M/s. Avtec Ltd., New Delhi V. DCIT (LTU), New Delhi

CO 105/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7862 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 27-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON
• Keywords: Business income; Depreciation; Retrospective amendment; Bad and doubtful debts; Unabsorbed depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 10AA; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.D.AGRAWAL, HONBLE VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.4165/DEL/2014 ASSESSMENT YEAR: 2009-10 DCIT (LTU), NBCC PLAZA, PUSHP VIHAR, SECTOR-III, NEW DELHI VS AVTEC LTD. 8 TH FLOOR, BIRLA TOWER, 25, BARAKHAMBA ROAD NEW DELHI-110001 PAN : AAFCA1313C APPELLANT RESPONDENT C.O. NO. 105/DEL/2015 (IN ITA NO. 4165/DEL/2 014) ASSESSMENT YEAR: 200 9-10 AVTEC LTD. 8 TH FLOOR, BIRLA TOWER, 25, BARAKHAMBA ROAD NEW DELHI PAN : AAFCA1313C VS DCIT NBCC PLAZA, PUSHP VIHAR, SECTOR-III NEW DELHI APPELLANT RESPONDENT ASSESSEE BY: S/SHRI SANAT KAPOOR, SHIVANS H PANDYA, ADVS. REVENUE BY : SHRI G. JOHNSON, SR. DR ORDER PER BENCH ITA NO. 4165/DEL/2014 IS THE DEPARTMENTS APPEAL PREFERRED AGAINST THE ORDER DATED 19.05.2014 PASSED BY THE LD. CIT (APPEALS)-LTU FOR ASSESSMENT YEAR 2009-10 WHERE AS THE C.O. HAS BEEN PREFERRED BY THE ASSESSEE FOR ASSESSMENT Y EAR 2009-10. DATE OF HEARING 08.10.2018 DATE OF PRONOUNCEMENT 04.01.2019 ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 2 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY, DURING THE RELEVANT YEAR, WAS ENGAGED IN THE BUSINE SS OF MANUFACTURING AND SELLING OF AUTOMOBILE POWER-TRAIN S AND POWER- SHIFT TRANSMISSIONS ALONG WITH COMPONENTS OF HEAVY DUTY POWER TRAINS. THE ASSESSEE HAS A UNIT IN CHENNAI KNOWN A S MEPZ UNIT WHICH IS SITUATED IN THE SEZ. THE RETURN WAS FILED DECLARING A LOSS OF RS. 1,01,47,052/- WHICH WAS SUBSEQUENTLY RE VISED TO A LOSS OF RS. 1,07,82,450/-. THE ASSESSMENT WAS COMP LETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED 'THE ACT') AT AN INCOME OF RS. 47,64,694/- AFTER MAKING CERTAIN A DDITIONS AND DISALLOWANCES WHICH, INTER ALIA, INCLUDED ADDITION OF RS. 25,05,972/- BEING ALLOCATION OF HEAD OFFICE EXPENSE S AGAINST THE MEPZ UNIT, ANOTHER AMOUNT OF RS. 2,68,251/- BEING A LLOCATION OF BANK AND LOAN PROCESSING CHARGES AGAINST MPEZ UNIT, ADDITION OF RS. 73,54,190/- AGAINST GOODS TRANSFERRED TO MEPZ U NIT. APART FROM THIS, THE ASSESSING OFFICER ALSO MADE A DISALL OWANCE OF RS. 18,40,692/- OUT OF RESEARCH AND DEVELOPMENT EXPENSE S AND A DISALLOWANCE OF RS. 1,46,892/- BY PARTIALLY DISALLO WING DEPRECIATION ON COMPUTER PERIPHERALS WHICH HAD BEEN CLAIMED BY THE ASSESSEE @ 60% BUT THE AO ALLOWED THE DEPRECIAT ION @ 15%. THE ASSESSING OFFICER ALSO MADE A DISALLOWANCE OF R S. 5,34,683/- ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 3 BEING CUSTOMIZATION CHARGES PAID FOR ERP BY TREATIN G THE SAME AS CAPITAL EXPENDITURE. THE ASSESSEES APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS PARTLY ALL OWED WHEREIN THE LD. CIT (A) DELETED THE ADDITIONS PERTA INING TO THE MEPZ UNIT AND NOW THE DEPARTMENT HAS APPROACHED THE ITAT CHALLENGING THE DELETION BY THE LD. COMMISSIONER OF INCOME TAX (A) WHEREAS THE ASSESSEE HAS PREFERRED CROSS OBJECT ION CHALLENGING THE UPHOLDING OF CUSTOMIZATION CHARGES TO BE CAPITAL IN NATURE. 