The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held the Assessee, IBM India Pvt. Ltd. liable to pay interest for delay in filing ITR under Section 234B of the Income Tax Act, 1961 on incremental income pursuant to unilateral Advance Pricing Agreement (APA) with CBDT.
The Assessee, IBM India Pvt. Ltd. is a company, engaged in the business of trading, leasing, and financing of computer hardware, maintenance of computer equipment, and export of software services to associated enterprises. It filed its return of income for the year under consideration for an income of Rs.1732,49,84,290/- and claimed deduction under section 10AA amounting to Rs.303,16,58,824. The AO noted that assessee computed Minimum Alternate Tax under section 115JB, payable at Rs.363,67,96,390/-.
AO observed that software purchased by the assessee was ‘license to use software’. AO, accordingly restricted depreciation at 25% by placing reliance on DRP restricted depreciation claimed to a lower rate of 25% by concluding that only software purchased along with the computer is eligible for depreciation at the rate of 60%.
Firstly, the issue was raised on the ground in respect of depreciation on computer software being restricted from 60% to 25%.
Secondly, the issue raised on the ground is in respect of levy of interest under section 234B of the Act.
The assessee with regards to the depreciation contended that as per Appendix 1 to Income Tax Rules for year under consideration, 60% depreciation is allowable on the computer, including computer software.
While addressing the issue of levy of interest under section 234B, the revenue contended that interest under section 234B is a mandatory levy, as the section defines levy of interest on the assessed tax. In the present facts of the case, tax is assessed including incremental income due to APA.
The Tribunal consists of the Accountant Member, B.R. Baskaran, and the Judicial Member, Beena Pillai directed the AO to verify if there is any software purchased that falls in the category of revenue expenditure, as then the question of granting depreciation would not arise. In respect of the other computer software that is capitalized, depreciation is to be granted to the assessee at 60%.
The tribunal while addressing the second issue held that the assessee is liable to pay interest under section 234B of the Act, on incremental income pursuant to APA.
Subscribe Taxscan Premium to view the Judgment
