Depreciation on sofware

sir

computer and computer  related software Depreciation is 60% only there is no difference 

 I feel the rate of 40% and 16.21 % WDV and SLM as prescribed under the Cos. Act are for hardware and AS-26 Intangible Assets will prevail for amortization of software. As per the said standard any intangible asset has to be w/o within a period of max 10 yrs; as per para 65 of AS-26, the rate of amortization has to less than even 10 yrs considering the tech obsolescense.

Kindly give ur feedback.

Dear Sir,

Depreciation on Fixed Assets is provided over the useful life of an asset.

But in ur case u have mentioned that Licence period is infinite.

So in this case AS-26 aIntangible Assets sates that where useful life of an intangible asset cannot be determinate then it should be amortized on SLM over a period not exceeding 10years (preferably 3-5 years)

But Standard also provides that the period of 10 years is a rebuttable preassumption.

Originally posted by : manikandan.J
	sir computer and computer  related software Depreciation is 60% only there is no difference

 I think in schedules to companies act, it is not specifically covering the Softwares. So we have to follow accounting standard. The standard is mandating that the softwares should be written off in 10 years, which according to me is a very long period keeping in view the type of economy we are into nowadays. I think, we can write it off in five years on SLM basis. My basis of conlcusion is that if we apply the rates prescribed for Computer in the Schedules to Companies Act, 1956, we will be able to write off  81% of the cost in first five years on SLM basis.

Thanks for the replies friends.

agree with you sir

no such rate has been specified in companies act.

sir

i am mentioned only for as per the IT ACT Depreciation @ 60%  and IT Act says followed the W.D.V method only,  As per the Companies ACT Depreciation @ 13.91% Computer the Computer Accessories 

thanks amir......i also had this query

For Income Tax purposes, on OTC software (whatever value) one can take it as 100% expense in year of purchase (dont remember the case). For accounting purposes, AS on Intangible asset can be followed.

SUMMARY OF CASE LAW

Printers, scanners and other peripherals are part and parcel of computer and depreciation against such asset are allowable @ 60 per cent.

CASE LAW DETAILS
Decided by: ITAT, DELHI BENCH `B’: NEW DELHI
In The case of: ACIT v Container Corporation of India Ltd.
Appeal No. : ITA Nos. 2851 & 3680/Del/2007
Decided on: February 27, 2009

RELEVANT PARAGRAPHS:

40. The accessories and peripherals of computers provide input processing, storage and various output devices. The output devices such as printer, scanner etc. are computer peripherals and form essential parts of PC. These output devices cannot work in isolation and also working on computer system without an output device such as printer would be futile. In view of the above, the claim ofdepreciation at 60% on printer, scanner and other computer peripherals is completely justified. The claim of depreciation of 60% further gets justified in view of the fact that even computer software which is installed on computer system supports the computer hardware and is eligible for depreciation at 60%.

41. As held by the Calcutta High Court decision in Jokai India Ltd. 251 ITR 39. in view of decision of Kolkata, ITAT in the case of ITO Vs. Sa Majumdar-2804TR~ 74, we hold that printers, scanners and other peripherals were part and parcel of computer anddepreciation against such asset are allowable @ 60%. This ground is to be decided in favour of the assessee and against the revenue in view of the decision of the Kolkata Bench `B’ of the Tribunal in the case of ITO vs. Samiran Majumdar (2006) 98 ITD 119 (Kol) wherein the Tribunal allowed the claim by observing as under :

“Therefore, the printer and scanner were integral part of the computer system and were to be treated as computer for the purposes of allowing higher rate of depreciation, i.e., 60 per cent and accordingly, no interference was required in the order passed by the Commissioner (Appeals) on that account.” Therefore, the effective ground remains with regard to deduction under section 80IA in respect of inland ports.

42. We accordingly uphold the order of the CIT(A) in allowing depreciation @ 60% on computer peripherals and accessories by treating them as computers.

i agree with the above members

As per AS-26  intangible assets should be written off over the period of  10 years unless the longer time period justified in certain circumstances.

And Software is an intangible asset.

Dear Sir,

I agree with u that software is intangible asset but there is no depreciation on it it called ammortisation.

Within 1865 days it has to be written off and calculation method is as mentioned below.

Value of Software/1865*number of days used.

Regards,

Bhat.

Thanks Amir...Your Explanation is really good.