2.1 THE GROUNDS RAISED IN THE REVENUES APPEAL ARE AS UNDER:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE TO SET OFF THE LOSS OF MEPZ (1 0AA) UNIT AGAINST INCOME OF TAXABLE UNITS. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING TH E ADDITION OF RS. 25,05,972/-, MADE BY ASSESSING OFF ICER ON ACCOUNT OF PROPORTIONATE ALLOCATION OF HEAD OFFI CE EXPENSES TO MPEZ (10AA) UNIT. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING TH E ADDITION OF RS. 2,68,251/-, MADE BY AO ON ACCOUNT O F ALLOCATION OF BANK AND LOAN PROCESSING CHARGES TO M PEZ (10AA) UNIT. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING TH E ADDITION OF RS. 73,54,190/-, MADE BY AO ON ACCOUNT OF PRICE DIFFERENCE IN RESPECT OF GOODS TRANSFERRED TO MPEZ (10AA) UNIT FROM OTHER UNITS. ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 4 5. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING TH E ADDITION OF RS. 18,40,690/-, BY DIRECTING TO TREAT THE SAME AS REVENUE EXPENDITURE INSTEAD OF CAPITAL AS TREATE D BY THE AO, PARTICULARLY WHEN THE ADDITION ON THE SAME ISSUE HAS BEEN UPHELD BY LD. CIT (APPEALS) IN CASE OF THE SAME ASSESSEE FOR AY 2008-09. 6. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN DELETING TH E ADDITION OF RS. 76,708/-, MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEPRECIATION @ 60% ON UPS OUT OF TOTAL ADDITION OF RS. 1,46,892/-. 7. THE APPELLANT CRAVES LEAVE TO, ADD TO, ALTER, A MEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2.2 THE GROUNDS RAISED IN THE CO ARE AS UNDER: 1. THAT THE CIT(APPEALS) HAS GROSSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE CUSTOMIZATION CHARGES FOR ERP OF RS 5,34,683/- TO BE CAPITAL EXPENDITURE. THIS EX PENSE IS REVENUE EXPENDITURE AND THE LOWER AUTHORITIES HA VE GROSSLY ERRED IN HOLDING THIS TO BE A CAPITAL EXPEN DITURE. 2. THAT THE CIT(APPEALS) HAS GROSSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE EXPENSE OF RS 24,000 FOR SOFTWARE FOR TOOL MANAGEMENT TO BE A CAPITAL EXPENDITURE. 3. THAT WITHOUT PREJUDICE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT ALLOWING DEPRECIATION @ 60% ON RS 5,34,683/- AND NOT GIVING A CLEAR FINDING IN THIS R ESPECT. 4. THAT THE EXPLANATIONS FILED BEFORE THE CIT(A) A ND THE MATERIAL AVAILABLE ON RECORD HAS NOT BEEN PROPERLY CONSIDERED AND LEGALLY INTERPRETED. THE ADDITIONS C ANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. 5. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE OBSERVATIONS MADE ARE ILLEGAL, BAD IN LAW AND UNWARRANTED AND CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 5 6. THAT THE ASSESSEE RESERVES THE RIGHT TO ADD/AME ND /ALTER ANY GROUND OF CROSS OBJECTION . 