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Comp softwares revenue or capital

kunal (a) (28 Points)

15 April 2014

I m preparing for CA finals. RTP has a recent case of Oriental Ceramics & Industries lts (2013)358 ITR 49 Delhi- where it has been held that Computer & its peripherals including COMPUTER SOWTWARE are to be depriciated under block of 60 %. On the othr hand, amendmended defination of ROYALTY as per FA 2012 includes payments for Computer software. explation says that IT Rules provide for depre on softwares at 60 % but now as per IT ACT software is a royalty payment and is thus allowable expenditure u/s 37(1) subject to TDS as per 40a(i) / 40a(ia). Rules cannot override act and so softwares are to be expensed out. what should i write in exam considering the contradictory decision of the Delhi HC.

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3 Replies

CA Deepesh Ruhela (Keen to Learn) (3271 Points)
Replied 15 April 2014

No, we have to give answer as per sec. 9. And give the note on this case that it is now over ruled.

kunal (a) (28 Points)
Replied 15 April 2014

but nowhere did i read that this case is overruled. in fact institute itself publishesthis case in RTP is an positive act to encourage students to pursue this view

CA Deepesh Ruhela (Keen to Learn) (3271 Points)
Replied 22 April 2014

Dear friend, Is it important to write that this case has been overruled. Whereas, there has been amendment in relevant section i.e change in Act. So, how can we presume that the case is still sustainable.

Yes, Institute still publishes this case in their RTP. I don't know why?

The same thing done by institute in IDT also. For your ready reference, In case of STEEL AUTHORITY OF INDIA LTD. 2012 (S.C.), process of removal of foreign materials from iron ore for concentration of such ore amount to manufacture or Not. SC held that it was held by SC that process of removal of foreign materials from iron ore for concentration of such ore doesn’t amount to manufacture. Presently, this process is covered as deemed manufacture. In case of, GTC INDUSTRIES LTD. 2011 (BOM.), Does the process of cutting and embossing aluminum foil for the purpose of packing of the cigarettes amount to manufacture or not? It was held that , process did not amount to manufacture. By FA 2012 cutting & embossing treated as Deemed Manufacture.

If in exam case study comes, then we should give the answer as per decided case but for safer side, we should also give the Note to highlight the recent amendments in particular section.