1.  ACIT Vs. M/s. Shree Raghupati Fibres Pvt. Ltd., I.T.A. No. 256/Ahd/2011, Date of Order: 12.09.2014, ITAT - Ahmedabad

Brought forward unabsorbed deprecation can be set off against income u/s 68 of the Income-tax Act, 1961. 

During the course of re-assessment proceedings, AO disallow the set off of unabsorbed deprecation against income determined u/s 68 of the Act for the reason that addition u/s 68 will not form part of any specific head of income and it is definitely not from business income.

Hon’ble ITAT held that brought forward unabsorbed deprecation loss merges with the deprecation of current year and therefore becomes current year’s business loss which is permitted to be set off against any income of the current year other than salary. Further in view of the decision of Hon’ble Supreme Court in case of D.P. Sandu Bros. Chembur (P) Ltd., the amount which has been deemed as income u/s 68 is assessable as income from other sources. In the result, the appeal of the revenue is dismissed.

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2.  DCIT Vs. M/s India Infoline Insurance Services Pvt. Ltd., I.T.A. No. 5758/Mum/2011, Date of Order: 21/07/2014, ITAT - Mumbai

Notice issued u/s 148 of the Act in order to determine whether expenses incurred on software are capital or revenue in nature is not justified.

Assessee-Company, engaged in the business of life insurance, filed its return of income and debited Rs.90 lacs under the head software development in its P&L A/c. AO disallow the same by treated it as capital expenditure. In reply to above assessee contained that assessee did not have right, title or interest in the computer software, that parent company was rendering information technology services to it, that it was not getting any enduring benefit for the said software development.

Hon’ble ITAT held that that the assessee had made payment under the head of Software charges in subsequent years also and the AO do not invoke the provisions of section 147/148. If it was revenue expenditure for the year under appeal, same was for the subsequent years also. In our opinion there was no tangible material to reopen the assessment. As a result, appeal filed by the AO stand dismissed.

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