Wayne Burt Petrochemicals (P) Ltd., Sriperumbudur V. DCIT Corporate Circle i(2), CHENNAI

ITA 1025/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2300 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 26-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS SREE VIDYA
• Keywords: Depreciation; Tax effect

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH : CHENNAI . , ! ' # ' $ . %& , ( * + [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBE R AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./I.T.A. NO.1025/CHNY/2018. / ASSESSMENT YEAR : 2013-2014. WAYNE BURT PETROCHEMICALS (P) LTD, (FORMERLY KNOWN AS M/S. BAILEY HYDROPOWER PVT. LTD) A-10, SIPCOT INDUSTRIAL PARK, IRUNGATTUKOTTAI, SRIPERAMBUDUR 602 105. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I(2) CHENNAI 600 034. ./I.T.A. NO.1207/CHNY/2018. / ASSESSMENT YEAR : 2013-2014. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I(2) CHENNAI 600 034. ( ,- / APPELLANT) VS . WAYNE BURT PETROCHEMICALS (P) LTD, (FORMERELY KNOWN AS M/S. BAILEY HYDROPOWER PVT. LTD) A-10, SIPCOT INDUSTRIAL PARK, IRUNGATTUKOTTAI, SRIPERAMBUDUR 602 105. [PAN AABCB 1804F] ( ./,- /RESPONDENT) ASSESSEE BY : MRS. SREEVIDYA, ADVOCATE /RESPONDENT BY : MR. CLEMENT RAMESH KUMAR, ADDL. CIT. /DATE OF HEARING : 27-08-2018 ! /DATE OF PRONOUNCEMENT : 03-09-2018 ITA NOS.1025 & 1207 /2018 :- 2 -: 0 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS OF THE ASSESSEE AND REV ENUE RESPECTIVELY DIRECTED AGAINST AN ORDER DATED 31.01 .2018 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI. 2. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTE D THAT TAX EFFECT IN THE APPEAL OF THE DEPARTMENT WAS LESS THAN C20,00,000/- AND THEREFORE SUCH APPEAL WOULD NOT SURVIVE. WITH R EFERENCE TO THE APPEAL OF THE ASSESSEE, LD. COUNSEL SUBMITTED THAT ISSUE WAS DISALLOWANCE OF DEPRECIATION CLAIMED AT THE RATE OF 60% ON DESIGN SOFTWARE COMPRISING OF DRAWINGS AND DESIGNS, ENGINE ERING AND DEVELOPMENT OF SPECIAL PURPOSE CUSTOM BUILT HYDRAU LIC CYLINDERS AND EXCAVATOR EQUIPMENTS. AS PER THE LD. AUTHORISED REP RESENTATIVE, THIS ISSUE STOOD COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISION DATED 22.03.2018 OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-2013 IN ITA NO.2123/CHNY/2017. 3. LD. DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED TH AT THE QUESTION REGARDING DEPRECIATION STOOD COVERED IN F AVOUR OF THE ASSESSEE BY VIRTUE OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-2013. VIS--VIS THE DEPART MENT APPEAL, LD. DEPARTMENTAL REPRESENTATIVE AGREED THAT THE TAX EF FECT WAS LESS THAN C20,00,000/- ITA NOS.1025 & 1207 /2018 :- 3 -: 4. WE HAVE HEARD THE CONTENTIONS. IN SO FAR AS DEPART MENT APPEAL IS CONCERNED, TAX EFFECT IS LESS THAN C20,00 ,000/- AND BY VIRTUE OF CBDT CIRCULAR NO.3/2018, DATED 11.07.2018, SUCH APPEAL CANNOT SURVIVE. IN SO FAR AS APPEAL OF THE ASSESSEE IS CON CERNED, THE CLAIM OF DEPRECIATION WAS ON SOFTWARE IN THE NATURE OF DESI GN AND ASSEMBLY DRAWINGS OF HYDRAULIC CYLINDERS, BILL OF MATERIALS AND OTHER COMPONENTS. DEPRECIATION WAS CLAIMED BY THE ASSESSEE ON THE OP ENING WRITTEN DOWN VALUE OF THIS ASSET. ACQUISITION OF THE SAID ASSET WAS IN FINANCIAL YEAR 2011-12 RELEVANT TO ASSESSMENT YEAR 2012-2013. THE QUESTION WHETHER SUCH ASSET WAS ELIGIBLE FOR DEPRECIATION A VAILABLE TO COMPUTER AND COMPUTER SOFTWARES HAD COME UP BEF ORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2012-201 3. WHAT WAS HELD BY THIS TRIBUNAL AT PARAS 5 TO 7 IS REPRODUCED HERE UNDER:- 5. THE LD.AO ARRIVED AT