3.0 AT THE OUTSET, THE LD. AR SUBMITTED THAT GROUN D NOS. 1, 2, 3 AND 4 OF THE DEPARTMENTS APPEAL WERE IDENT ICAL AND WERE COVERED BY THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 IN ITA NO. 2775/DEL/2014 VI DE ORDER DATED 10.9.2009. A COPY OF THE SAID ORDER WAS PLAC ED ON RECORD. WITH RESPECT TO GROUND NO. 5 OF THE DEPARTMENTS AP PEAL, RELIANCE WAS PLACED ON THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). WITH RESPECT TO GROUND NO. 6 OF THE DEPARTMENTS APPEAL, IT WAS SUBMITTED THAT THE ISSUE STOOD COVER ED BY THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF BSES YAMUNA POWER LIMITED IN ITA 1267/2010. 4.0 WITH RESPECT TO THE CROSS OBJECTION FILED BY T HE ASSESSEE, THE LD. AR SUBMITTED THAT WHILE HOLDING T HE CUSTOMIZATION CHARGES FOR ERP AS CAPITAL EXPENDITUR E, BOTH THE LOWER AUTHORITIES HAD NEITHER ALLOWED DEPRECIATION ON THE SAME NOR ALLOWED THE CLAIM OF EXPENDITURE AS REVENUE EXP ENDITURE. WITH RESPECT TO GROUND NOS. 2 AND 3 OF THE CROSS OB JECTION, IT WAS PRAYED THAT DEPRECIATION SHOULD BE DIRECTED TO BE A LLOWED @60%. ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 6 5.0 IN RESPONSE, THE LD. SR. DR APPEARING ON BEHAL F OF THE REVENUE PLACED RELIANCE ON THE OBSERVATIONS AND FIN DINGS OF THE ASSESSING OFFICER BUT COULD NOT NEGATE THE FACT THA T GROUND NOS. 1 TO 4 OF THE DEPARTMENTS APPEAL WERE COVERED IN FAV OUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE ORDER OF THE ITAT FOR THE IMMEDIATELY PRECEDING YEAR. 5.1 ON GROUND NOS. 5 AND 6, RELIANCE WAS PLACED ON THE FINDINGS AND OBSERVATIONS OF THE ASSESSING OFFICER. 6.0 WITH RESPECT TO THE C.O. OF THE ASSESSEE, THE LD. SR. DR AGAIN PLACED RELIANCE ON THE FINDINGS OF BOTH THE L OWER AUTHORITIES AND ARGUED THAT THE CONCURRENT FINDINGS OF THE LOWE R AUTHORITIES SUPPORTED THE DEPARTMENTS CASE. IT WAS PRAYED THA T THE C.O. OF THE ASSESSEE DESERVES TO BE DISMISSED. 7.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. AS FAR AS GROUND NOS. 1, 2, 3 AND 4 OF THE DEPARTMENTS APPEAL ARE CONCERNED, IT IS SEE N THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 200 8-09 (SUPRA) AND THE RELEVANT OBSERVATIONS AND FINDINGS ARE CONT AINED IN ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 7 PARAGRAPHS 8 TO 15 OF THE SAID ORDER. THE SAME ARE BEING REPRODUCED HERE IN UNDER FOR READY REFERENCE:- 8. HON'BLE APEX COURT IN CIT VS. YOKOGAWA INDIA LTD . (SUPRA) HAS DECIDED THE ISSUE IN CONTROVERSY IN FAV OUR OF THE ASSESSEE AFTER EXAMINING CIRCULARS NO.794 DATED 09.08.2000, NO.1 DATED 17.01.2013 AND CIRCULAR NO.7 DATED 16.07.2013 BY FRAMING THE FOLLOWING QUESTIONS :- '(I) WHETHER SECTION 10A OF THE ACT IS BEYOND THE P URVIEW OF THE COMPUTATION MECHANISM OF TOTAL INCOME AS DEF INED UNDER THE ACT. CONSEQUENTLY, IS THE INCOME OF A SEC TION 10A UNIT REQUIRED TO BE EXCLUDED BEFORE ARRIVING AT THE GROSS TOTAL INCOME OF THE ASSESSEE? (II) WHETHER THE PHRASE 'TOTAL INCOME' IN SECTION 1 0A OF THE ACT IS AKIN AND PARI MATERIA WITH THE SAID EXPR ESSION AS APPEARING IN SECTION 2(45) OF THE ACT? (III) WHETHER EVEN AFTER THE AMENDMENT MADE WITH EF FECT FROM 1.04.2001, SECTION 10A OF THE ACT CONTINUES TO REMAIN AN EXEMPTION SECTION AND NOT A DEDUCTION SECTION? (IV) WHETHER LOSSES OF OTHER 10A UNITS OR NON 10A U NITS CAN BE SET OFF AGAINST THE PROFITS OF 10A UNITS BEF ORE DEDUCTIONS UNDER SECTION 10A ARE EFFECTED? (V) WHETHER BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION OF 10A UNITS OR NON 10A UNI TS CAN BE SET OFF AGAINST THE PROFITS OF ANOTHER 10A U NITS OF THE ASSESSEE.' 9. HON'BLE APEX COURT DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- '17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIRST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] T HAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF D EDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW TH E CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS O NLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 8 PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDIATELY AFTER THE STAGE OF DETERMINA TION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SE T OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRI OR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOT AL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL IN COME OF THE ASSESSEE' IN SECTION 10A HAS ALREADY BEEN DE ALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED B Y THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTION 10A AS 'TOTAL IN COME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THIS ORDER, BY HOLDING THAT THOUGH SECTIO N 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAN D DISPOSED OF ACCORDINGLY. 10. EVEN PARA 5.2 OF CIRCULAR NO.7 DATED 16.07.2013 IS ALSO CATEGORIC ENOUGH TO DECIDE THE ISSUE IN CONTRO VERSY AND PARA 5.2 THEREOF IS EXTRACTED AS UNDER FOR READ Y PERUSAL :- '5.2 THE INCOME COMPUTED UNDER VARIOUS HEADS OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER IV OF THE IT ACT SHALL BE AGGREGATED IN ACCORDANCE WIT H THE PROVISIONS OF CHAPTER VI OF THE IT ACT, 1961. THIS MEANS THAT FIRST THE INCOME/LOSS FROM VARIOUS SOURCES I.E . ELIGIBLE AND INELIGIBLE UNITS, UNDER THE SAME HEAD ARE AGGREGATED IN ACCORDANCE WITH THE PROVISIONS OF SEC TION 70 OF THE ACT. THEREAFTER, THE INCOME FROM ONE AHEA D IS AGGREGATED WITH THE INCOME OR LOSS OF THE OTHER HEA D IN ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 9 ACCORDANCE WITH THE PROVISIONS OF SECTION 71 OF THE ACT. IF AFTER GIVING EFFECT TO THE PROVISIONS OF SECTIONS 7 0 AND 71 OF THE ACT THERE IS ANY INCOME (WHERE THERE IS NO B ROUGHT FORWARD LOSS TO BE SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 72 OF THE ACT) AND THE SAME I S ELIGIBLE FOR DEDUCTION IN ACCORDANCE WITH THE PROVI SIONS OF CHAPTER VI-A OR SECTIONS 10A, 10B ETC. OF THE AC T, THE SAME SHALL BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE.' 11. FURTHERMORE, AFTER THE DECISION OF HON'BLE APEX COURT IN CIT VS. YOKOGAWA INDIA LTD . (SUPRA), THE EXPLANATION HAS BEEN ADDED TO SECTION 10A OF THE ACT WHICH IS EXTRACTED AS UNDER :- '7. IN SECTION 10AA OF THE INCOME-TAX ACT, AFTER SUB- SECTION (1), THE FOLLOWING EXPLANATION SHALL BE INS ERTED WITH EFFECT FROM THE 1ST DAY OF APRIL, 2018, NAMELY :-- 'EXPLANATION.--FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT THE AMOUNT OF DEDUCTION UNDER THIS SE CTION SHALL BE ALLOWED FROM THE TOTAL INCOME OF THE ASSES SEE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, BEFORE GIVING EFFECT TO THE PROVISIONS OF THIS SECT ION AND THE DEDUCTION UNDER THIS SECTION SHALL NOT EXCEED S UCH TOTAL INCOME OF THE ASSESSEE.'