M/s Microsoft Corporation India Pvt. Ltd., New Delhi V. DCIT, New Delhi

CO 152/DEL/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7175 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 03-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 13-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: MRS PREETY GOEL
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T. A. NO.1665/DEL/2011 ASSESSMENT YEAR : 2003-04 DY. COMMISSIONER OF INCOME-TAX, M/S. MICROSOFT COR PORATION CIRCLE 6(1), NEW DELHI. VS. INDIA PVT. LTD., F-40 , NDSE PART-I, NEW DELHI. PAN: AAACM5586C C.O. NO.152/DEL/2011 ASSESSMENT YEAR : 2003-04 M/S MICROSOFT CORPORATION INDIA DY. COMMISSIONER OF I.TAX, PVT. LTD., F-40, NDSE PART-I, VS. CIRCLE 6(1), NEW DELHI. NEW DELHI. PAN: AAACM5586C (APPELLANTS) (RESPONDE NTS) DEPARTMENT BY : SHRI R.S. NEGI, SR. DR. ASSESSEE BY : SHRI NAGESHWAR RAO, ADVOCATE & MRS. PREETY GOEL, CA O R D E R PER K.D. RANJAN, ACCOUNTAT MEMBER: THE APPEAL BY THE REVENUE AND CROSS OBJECTION BY TH E ASSESSEE FOR ASSESSMENT YEAR 2003-04 ARISE OUT OF THE ORDER OF T HE COMMISSIONER OF 2 INCOME-TAX (APPEALS)-IX, NEW DELHI. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDER:- 1. THE ORDER OF LEARNED CIT(APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION @ 60% ON ITG NETWORKING EQUIPMEN TS AS AGAINST 25% ALLOWED BY THE ASSESSING OFFICER. 3. THE LD. CIT(A) IGNORED THE FINDING RECORDED BY T HE ASSESSING OFFICER AND THE FACT THAT THE DEPRECIATIO N ON ITG NETWORKING EQUIPMENT IS ALLOWABLE @ 25% ON ITG NETW ORKING EQUIPMENT I.E. EQUIVALENT TO PLANT & MACHINERY. 2. THE ONLY ISSUE FOR CONSIDERATION IN REVENUES AP PEAL RELATES TO DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATI ON @ 60% ON ITG NETWORKING EQUIPMENT AS AGAINST 25% ALLOWED BY THE AO. THE AO ALLOWED DEPRECIATION @ 25% TREATING THE NETWORKING CABLES A ND EQUIPMENTS AS PLANT AND MACHINERY. 3. ON APPEAL THE LEARNED CIT(A) ALLOWED DEPRECIATIO N @ 60% FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. BSES YAMUNA POWERS LTD., REPORTED IN 2010-TIOL-636-HC-DE L-IT, WHEREIN IT HAS BEEN HELD THAT COMPUTER ACCESSORIES AND PERIPHE RALS SUCH AS PRINTERS, SCANNERS, SERVERS ETC. ARE ENTITLED TO HIGHER RATE OF DEPRECIATION @ 60%. 4. BEFORE US WHEN CASE CAME UP FOR HEARING THE LEAR NED AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVER ED BY THE DECISION OF 3 ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEA R 2002-03 IN ITA NO.4173/DEL/2010 DATED 19.11.2010. ON THE OTHER HA ND, THE LEARNED SR. DR SUPPORTED THE ORDER OF THE AO. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. ITAT IN ASSESSEES OWN CASE V IDE ORDER DATED 19.11.2010 ALLOWED DEPRECIATION @ 60% ON ITG NETWOR KING EQUIPMENT BY OBSERVING AS UNDER:- 16. FROM THE ABOVE NOTE, IT IS CLEAR THAT THE ABOV E EQUIPMENT PRIMARILY INCLUDE THE ROUTERS, SWITCHES, MODEMS, ET C. WHICH ARE IN THE NATURE OF INPUT AND OUTPUT SUPPORT DEVICES W HICH PERFORMS THE FUNCTIONS INCLUDING COMMUNICATION AND CONTROL AND, THUS, THEY ARE COMPUTER HARDWARE WHEN THEY ARE USED ALONG WITH COMPUTER AND WHEN THEIR FUNCTIONS ARE IN TEGRATED WITH `COMPUTER. SUCH DEVICES USED AS PART OF THE COMPUTER IN ITS FUNCTIONS AND, THUS, IT CAN BE TERMED AS `COMPU TER ONLY, THEREFORE, ELIGIBLE FOR DEPRECIATION @ 60%. THEREF ORE, ALSO WE FIND NO INFIRMITY IN THE CLAIM OF THE ASSESSEE OF D EPRECIATION @ 60% OF ITG NETWORKING EQUIPMENTS. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT IN THE ASSESSEES OWN CASE AS ALSO BY THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF BSES YAMUNA POWERS LTD. (SUPRA), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) DELETING THE ADDITION ON ACCOUNT OF DIFFE RENCE IN DEPRECIATION. THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEPRECIA TION ON ITG NETWORKING EQUIPMENTS AND CABLES ETC. @ 60%. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. 4 7. NOW COMING TO CROSS OBJECTION FILED BY THE ASSES SEE. THE GROUNDS OF CROSS OBJECTION ARE REPRODUCED AS UNDER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT-A IN NOT HOLDING THAT THE REASS ESSMENT PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT BY THE LEARNED AO WERE BAD IN LAW AND ACCORDINGLY, THE REA SSESSMENT ORDER PASSED UNDER SECTION 147 OF THE ACT IS INVALI D AND IS THEREFORE, LIABLE TO BE QUASHED. 8. THE ONLY ISSUE FOR CONSIDERATION IN ASSESSEES C ROSS-OBJECTION RELATES TO REOPENING OF ASSESSMENT U/S 147 OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER REOPENED ASSES SMENT FOR ASSESSMENT YEAR 2003-04 ON THE GROUND THAT THE ASSESSEE HAD BE EN ALLOWED INADVERTENTLY DEPRECIATION ON NETWORKING EQUIPMENTS @ 60% UNDER THE CATEGORY OF COMPUTER WHEREAS IT SHOULD HAVE BEEN AL LOWED @25% AS IN THE CASE OF PLANT & MACHINERY. 9. BEFORE US WHEN CASE CAME UP FOR HEARING, IT WAS ARGUED BY THE LEARNED AR OF THE ASSESSEE THAT ON IDENTICAL FACTS FOR ASSE SSMENT YEAR 2002-03, THE ASSESSMENT WAS REOPENED AND THE TRIBUNAL AFTER DETA ILED DISCUSSION HAS HELD THAT REOPENING OF ASSESSMENT WAS NOT VALID. IT WAS ALSO SUBMITTED THAT THE HONBLE DELHI HIGH COURT HAS UPHELD THE ORDER OF IT AT VIDE THEIR ORDER DATED 11.07.2011 IN ITA 820/2011. THEREFORE, REOPE NING OF ASSESSMENT IS BAD IN LAW. 5 10. ON THE OTHER HAND, THE LEARNED SR. DR SUBMITTED THAT IN ASSESSMENT YEAR 2003-04 THE ASSESSMENT HAS BEEN REOPENED WITHI N THE PERIOD OF 4 YEARS AND THEREFORE, THE DECISION FOR ASSESSMENT YEAR 200 2-03 CANNOT BE APPLIED AS IN THAT YEAR THE REOPENING WAS MADE AFTER PERIOD OF 4 YEARS. 11. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS TAKEN THE GR OUND RELATING TO REOPENING OF ASSESSMENT BEFORE THE CIT(A). HOWEVER, THE LEAR NED CIT(A) HAS DECIDED THIS GROUND OF APPEAL BY STATING THAT THIS GROUND B EING GENERAL IN NATURE DID NOT REQUIRE ANY SPECIFIC ADJUDICATION. BEFORE THE CIT(A) THE ASSESSEE HAD TAKEN THE FOLLOWING GROUND REGARDING REOPENING OF A SSESSMENT UNDER SEC. 147 OF THE ACT:- 1. THAT THE REASSESSMENT PROCEEDINGS INITIATED UND ER SECTION 147 OF THE INCOME TAX ACT 1961, (THE ACT) BY THE L EARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 6(1), NEW DELHI (HEREINAFTER REFERRED TO AS THE LEARNED ASSESSING OFFICER) ARE BAD IN LAW AND ACCORDINGLY, THE REASSESSMENT ORDER ISSUED UNDER SECTION 147 OF THE ACT IS INVALID AND IS LIAB LE TO BE QUASHED. 12. WE HAVE GONE THROUGH THE GROUND OF APPEAL RAISE D BEFORE THE CIT(A). ON PERUSAL OF THIS GROUND OF APPEAL IT IS CLEAR THA T THE ASSESSEE HAD NOT TAKEN THE GROUND RELATING TO ASSUMPTION OF JURISDICTION O N A SPECIFIC POINT INDICATING WHETHER THERE WAS CHANGE OF OPINION OR T HERE WAS NO MATERIAL OR IT WAS BARRED BY LIMITATION ETC. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS 6 NOT SPECIFIC IN NATURE. WE THEREFORE, AGREE WITH T HE FINDING OF THE LEARNED CIT(A) THAT GROUND RAISED BY THE ASSESSEE IS GENERA L WHICH DID NOT REQUIRE ANY SPECIFIC ADJUDICATION. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) DISMISSING GROUN D OF APPEAL FOR INITIATION OF PROCEEDINGS U/S 147 OF THE ACT. ACCO RDINGLY, CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 13. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 14. TO SUM UP, THE APPEAL BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. 15. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 11 TH MAY, 2012. SD/- SD/- (R.P. TOLANI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH MAY, 2012. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.