M/s. Nokia India Pvt. Ltd., Gurgaon V. ACIT, New Delhi

CO 276/DEL/2012

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9558 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 28-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 26-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G H SAXENA
• Assessee Lawyers: VIKAS SRIVASTAVA; VARSHA BHATTACHARYA
• Keywords: Depreciation

Judgement Text

ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 324/DEL/2012 A.Y. : 2007-08 ACIT, CIR CLE 1 3 (1), ROOM NO. 406, CR BUILDING, IP ESTATE, NEW DELHI VS. M/S NOKIA INDIA PVT. LTD., 1&2 ND FLOOR, TOWER-A, S.P. INFROCITY, INDUSTRIAL PLOT NO. 2 & 3, UDYOG VIHAR, PHASE-1, DUNDAHERA, GURGAON (PAN: AAACN2170R) AND C.O. NO. 276/DEL/2012 (IN ITA NO. 324/ DEL/2012) A.Y. 2007-08 M/S NOKIA INDIA PVT. LTD., VS. ASSISTANT COMMISSIONER O F INCOME 1&2 ND FLOOR, TOWER-A, S.P. TAX, CIRCLE 13(1), CR BUIL DING, NEW INFROCITY, INDUSTRIAL PLOT NO. 2 & 3, DELHI UDYOG VIHAR, PHASE-1, DUNDAHERA, GURGAON (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. VIKAS SRIVASTAVA, ADV. AND MS. VARSHA BHATTACHARYA, ADV. DEPARTMENT BY : SH. G.H. SAXENA, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF THE ORDER OF THE LD. CIT(A) DATED 3 1.8.2011 AND PERTAIN TO ASSESSMENT YEAR 2007-08. ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 2 REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL (ITA NO. 324/DEL/2012) (ITA NO. 324/DEL/2012) (ITA NO. 324/DEL/2012) (ITA NO. 324/DEL/2012) 2. THE GROUNDS RAISED READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE ASSESSEE DEPRECIATION OF RS. 98,88,500/- ON COMPUTERS RELYING PURELY ON THE R EVISED CERTIFICATE SUBMITTED BY THE ASSESSEE WHICH IN ITSEL F DOES NOT CERTIFY THAT THE COMPUTERS HAVE BEEN USED FROM 1.4.2002, I.E. FOR MORE THAN 180 DAYS. FURTHER, NO REMAND REPORT WAS EVER CALLED FROM THE ASSESSING OFFICER F OR CROSS VERIFICATION OF FRESH EVIDENCE FILED BEFORE THE CIT (A). 2. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUNDS OF APPEAL AND / OR DELETE OR AMEND ANY OF TH E GROUNDS OF APPEAL. 3. IN THIS CASE AO NOTED THAT DURING THE ASSESSME NT YEAR THE ASSESSEE HAS CLAIMED THE DEPRECIATION OF RS. 197.77 LACS AS PER I.T. ACT IN THE COMPUTATION OF INCOME ON COMPUTERS. HOWEVER, THE ALLOWABLE DEPRECIATION IS RS. 98.88 LACS ONLY, AS THE COMPUTER S WORTH RS. 329.92 LACS ACQUIRED DURING PREVIOUS YEAR WERE PUT TO USE FOR LESS THAT 180 DAYS AS CERTIFIED BY THE AUDITORS OF THE COMPANY. THUS AO OPINED THAT THE ASSESSEE HAD CLAIMED AN EXCESS DEPRECIATION OF RS. 98.88 LACS, AS DURING THE YEAR THE AUDITOR OF THE ASSESSEE HAD CER TIFIED THAT THE ASSETS INCLUDING COMPUTER AMOUNTING RS. 392.62 HAV E BEEN PUT TO USE FOR A PERIOD LESS THAN 180 DAYS. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THE EXCESS DEPRECIATION CLAIMED B Y THE ASSESSEE MAY NOT BE WITHDRAWN. THE ASSESSEE IN ITS REPLY DATED 27.10.2010 SUBMITT ED AS UNDER:- ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 3 (I) THE ASSESSEE HAS ACQUIRED UNIT OF AMBER NETWORKS INDIA PRIVATE LIMITED UNDER SLUMP SALE EFFECTIVE ON APRIL 1, 2002. UNDER THE SAID SLUMP SALE, THE ASSESSEE ACQUIRED VARIOUS ASSETS INCLUDING THE COMPUTERS AMOUNTING TO RS. 329.62 LACS. AS THE UNDERTAKING WAS ACQUIRED AS A GOING CONCERN, ALL THE ASSETS ACQUIRED UNDER SLUMP SALE WERE PUT TO USE WITH EFFECT FROM APRIL 1, 2002. IN THE TAX AUDI T REPORT, HOWEVER, BY WAY OF TYPOGRAPHICAL ERROR THE DATES OF CAPITALIZATION DATE (THE DATE ON WHICH ENTRY WAS MADE IN ERP SYSTEM OF ACCOUNTING) AND DATE OF PUT TO USE WERE INTERCHANGED FOR THE ABOVE MENTIONED ASSETS AND THEREBY THE DATE REFLECTED IN PUT TO USE WAS SHOWN AS DECEMBER 25, 2002 AS AGAINST APRIL 1, 2002. (II) IT IS SUBMITTED THAT IT WAS ONLY A CLERICAL MISTAKE AND THE ACTUAL DATE OF ASSETS (COMPUTERS) PUT TO USE IS APRIL 1, 2002. TO SUBSTANTIATE THIS, WE ARE ATTACHING HEREWITH A CA CERTIFICATE IN FORM 3CEA INDICATING THE DATE OF SLUMP SALE AS APRIL 1, 2002 AND A CERTIFICATE FROM THE AUDITOR OF THE COMPANY TO THE EFFECT THAT THESE ASSETS WERE PUT TO USE FOR MORE THAN 180 DAYS DURING THE FY 2002-03. BASED ON ABOVE, IT IS SUBMITTED THAT THESE COMPUTERS HAVE BEEN PUT TO USE FOR MORE THAN 180 DAYS DURING THE FY 2002-03 AND ACCORDINGLY, ON MERITS OF THE CASE, THE ASSESSEE HAS NOT BEEN ALLOWED EXCESS ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 4 DEPRECIATION. THEREFORE, THERE IS NO INCOME WHICH HAS ESCAPED ASSESSMENT. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE ABOV E REPLY. HE REFERRED TO THE REVISED CERTIFICATE DATED 25.1.2008 OF THE AUDITOR FILED BY THE ASSESSEE WHICH READ AS UNDER:- WITH REFERENCE TO OUR REPORT (IN FORM NO. 3CB) DATE D NOVEMBER 26, 2003 ON THE FINANCIAL STATEMENTS OF NOKIA INDIA PRIVATE LIMITED (THE COMPANY) FOR THE ASSESSMENT YEAR 2003-04, WE HAVE VERIFIED THE BOOKS AND RECORDS OF THE COMPANY AND CERTIFY AS UNDER:- THE FOLLOWING FIXED ASSETS INCLUDED IN ANNEXURE II(A) OF THE AFORESAID REPORT REPRESENT FIXED ASSETS ACQUIRED AS A PART OF THE STPI UNDERTAKING OF AMBER NETWORKS (INDIA) PRIVATE LIMITED TAKEN OVER BY THE COMPANY WITH EFFECT FROM APRIL 1, 2002 (THE DATE OF THE SLUMP SALE AS CERTIFIED BY THE MANAGEMENT AND BY ANOTHER FIRM OF INDEPENDENT CHARTERED ACCOUNTANTS IN THEIR REPORT IN FORM NO. 3CEA DATED JANUARY 3, 2003). THE APPROVAL OF THE TRANSFER OF STPI UNDERTAKING OF AMBER NETWORKS PRIVATE LIMITED TO THE COMPANY WAS DATED MARCH 9, 2002. ACCORDINGLY, THESE FIXED ASSETS HAVE BEEN PUT TO USE BY THE COMPANY FOR MORE THAN 180 DAYS IN THE FINANCIAL YEAR ENDED MARCH 31, 2003: ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 5 PARTICULARS PARTICULARS PARTICULARS PARTICULARS DATE DATE DATE DATE OF PUT OF PUT OF PUT OF PUT TO USE TO USE TO USE TO USE CAPITALIZATION CAPITALIZATION CAPITALIZATION CAPITALIZATION DATE ** DATE ** DATE ** DATE ** ACQUIRED ACQUIRED ACQUIRED ACQUIRED VALUE (RS.) VALUE (RS.) VALUE (RS.) VALUE (RS.) AMBER NET FURNITURE APRIL 1, 2002 DECEMBER 25, 2002 1,917,989 AMBER NET MACHINERY APRIL 1, 2002 DECEMBER 25, 2002 419,270 AMBER NET OFFICE EQUIPMENTS APRIL 1, 2002 DECEMBER 25, 2002 492,384 AMBER NET COMPUTERS, SERVERS APRIL 1, 2002 DECEMBER 25, 2002 9,043,594 AMBER NET COMPUTERS, SERVERS APRIL 1, 2002 DECEMBER 25, 2002 23,231,412 AMBER NET SOFTWARE APRIL 1, 2002 DECEMBER 25, 2002 645,351 ** REPRESENTS THE POSTING DATE IN THE COMPANYS ERP SOFTWARE SYSTEM. 4.1 THE AO HELD THAT THE ABOVE CERTIFICATE BY THE AUDITORS WAS NOT SATISFACTORY. HE HELD THAT ASSESSEE HAS NOT BEEN A BLE TO FILE ANY CONCLUSIVE OR INDEPENDENT EVIDENCE WHICH COULD PROV E THAT ASSETS HAVE BEEN PUT TO USE HAVE MORE THAN 180 DAYS, BEYON D THE FACT OF SLUMP SALE WAS EXECUTED ON 1.4.2002. ACCORDINGLY, A O HELD THAT DEPRECIATION IS RESTRICTED TO 98.88 LACS ONLY AS AG AINST THE CLAIM OF DEPRECIATION 199.97 LACS, AS PER I.T. ACT. 5. UPON ASSESSEES APPEAL LD. CIT(A) CONSIDERED THE ISSUE AND HELD AS UNDER:- I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLANT AND ALSO CERTIFICATES OF CA AND AUDITOR FILED BY TH E APPELLANT. IT IS TO BE NOTED THAT THE AO VERIFIED THE DATE OF PUT TO USE OF ASSETS FROM TAX AUDIT REPORT WHICH IS CERTIFIED BY THE AUDITOR (IN WHICH, HOWEVE R, ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 6 THERE WAS A TYPOGRAPHICAL ERROR AND THE DATES OF P UT TO USE AND ENTRY IN ERP SYSTEM OF ACCOUNTING WERE INTERCHANGED). HENCE, THERE IS NO REASON FOR NOT ADMITTING THE AUDITORS CERTIFICATE WHEREIN IT WAS SPECIFICALLY STATED THAT THE ASSETS HAVE BEEN PUT T O USE BY THE COMPANY FOR MORE THAN 180 DAYS IN THE FINANCIAL YEAR ENDED MARCH 31, 2003. FURTHER, THE AR ALSO STATED THAT ON PERUSAL OF THE DEFINITION OF SLUMP SALE AS GIVEN IN SECTION 2(42 C) OF THE ACT, THE SLUMP SALE CAN BE CHARACTERIZED AS TRANSFER OF AN UNDERTAKING OR UNIT OR DIVISION OF AN UNDERTAKING OR A BUSINESS ACTIVITY AS A WHOLE ON A GOING CONCERN BASIS. HENCE, THE MAIN PURPOSE OF TAKING THE UNDERTAKING O N SLUMP SALE BASIS IS TO ENABLE SUCH UNDERTAKING TO RU N ON ITS OWN AFTER TRANSFER AS A GOING CONCERN. HENCE , IF THE UNDERTAKING HAS BEEN TAKEN ON SLUMP SALE NO PRUDENT BUSINESSMAN WOULD LET THE UNDERTAKING REMAIN IDLE FOR SO MANY MONTHS WHEN IT IS CAPABLE OF RUNNING ON ITS OWN WITHOUT ANY INTERRUPTION. THERE IS MERIT IN THE ABOVE ARGUMENT TOO AND FOR THE REASON STATED ABOVE, I HOLD THAT THE ASSETS HAVE ACTUALLY BEEN PUT TO USE FOR MORE THAN 180 DAYS AND HENCE, ARE ELIGIBLE FOR FULL DEPRECIATION FOR THE Y EAR. ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 7 6. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEA L BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT IN THIS CASE THE ASSESSEE HAS TAKEN OVER THE FIXED ASSETS OF AMBER NETWORKS INDIA PVT. LTD. UNDER A SLUMP SALE W.E. F. APRIL 1, 2002. THERE IS NO DISPUTE ABOUT THIS FACT. FROM THE TAX A UDIT REPORT BY REFERRING TO THE DATE OF PUT TO USE FOR THE COMPUTER S WORTH RS. 329.92 LACS, AO INFERRED THAT THEY WERE PUT TO USE FOR LE SS THAN 180 DAYS AS CERTIFIED BY THE AUDITORS OF THE COMPANY. WHEN ENQUI RY WAS MADE IN THIS REGARD, ASSESSEE REPLIED THAT ALL ASSETS ACQUI RED UNDER SLUMP SALE WERE PUT TO USE WITH EFFECT FROM APRIL 1, 2002. IN THE TAX AUDIT REPORT, HOWEVER, BY WAY OF TYPOGRAPHICAL ERROR, THE DATE O F CAPITALIZATION DATE (THE DATE ON WHICH ENTRY WAS MADE IN ERP SYSTEM OF ACCOUNTING) AND DATE OF PUT TO USE WERE INTERCHANGED FOR THE AB OVE MENTIONED ASSETS AND THEREFORE, THE DATE REFLECTED IN PUT TO USE WAS SHOWN AS DECEMBER 25, 2002 AS AGAINST APRIL 1, 2002. IN THIS REGARD, REVISED CERTIFICATE FROM THE AUDITOR DATED 25.1.2007 WAS AL SO FILED. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THERE IS NO REASON WHATSOEVER TO NOT RELY UPON THE VERACITY OF THE REV ISED STATEMENT FILED BY THE AUDITOR. IT WAS ONLY THE ORIGINAL CERTIFIC ATE WHICH HAD CONTAINED ERROR WHICH LED THE AO TO BELIEVE THE ASSETS WER E PUT TO SUE FROM 25.12.2002. THERE WAS NO OTHER MATERIAL WHATSOEVE R IN THE ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 8 POSSESSION OF THE AO. IN THESE CIRCUMSTANCES, THE AOS RELUCTANCE TO GIVE CREDENCE TO THE REVISED CERTIFICATE OF THE AU DITOR IS NOT AT ALL SUSTAINABLE. MOREOVER, ON THE BASIS OF THE FACTS OF THE CASE IT EMERGES THAT ASSESSEE HAS ACQUIRED THE ASSETS UNDE R SLUMP SALE WITH EFFECT FROM APRIL 1, 2002. IN THESE CIRCUMSTANCES, T HERE IS NO PLAUSIBLE REASON WHY APRIL, 25, 2002 WOULD BE MENTIONED AS DA TE ON WHICH THE ASSETS ARE PUT TO USE. LD. CIT(A) IS CORRECT IN OBSERVING THAT THE MAIN PURPOSE OF TAKING THE UNDERTAKING OF SLUMP SALE BASI S IS TO ENABLE SUCH UNDERTAKING TO RUN AFTER TRANSFER OF THE GOING CON CERN. HENCE, IF THE UNDERTAKING HAS BEEN TAKEN ON SLUMP SALE, NO PRUDENT BUSINESSMAN WOULD LEAVE THE UNDERTAKING REMAIN IDLE FOR SO MANY MONTHS, WHEN IT IS CAPABLE OF RUNNING OF ITS OWN WITHOUT ANY INTERR UPTION. IN THE BACKGROUND OF THE AFORESAID DISCUSSION, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOL D THE SAME. ASSESSEES CROSS OBJECTION ASSESSEES CROSS OBJECTION ASSESSEES CROSS OBJECTION ASSESSEES CROSS OBJECTION NO. NO. NO. NO. 276/DEL/2012 276/DEL/2012 276/DEL/2012 276/DEL/2012 8. IN THE CROSS OBJECTION, THE ASSESSEE HAD AGITATE D THE ISSUE OF REOPENING. BEFORE US, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT HE WOULD NOT BE PRESSING THE CROSS OBJECTION. ACCORDIN GLY, THE CROSS OBJECTION IS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, THE APPEAL BY THE REVENUE AND A SSESSEES CROSS OBJECTION STAND DISMISSED. ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 9 ORDER PRONOUNCED IN THE OPEN COURT ON 24/4/2014, UP ON CONCLUSION OF HEARING. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [R RR R.P. TOLANI .P. TOLANI .P. TOLANI .P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 24/4/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 324/DEL/2012 & CO NO. 276/DEL/2012 10