. 12. KEEPING IN VIEW THE FACT THAT SECTION 10AA MAKES THE ASSESSEE ELIGIBLE FOR DEDUCTION IN THE SAME MAN NER, THE DEDUCTION PRESCRIBED U/S 10A AND 10B AND IT CAN NOT BE TREATED IN THE NATURE OF EXEMPTION AND AS SUCH, THE LOSS SUFFERED BY THE ASSESSEE IN THE UNIT ELIGIBLE FOR DEDUCTION U/S 10AA CAN BE SET OFF AGAINST THE NORMA L BUSINESS INCOME. 13. SO FAR AS QUESTION OF AMENDMENT OF SECTION 10A IS CONCERNED, THE HON'BLE SUPREME COURT IN ALLIED MOTO RS (P.) LTD. VS. CIT AND CIT VS. GOLD COIN HEALTH FOOD (P .) LTD. (SUPRA) HAS DECIDED THE IDENTICAL ISSUE BY HOL DING THAT, 'WHEN THE AMENDMENT IS CURATIVE IN NATURE IT HAS TO BE READ FROM ITS INCEPTION.' SO, WE ARE OF THE CONSIDERED VIEW THAT THE AMENDMENT OF SECTION 10A BY WAY OF INSERTING EXPLANATION IS ONLY DECLARATOR Y IN NATURE HAVING RETROSPECTIVE EFFECT. ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 10 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS TAKEN VALID, LEGAL AND PLAUSIBLE VIEW THAT THE DEDUCTION IS TO B E ALLOWED FROM THE TOTAL INCOME OF THE UNIT AND NOT F ROM THE TOTAL INCOME OF THE ASSESSEE UNDER CHAPTER IV O F THE ACT AND NOT AT THE STAGE OF TOTAL INCOME UNDER CHAP TER VI OF THE ACT. SO, GROUND NO.1 IS DETERMINED AGAINST T HE REVENUE. 15. SINCE GROUNDS NO.2, 3, 4 & 5 ARE OFFSHOOT OF GR OUND NO.1 BEING THE ADDITION ON ACCOUNT OF ALLOCATION OF HEAD OFFICE EXPENSES; ALLOCATION OF BANK AND LOAN PROCES SING CHARGES; BAD DEBTS WRITTEN OFF AND ADDITION ON ACCO UNT OF GOODS TRANSFERRED TO 10AA UNIT, THE SAME HAVE BE EN RIGHTLY DECIDED BY LD. CIT (A). SO, FINDING NO ILLE GALITY OR PERVERSITY, THE SAME ARE DETERMINED AGAINST THE REVENUE. 7.1 ACCORDINGLY, RESPECTFULLY FOLLOWING THE CO-ORD INATE BENCHS ORDER IN THE ASSESSEES OWN CASE FOR IMMEDI ATELY PRECEDING YEAR, ON IDENTICAL FACTS, WE DISMISS GROU ND NOS. 1 TO 4 OF THE DEPARTMENTS APPEAL. 7.2 AS FAR AS GROUND NO. 5 CHALLENGING THE DELETIO N OF ADDITION OF RS. 18,40,690/- PERTAINING TO RESEARCH AND DEVELOPMENT EXPENSES IS CONCERNED, IT IS SEEN THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS STATED THA T THE ASSESSEE HAS FURNISHED THE DETAILS OF THE R&D EXPEN SES BEFORE HIM. THE LD. COMMISSIONER OF INCOME TAX (A) HAS AL SO REPRODUCED A CHART FURNISHED BY THE ASSESSEE IN THI S REGARD WHICH GIVES A DETAILED BREAK-UP OF THE R&D EXPENSES AND ALSO ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 11 GIVES A BRIEF NOTE ABOUT THE NATURE OF EACH ITEM AL ONG WITH THE INVOICE. THEREAFTER, THE LD. COMMISSIONER OF INCOM E TAX (A) HAS GIVEN A CATEGORICAL FINDING THAT THE TRAINING CHARG ES AND ANNUAL SUBSCRIPTION CHARGES FOR CAD VALIDATION WERE REVENU E IN NATURE. IT HAS FURTHER BEEN CATEGORICALLY OBSERVED BY THE L D. COMMISSIONER OF INCOME TAX (A) THAT THE INVENTORY M OVEMENT FOR R&D EXPENDITURE WAS IN THE NATURE OF DESTRUCTIVE T ESTING WHEREIN THE ITEM/S WERE CONSUMED AND NO INVENTORY H AVING COMMERCIAL VALUE WAS LEFT. IT HAS ALSO BEEN NOTED