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TMI Blog2021 (10) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 days in filing appeal before the Tribunal for which necessary petition for condonation of appeal along with affidavit has been filed explaining the reasons for delay in filing the appeal. The ld.AR further submitted that the delay was unintentional on account of administrative activities associated with the merger activities in making ready the appeal papers and submits that substantive issues of law and facts are involved in the appeal against the assessment. The delay in filing the appeal was not intentional and that there is no undue benefit in delay in filing the appeal by 12 days. The Ld. DR opposed condonation of appeal. Having heard both sides, we are of the considered view that reasons given by the assessee for not filing the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in not verifying the fact the Cost of the software disallowed in both u/s. 32(2) and u/s. 40a(i). For these and other grounds that may be permitted to be adduced before or during the course of hearing, the Appellant prays that the appeal be allowed and the order of Learned Commissioner of Income Tax (Appeals) be deleted." 4. The brief facts of the case are that the assessee company is engaged in the business of providing software solutions, filed its return of income for assessment year 2014- 15 on 29.11.2014 declaring total income of Rs. 79,54,530/-. The case has been taken up for scrutiny and the assessment has been completed u/s. 143(3) of the Income Tax Act, 1961 (herein after "the Act") on 21.12.2016 and determined total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to intangible assets like copyrights, patent and license etc. 6. The Ld. AR for the assessee submitted that the Ld. CIT(A) has erred in sustaining the additions made by the AO towards disallowance of excess depreciation on computer software without appreciating the fact that any computer software embaded with computer system is an integrated computer system which is eligible for depreciation @ 60% as applicable to computer and computer software as per Rule 5 of the IT Rules, 1962. The CIT(A) without appreciating the fact, has simply disallowed depreciation by holding that the assessee has purchased a license in computer software which is nothing but an intangible asset which is eligible for depreciation @ 25% as applicable to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60% as claimed by the assessee, but not 25% as applicable to intangible asset as considered by the Ld. AO. Therefore, we are of a considered view that the AO as well as CIT(A) were erred in restricting depreciation on software to 25% as against 60% as claimed by the assessee. Hence, we direct the AO to allow depreciation @ 60% as claimed by the assessee. 9. The next issue that came up for consideration from ground no. 3 of the assessee appeal is disallowance of payment made to a non-resident for purchase of software u/s. 40(a)(i) of the Act, for non-deduction of tax at source u/s. 195 of the IT Act, 1961. The assessee has purchased copyrighted software from a service provider from USA. The assessee has not deducted TDS u/s. 195 of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fact are that, the assessee had purchased a copyrighted article from an USA supplier and made payment without deducting tax at source u/s. 195 of the IT Act, 1961. The AO disallowed sum paid by the assessee u/s. 40(a)(i) of the Act, for deduction of tax at source u/s. 195 by holding that, amount paid by the assessee for acquiring license in a software is in the nature of Royalty as defined u/s. 9(1)(vi) of the IT Act, 1961. We have gone through reasons given by the AO, in light of arguments advanced by the Ld. AR for the assessee, and we ourselves do not subscribe to the reasons given by the AO for disallowance of sum paid by the assessee for purchase of software u/s. 40(a)(i), for the simple reason that what is purchased by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lence P. Ltd. Vs CIT (2021) 125 Taxmann.com42 (SC) has put an end to all controversies with regard to deduction of tax at source on payment to non-resident for purchase of computer software and held that amount paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not a payment of royalty for the use of copyright in the computer software, and thus, same does not give rise to any income taxable in India. Similarly, the Hon'ble High Court of Madras in the case of CIT vs M/s. Dassault Systems Simulia P Ltd., (2021) 127 Taxmann.com 27 (madras) had considered an identical issue and held that w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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