered accordingly. Nature of expenditure - software development expenses - revenue or capital expenditure - CIT(A) held that the expenditure incurred on the software development is capital expenditure - HELD THAT:- CIT(A) failed to appreciate that the assessee does not test on a single software during the entire year. Further, a software is not customized and deployed on the electronic products and a new product is launched every year and the same is a continuous activity. Since the CIT(A) has not understood the business model of the assessee, it is necessary that the matter needs to be examined afresh by the A.O. Accordingly, the issue raised in ground 2 is restored to the files of the A.O. The A.O. is directed to examine the expenditure incurred and come to a conclusion whether it is a capital or revenue expenditure. The A.O. shall afford a reasonable opportunity of hearing to the assessee before a decision is taken in this matter. It is ordered accordingly. Deduction of education cess on Income Tax and Secondary and Higher education cess on Income Tax - admission of Additional ground - HELD THAT:- The Mumbai Bench of the Tribunal in the case of Voltas Limited [2020 (7) TMI 125 - ITAT MUMBAI] had admitted additional ground of appeal with regard to the claim of education cess and adjudicated the matter in favour of the assessee, by following the judgment of the Hon’ble Bombay High Court in the case of Sesa Goa Limited [2020 (3) TMI 347 - BOMBAY HIGH COURT]. In the light of the aforesaid judicial pronouncements, we hold that education cess is to be allowed as deduction. It is ordered accordingly.
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