BY THE LD. COMMISSIONER OF INCOME TAX (A) THAT NO NEW ASSET HA D COME INTO EXISTENCE. THE LD. SR. DR COULD NOT POINT OUT ANY INFIRMITY IN THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A). WE ALSO NOTE THAT WHILE REACHING HIS DECISION, THE LD. COMMISSIO NER OF INCOME TAX (A) HAS PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF EMPIRE JUTE CO. 124 ITR 1(SC). ACCORDINGLY, ON OVERALL VIEW OF FACTS OF THE CASE AND IN VIEW OF THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) REMAINING UNCONTROVERTED, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSU E AND WE ACCORDINGLY DISMISS GROUND NO. 5 OF THE REVENUES A PPEAL. ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 12 7.3 AS FAR AS GROUND NO. 6 IS CONCERNED WHICH CHAL LENGES THE ACTION OF THE LD. COMMISSIONER OF INCOME TAX (A ) IN DIRECTING DEPRECIATION ON COMPUTER PERIPHERALS TO BE ALLOWED @60% AS AGAINST 15% WHICH HAD BEEN ALLOWED BY THE ASSESSING OFFICER, IT IS SETTLED LAW THAT COMPUTER PERIPHERALS ENJOY THE SAME RATE OF DEPRECIATION AS OF COMPUTERS BECAUSE COMPUTER PERIP HERALS CANNOT BE SAID TO BE USED IN ISOLATION AND THEY ARE INTRICATELY CONNECTED WITH THE COMPUTER SYSTEM. THE HONBLE HI GH COURT JUDGMENT IN THE CASE OF BSES YAMUNA POWER LTD. (SUP RA) ALSO SUPPORTS THE ASSESSEES CASE. ACCORDINGLY, WE FIND NO REASON TO INTERFERE ON THIS ISSUE AS WELL AND WE DISMISS GROU ND NO. 6 OF THE DEPARTMENTS APPEAL. 8. IN THE RESULT, THE DEPARTMENTS APPEAL STANDS DISMISSED. 9. AS FAR AS GROUND NOS. 1, 2 AND 3 OF THE ASSESSE ES C.O. ARE CONCERNED, THE AVERMENT OF THE LD. AR IS THAT N EITHER DEPRECIATION HAS BEEN ALLOWED NOR THE CLAIM OF EXPE NDITURE HAS BEEN ALLOWED AND THE ENTIRE EXPENDITURE HAS BEEN CA PITALIZED BY THE ASSESSING OFFICER. LD. COMMISSIONER OF INCOME TAX (A) HAS UPHELD THIS ACTION OF THE ASSESSING OFFICER. HOWEV ER, WE ARE OF THE OPINION THAT THE ASSESSEES CLAIM OF DEPRECIATI ON IS ENTIRELY ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 13 JUSTIFIED. IF THE EXPENDITURE ON SOFTWARE DEVELOPME NT AND ERP CUSTOMIZATION IS TO BE TREATED AS A CAPITAL EXPENDI TURE, THE NATURAL COROLLARY WOULD BE TO ALLOW DEPRECIATION ON THE SAME. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE AND DIRECT THE AS SESSING OFFICER TO ALLOW DEPRECIATION @60% ON THE CUSTOMIZA TION CHARGES FOR ERP AMOUNTING TO RS. 5,34,683/- AND SOFTWARE FO R TOOL MANAGEMENT AMOUNTING TO RS. 24,000/-. ACCORDINGLY, GROUND NOS. 1, 2 AND 3 OF THE ASSESSEES C.O. STAND ALLOWE D. 9.1 GROUND NOS. 4, 5 AND 6 OF THE ASSESSEES C.O. ARE GENERAL IN NATURE AND NEED NO ADJUDICATION. 10. IN THE RESULT, THE ASSESSEES C.O. STANDS ALLO WED. 11. IN THE FINAL RESULT, THE APPEAL OF THE DEPARTM ENT STANDS DISMISSED WHEREAS THE C.O. OF THE ASSESSEE STANDS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.01.2019. SD/- SD/- (G.D.AGRAWAL) (SUDHANSHU SRIV ASTAVA) VICE PRESIDENT JUDICIAL MEMBER DATED: 04 .01.2019 GS ITA NO. 4165/SD/2014 & C.O. NO. 105/D/2015 14 COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR TRUE COPY BY ORDER ASSTT. REGISTRAR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER