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Depreciation on software is allowed as intangble block @25%.
Depreciation on software is allowed as intangble block @25%.
Attention! Attention! Attention ! all the software developers, chartered accountants and businessmen, Today we are going to share with you an insight of depreciation related to software. If a software is developed inhouse then either the software development expense should be claimed as an expense to the extent of 100% in the same year. However as per income tax act if you decided to capitalize the same then you can claim depreciation on it @ 25% as intangible as per and not as software @ 60%. Further, any purchase and development of software comes is entitled to depreciation @ 25% as intangible assets. We have referred the case M/S Exensys Software Solutions VS Dy. Commissioner of Income Tax decided by ITAT Hyderabad on 27, November 2015.
Facts in brief of the said case are as under.
There are two major points in this case. (1) whether depreciation on software is @ 60% or 25%. (2) If assessee had applied wrong rate of depreciation whether income tax dept. can impose penalty for concealment of income.
In this part-A, we have discussed the impugned fact relating to rate of depreciation on software. M/s Exensys Software Solutions Ltd was engaged in software business.
It filed its revised return of income on admitting Nil income under normal provision and Rs. 1.2 crore under MAT.
AO passed assessment order u/s 143(3) assessing the total loss admitted by assessee at Rs 2.77 crores.
AO noted that assessee had claimed higher depreciation on software @60% and on software development @100%.
AO held that any purchase or development made on software comes under intangible assets and the rate of depreciation is @25% only.
AO reworked allowable depreciation and arrived that assessee had claimed an excess depreciation of Rs 19.99 crores.
Assessee did not challenge the quantum addition.
The matter achieved finality as no further appeal was filed by either party relating to a rate of depreciation for software.