SUCH CONCLUSION BASED ON THE INVOICE PRODUCED BEFORE HIM AS UNDER:- S.NO. DESCRIPTION QUANTITY RATE IN $USD AMOUNT IN $USD 1 DESIGN & ASSEMBLY DRAWINGS OF HYDRAULIC CYLINDERS, BILL OF MATERIALS, AND OTHER COMPONENTS DRAWING SUPPLIED WHENEVER NECESSARY 1. A VR CYLINDERS 2. BL 200 WHEEL LOADER 3. BG- 605 MOTOR GRADER 4. BG 825 MOTOR GRADER 5. BE-220 EXCAVATOR 6. BG-405 MOTOR GRADER 6 SETS 11,00,000.00 0 11,00,000.00 ITA NOS.1025 & 1207 /2018 :- 4 -: THE LD.AO OPINED FROM THE ABOVE INVOICE THAT THE PU RCHASE MADE BY THE ASSESSEE IS ONLY DESIGN AND ASSEMBLY DRAWINGS OF HY DRAULIC CYLINDERS CONSISTING OF SIX SETS. ON APPEAL, THE LD.CIT(A) GR ANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING THE PURCHASES MADE BY THE ASSESSEE AS INTANGIBLE ASSETS AND THEREBY GRANTED DEPRECIATION @ 25% BY OBSERVING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED THE FACTS, ORDER OF THE AO, SUBMISSIONS MADE BY THE APPELLANT AND MATERIAL ON R ECORD. HE APPELLANT WHICH IS IN THE BUSINESS OF MANUFACTURE O F HYDRAULIC CYLINDERS ACQUIRED CAD DRAWINGS AND CAPITALIZED THE COST UNDER THE HEAD COMPUTER OR COMPUTER SOFTWARE. THIS IS A DES IGN SOFTWARE EMBEDDED IN CD CONTAINING THE DESIGN ETC. SO IN MY VIEW IT DOES NOT TANTAMOUNT TO USE OF COMPUTER SOFTWARE. THEREFO RE, THE ALTERNATIVE PLEA OF THE APPELLANT NEEDS TO BE CONSI DERED. THEREIN IT HAS BEEN PLEADED THAT S.32(1)(II) DEALS WITH DEPREC IATION ON INTANGIBLE ASSETS AND INCLUDES PATENTS, COPYRIGHT S, TRADE MARK, LICENSES OR COMMERCIAL RIGHTS ELIGIBLE FOR DEPRECIA TION @ 25% MAY BE CONSIDERED IN LIEU OF THE CLAIM AT 60%. THIS CL AIM APPEARS TO BE JUSTIFIED IN VIEW OF THE FACTS DISCUSSED ABOVE. THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEPRECIATION ON THE CAPITALIZE D ASSETS @ 25%. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. BEFORE US, THE LD.AR VEHEMENTLY ARGUED THAT THE PURCHASES MADE BY THE ASSESSEE COMPANY IS COMPUTER SOFTWARE A ND THEREFORE IT ARE ENTITLED FOR DEPRECIATION @ 60%. WHILEAS THE LD .DR RELIED ON THE ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. ON PERUSING THE ORDER OF THE L D.CIT(A), WE FIND THAT HE HIMSELF HAS AGREED THAT THE PURCHASES MADE BY TH E ASSESSEE COMPANY IS DESIGN SOFTWARE EMBEDDED IN CD, CONTAINI NG THE DESIGN ETC.. ONCE THE LD.CIT(A) HAS HIMSELF HELD THE PURCHASE MA DE BY THE ASSESSEE COMPANY IS A DESIGN SOFTWARE, WE WONDER AS TO HOW IT CANNOT BE TREATED AS A COMPUTER SOFTWARE. THE DESIGN SOFTW ARE EMBEDDED IN CD CONTAINING THE DESIGN HAS TO BE NECESSARILY TREA TED AS COMPUTER SOFTWARE AND THE SAME IS CLARIFIED IN NOTE 7 OF THE NEW APPENDIX-1 OF THE RULES WHICH STATES THAT COMPUTER SOFTWARE MEANS A NY COMPUTER PROGRAM RECORDED ON ANY DISK, TAPE, PERFORATED MEDI A OR OTHER INFORMATION STORAGE DEVICE. FURTHER AS PER THE RULE , THE RATES PRESCRIBED FOR COMPUTER SOFTWARE IS 60% FOR THE RELEVANT ASSES SMENT YEAR. THEREFORE WE HEREBY DIRECT THE LD.AO TO GRANT THE B ENEFIT OF DEPRECIATION @ 60% FOR THE PURCHASE OF DESIGN SOFTWARE BY THE AS SESSEE. ITA NOS.1025 & 1207 /2018 :- 5 -: IN LINE WITH THE ABOVE, WE HOLD THAT ASSESSEE WAS ELIGIBLE FOR CLAIMING DEPRECIATION @60% ON THE CONCERNED ASSET. GROUNDS RAISED BY THE ASSESSEE ARE THEREFORE ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED WHEREAS THAT OF DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 3RD DAY OF SEPTEMB ER, 2018, AT CHENNAI. SD/- SD/- ( ' # ' $ . %& ) ( DUVVURU RL REDDY ) ( / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:3 RD SEPTEMBER, 2018. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF