Joint Commissioner of Income tax(LTU), Bangalore V. M/s State Bank of Mysore, Head Office, Bangalore

ITA 1115/BANG/2014

• Counselvise Citation: 111521114 RSA 2014
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RADHAKRISHNA CITIIIDR
• Assessee Lawyers: K R VASUDEVAN
• Keywords: Depreciation; Additional evidence
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER ITA NOS. 1115 & 1116/BANG/2014 ASSESSMENT YEARS : 2007-08 TO 2008-09 THE JOINT COMMISSIONER OF INCOME TAX (LTU), BANGALORE. VS. M/S. STATE BANK OF MYSORE, HEAD OFFICE, FINANCE & ACCOUNTS DEPARTMENT, BANGALORE. PAN: AACCS 0155P APPELLANT RESPONDENT APPELLANT BY : SHRI S. RADHA KRISHNA, CIT-III(DR) RESPONDENT BY : SHRI K.R. VASUDEVAN, ADVOCATE DATE OF HEARING : 26.05.2015 DATE OF PRONOUNCEMENT : 29.05.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE ARE APPEALS BY THE REVENUE AGAINST THE ORDE RS DATED 28.5.2014 AND 14.7.2014 OF THE CIT(APPEALS), LTU, B ANGALORE RELATING TO ASSESSMENT YEARS 2007-08 & 2008-09 RESPECTIVELY. 2. THE COMMON ISSUE THAT ARISES FOR CONSIDERATION I N BOTH THESE APPEALS IS AS TO, WHETHER THE CIT(APPEALS) WAS JUST IFIED IN DIRECTING THE AO ITA NOS.1115 & 1116/BANG/2014 PAGE 2 OF 10 TO ALLOW DEPRECIATION AT 60% OF PRINTERS, SCANNERS, EQUIPMENTS AND OTHER PERIPHERALS, TREATING THEM AS FALLING WITHIN THE DE SCRIPTION OF COMPUTER FOR THE PURPOSE OF ALLOWING DEPRECIATION. 3. THE ASSESSEE IS A BANKING COMPANY. FOR THE A.Y. 2007-08, THE AO CALLED FOR THE DETAILS OF THE ADDITIONS TO THE FIXE D ASSETS OF COMPUTERS DURING THE PREVIOUS YEAR. THE ADDITIONS TO THE FIXED ASSE TS UNDER THE HEAD COMPUTER DURING THE PREVIOUS YEAR WAS A SUM OF RS .13,17,60,280 OUT OF WHICH THE ASSETS ADDED BEFORE 30.9.2006 WAS RS.8,38 ,80,498. THE ASSESSEE COULD PRODUCE COPIES OF BILLS EVIDENCING A DDITION TO FIXED ASSETS OF COMPUTERS ONLY TO THE EXTENT OF RS.6,87,62,263. THE ASSESSEE HAD INCLUDED PRINTERS, ATM, UPS, SCANNERS, NETWORK EQUI PMENTS AND OTHER PERIPHERALS AS PART OF THE FIXED ASSETS COMPUTER. 4. ACCORDING TO THE AO, DEPRECIATION ON COMPUTER WA S ALLOWED AT 60%, WHEREAS IF THE AFORESAID FIXED ASSETS ARE TREATED A S FORMING PART OF THE BLOCK OF ASSETS PLANT & MACHINERY, THE ALLOWABLE DEPRECIATION WAS ONLY 15%. ACCORDING TO THE AO, PRINTERS, ATM, UPS, SCAN NERS, NETWORK EQUIPMENTS AND OTHER PERIPHERALS CANNOT BE REGARDED AS COMPUTERS AND ACCORDINGLY THE AO ALLOWED DEPRECIATION AS FOLLOWS: - TOTAL ADDITION OF FIXED ASSETS UNDER THE HEAD COMPUTER & SOFTWARE 13,54,65,893 EVIDENES PRODUCED FOR 6,87,62,623 WHERE NO EVIDENCES SUBMITTED 6,67,03,270 ITA NOS.1115 & 1116/BANG/2014 PAGE 3 OF 10 DEPRECIATION AS CLAIMED ORIGINALLY BY THE ASSESSEE IS AS UNDER DESCRIPTION OF ASSETS MORE THAN 180 DAYS RATE DEPRECIATION ALLOWED LESS THAN 180 DAYS RATE DEPRECIATION ALLOWED TOTAL DEPRECIATION COMPUTERS 4,78,79,782 60% 2,87,27,869 8,38,80,498 30% 2,51,64,150 5,38,92,019 SOFTWARE 12,73,723 60% 7,64,234 24,31,890 30% 7,29,567 14,93,801 TOTAL DEPRN. CLAIMED 2,94,92,103 2,58,93,717 5,53,85,820 DEPRECIATION ON THE BASIS OF INVOICES FURNISHED BY THE ASSESSEE DESCRIPTION OF ASSETS MORE THAN 180 DAYS RATE DEPRECIATION ALLOWED LESS THAN 180 DAYS RATE DEPRECIATION ALLOWED TOTAL DEPRECIATION COMPUTERS 16,98,633 60% 10,19,179 10,52,740 30% 3,15,822 13,35,001 PRINTERS, ATM, UPS AND SCANNER 1,45,02,583 15% 21,75,387 5,15,08,667 7.5% 38,63,150 60,38,537 TOTAL DEPRECIATION ELIGIBLE 73,73,538 ACCORDINGLY, THE AO DISALLOWED A SUM OF RS.4,80,12, 282 (5,53,85,820 73,73,538) BEING THE EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE. 5. FOR THE AY 2008-09, SIMILAR CLAIM MADE BY THE AS SESSEE WAS DISALLOWED AS FOLLOWS:- RECOMPUTATION OF DEPRECIATION IN THE AY 2007-08 WHILE PASSING THE OGE TO THE OR DER OF CIT, LTU, THE SIMILAR EXERCISE HAS BEEN CARRIED OUT WHEREIN THE CLOSING WDV WAS DETERMINED BY RESTRICTING THE DEPRE CIATION CLAIM. IT IS AS UNDER: BY TREATING THE SAME AS OPENING WDV FOR THE AY 200 8-09 THE DEPRECIATION CLAIM FOR THE AY 2008-09 ON ACCOUN T OF COMPUTERS AND SOFTWARE IS REWORKED AS UNDER: ITA NOS.1115 & 1116/BANG/2014 PAGE 4 OF 10 WDV FOR AY 2008-09 IN THE CASE OF M/S. SBM OB ON 01/04/2006 ADDITIONS AS PER ORDER U/S 143(3) RWS 263 DATED 30/11/2012 DEDUCTIONS DEPRECIATION ALLOWED WDV AS ON 31/03/2007 MORE THAN 180 DAYS LESS THAN 180 DAYS COMPUTERS 338840845 1698633 1052740 55870605 171117146 114604467 SOFTWARE 86132133 0 0 11944309 44512694 29675130 COMPUTERS TREATED AS PLANT & MACHINERY 0 14502583 51508667 0 6038537 599727713 221668378 AMOUNT OF DEPRECIATION CLAIMED IN RETURN 269680657 EXCESS DEPRECIATION CLAIMED TO BE DISALLOWED 4801 2282 OB ON 01/04/2006 ADDITIONS AS PER ORDER U/S 143(3) RWS 263 DATED 30/11/2012 DEDUCTIONS DEPRECIATION ALLOWED WDV AS ON 31/03/2007 MORE THAN 180 DAYS LESS THAN 180 DAYS COMPUTERS 114604467 40735662 42581998 65327578 60394830 72199719 SOFTWARE 29675130 0 0 12291605 10430115 6953410 COMPUTERS TREATED AS PLANT & MACHINERY 59972733 28796054 37451434 0 16124173 110096028 86949118 DEPRECIATION CLAIMED 176802937 EXCESS CLAIMED 89853819 CONCLUSION IT IS NOTICED FROM THE DETAILED DISCUSSION THAT TH E ASSESSEE BANK HAS BEEN CLAIMING EXCESS DEPRECIATION IN EVERY YEAR. IT HAS BEEN DETECTED DURING THE PROCEEDINGS INITIATED U/S 263 OF THE IT ITA NOS.1115 & 1116/BANG/2014 PAGE 5 OF 10 ACT BY CIT(LTU) FOR THE AY 2007-08. THE ASSESSMENT FOR THE AY 2008-09 WAS REOPENED AND THE ASSESSEE BANK WAS R EQUESTED TO SUBSTANTIATE THE CLAIM OF DEPRECIATION. EVEN TH OUGH THE ASSESSEE BANK HAS OBJECTED THE REOPENING THEY HAVE FAILED TO FURNISH COMPLETE EVIDENCES IN SUPPORT OF FIXED ASSE TS ADDED UNDER THE HEAD COMPUTERS AND SOFTWARE. IN SOME CASES THE MACHINERIES LIKE ATM, AC, PRINTER ETC HAS BEEN CLAIMED AS COMPU TER AND THE EXCESS DEPRECIATION HAS BEEN RESTRICTED ACCORDINGLY . HENCE AFTER VERIFYING THE EVIDENCES THE DEPRECIATION CLAIM HAS BEEN RESTRICTED AS PER THE DETAILED DISCUSSION MADE ABOVE. THE EXC ESS CLAIM OF DEPRECIATION OF RS.8,98,53,819 HAS BEEN DISALLOWED AND ADDED BACK. 6. AGGRIEVED BY THE AFORESAID ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS). INSOFAR AS IT RELA TES TO TREATING THE PRINTERS, SCANNERS, NETWORK EQUIPMENTS AND OTHER PE RIPHERALS AS FORMING PART OF THE FIXED ASSETS COMPUTER, THE CIT(APPEAL S) WAS OF THE VIEW THAT THE CLAIM OF THE ASSESSEE WAS JUSTIFIED, BASED ON THE DECISIONS REFERRED TO BY THE ASSESSEE. THE FOLLOWING WERE THE RELEVANT OB SERVATIONS OF THE CIT(APPEALS):- 5. RELYING UPON THE JUDICIAL DECISIONS CITED IN R ESPECT OF HDFC BANK AND VENTURE INFOTECH (SUPRA), THE AO HAS DISALLOWED THE CLAIM OF DEPRECIATION AT 60% ON THE CAPTIONED ITEMS. BEFORE ME THE APPELLANT SUBMITTED THAT THE P RINTERS, SCANNERS, MODEMS ETC., ARE COMPUTER PERIPHERALS AND PROVIDE INPUT PROCESSING, STORAGE AND VARIOUS OUTPUT DEVICE S AND, ACCORDINGLY, FORM AN ESSENTIAL PART OF A COMPUTER. THEY CANNOT WORK IN ISOLATION APART FROM THE COMPUTER TO WHICH THEY ARE ATTACHED. LIKEWISE, THE NETWORK EQUIPMENT SUCH AS R OUTERS ETC ASSIST IN TRANSMITTING THE DATA AND THE DATA PACKAG ES TO INTENDED LOCATIONS BETWEEN COMPUTER NETWORKS. RELIANCE WAS P LACED BY THE APPELLANT ON THE FOLLOWING JUDICIAL DECISIONS:- ITA NOS.1115 & 1116/BANG/2014 PAGE 6 OF 10 - DCIT VS. DATACRAFT INDIA LIMITED (40 SOT 295) (MUM ITAT) (SB) - ITO VS. SAMIRAN MAJUMDAR (2006) 280 ITR (AT) 74 (KOLKATA ITAT) - CONTAINER CORPORATION OF INDIA LTD. VS. ACIT (30 SO T 284) (DELHI ITAT) - DCIT VS. MICROSOFT CORPN. INDIA (P) LTD. (139 TTJ 4 0) (DELHI ITAT) - EXPEDITORS INTERNATIONAL INDIA (P) LTD. VS. ADDL.CI T (118 TTJ 652) (DELHI ITAT) - HAWORTH INDIA (P) LTD. VS. DCIT (140 TTJ 446) (DELH I ITAT) - DCIT AND ADDL.CIT VS. COSMOS FILMS LTD. (13 ITR (TR IB) 340)(DELHI ITAT) 5.1 I HAVE GONE EXAMINED THE APPELLANTS ARGUMENTS AND THE CITED CASE LAWS AND FIND THAT IN RESPECT OF PRINTER S, SCANNERS, ROUTERS AND OTHER NET WORK EQUIPMENTS, THE JUDICIAL DECISIONS ARE STRONGLY WEIGHED IN FAVOUR OF THE APPELLANT PRIMARI LY ON THE GROUND THAT THESE HARDWARE ITEMS BECOME OPERATIONAL ONLY THROUGH COMPUTER FUNCTIONS AND THESE COMPUTER HAR DWARE WHEN USED AS COMPONENT OF THE COMPUTER BECOME PART AND P ARCEL OF THE COMPUTER. IN THESE SITUATIONS, AS HELD IN THE DATA CRAFT INDIA DECISION, THE HARDWARE IN QUESTION CAN BE CONSIDER ED AS A PART OF THE COMPUTER AND, HENCE, A COMPUTER. ON THESE ITEM S, THEREFORE, THE CLAIM OF HIGHER DEPRECIATION AT 60% IS CONSIDER ED APPROPRIATE AND THE AO IS DIRECTED TO ALLOW THE SAME. 7. IN AY 2007-08, THE CIT(APPEALS) FOLLOWED HIS OWN ORDER FOR AY 2006-07. 8. AGGRIEVED BY THE RELIEF ALLOWED BY THE CIT(APPEA LS), THE REVENUE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUN AL. ITA NOS.1115 & 1116/BANG/2014 PAGE 7 OF 10 9. AS FAR AS THE CLAIM OF REVENUE THAT PRINTERS, SC ANNERS, NETWORK EQUIPMENTS AND OTHER PERIPHERALS CANNOT BE REGARDED AS COMPUTER, WE ARE UNABLE TO ACCEPT THE STAND OF THE REVENUE. THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT V. BIRLA SOFT LTD., ITA NO.1284/2011, JUDGMENT DATED 15.12.2011 HAS HELD THAT COMPUTER PERIPHERALS, CD WRITER, PRI NTER, NETWORK CABLES, SWITCHES, ISOLATORS, ETC. ARE ENTITLED TO D EPRECIATION @ 60%. THE SLP FILED BY THE REVENUE AGAINST THE JUDGMENT OF TH E DELHI HIGH COURT HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME COURT B Y ITS JUDGMENT DATED 14.2.2014 IN SLP(CIVIL) NOS.2645/2012 . 10. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE O F DCIT V. DATACRAFT INDIA LTD. (2010) 40 SOT 295 (MUM) SB HAS HELD THAT IT IS NOT CORRECT TO SAY THAT IT IS ONLY A DEVICE WHICH COULD PERFORM LO GICAL ARITHMETIC OR MEMORY FUNCTIONS BY MANIPULATIONS OF ELECTRONIC IMPULSES I S COMPUTER. ALL THE INPUT AND OUTPUT DEVICES WHICH SUPPORT IN THE RECEIPT OF INPUT AND OUTFLOW OF OUTPUT ARE ALSO PART OF COMPUTER. THUS, COMPUTER HAS TO NECESSARILY INCLUDE INPUT AND OUTPUT DEVICES WITHIN ITS SCOPE, SUBJECT TO THEIR EXCLUSIVE USER WITH THE COMPUTER. 11. IN THE LIGHT OF THE AFORESAID DECISIONS BASED O N WHICH THE CIT(APPEALS) ALLOWED RELIEF TO THE ASSESSEE, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THESE APPEALS BY THE REVENUE. ITA NOS.1115 & 1116/BANG/2014 PAGE 8 OF 10 12. FOR AY 2007-08, ONE OF THE OBJECTIONS RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL IS THAT THE CIT(APPEALS) HAS ADMI TTED ADDITIONAL EVIDENCE WITH REGARD TO ADDITIONS TO THE FIXED ASSE TS UNDER THE HEAD COMPUTER WITHOUT AFFORDING THE AO OF LOOKING INTO THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE CIT(A). ON THIS A SPECT, WE HAVE PERUSED THE ORDER OF THE CIT(APPEALS) AND WE FIND THAT THE CIT(APPEALS) HAS NOT ADMITTED ANY ADDITIONAL EVIDENCE. HE FOUND THAT TH E ASSESSEE HAS ENTERED INTO MOU WITH SBI FOR SHARING OF COSTS PERTAINING T O COMMON INFORMATION TECHNOLOGY INITIATIVES. PURSUANT TO THIS MOU, THE TOTAL ADDITIONS MADE TO COMPUTERS AND SOFTWARES BY SBI WAS RS.27,42,43,752 AND 10% OF THE AFORESAID ADDITION HAS BEEN CHARGED TO THE ASSESSEE BANK VIZ., RS.2,74,24,375 AS IT COSTS. THE ASSESSEE ALSO FURN ISHED EVIDENCE FOR ADDITIONS TO COMPUTER AND SOFTWARE AMOUNTING TO RS. 27,03,494 BY COLLATING INVOICES FROM ITS BRANCHES. THE ASSESSEE THUS FILE D EVIDENCE TO THE EXTENT OF 73% OF THE TOTAL ADDITIONS TO FIXED ASSETS UNDER THE HEAD COMPUTER. THE ASSESSEE, IN RESPECT OF REMAINING ADDITIONS TO FIXED ASSETS UNDER THE HEAD COMPUTER, REQUESTED TO ACCEPT THE LETTER FRO M DGM(F&A) CONFIRMING THAT AS PER STATUTORY AUDITORS HAVE VERIFIED ALL TH E UNDERLYING INVOICES AND BILLS FOR ADDITIONS TO FIXED ASSETS UNDER THE HEAD COMPUTERS. THE CIT(APPEALS) CONSIDERED THE AFORESAID SUBMISSIONS O N BEHALF OF THE ASSESSEE AND OBSERVED AS FOLLOWS:- 7.4 THE APPELLANTS CLAIM AND EVIDENCES AS ABOVE HAVE BEEN EXAMINED AND THEY ARE FOUND RELEVANT FOR DECIDING T HE ISSUE AT HAND. THE AO IS DIRECTED TO EXAMINE THE SAME AND, I F FOUND ITA NOS.1115 & 1116/BANG/2014 PAGE 9 OF 10 GENUINE, TO ALLOW THE CLAIM TO THE EXTENT OF RS.2,7 4,24 375 FOR THE SBI COST SHARED COMPONENTS AND RS.29,03,494 FOR THE BALANCE ASSETS. THE REMAINING GAP IN ADDITION TO FIXED ASSE TS WHICH IS NOT SUPPORTED BY EVIDENCE, HOWEVER, CANNOT BE ACCEPTED SINCE THE ONUS PROVIDED BY LAW ON THE APPELLANT HAS NOT BEEN DISCHARGED THROUGH PRODUCTION OF THE PRIMARY EVIDENCES TO SUPP ORT ITS CLAIM. IN FACT, IN THE CONTEXT OF DISALLOWANCE OF PENALTY EXPENDITURE DISCUSSED IN THE NEXT SECTION THE APPELLANT HAS STA TED THAT IT WAS NOT BOUND BY THE VIEWS OF THE STATUTORY AUDITORS. T HIS BEING THE CASE IT WOULD BE UNFAIR TO BIND THE AO TO THE CERTI FICATION BY THE STATUTORY AUDITORS IN THE MATTER OF INVOICES FOR FI XED ASSETS. THE UNEVIDENCED ADDITION TO FIXED ASSETS, THEREFORE, CA NNOT BE ADMITTED FOR ALLOWING THE CLAIM OF DEPRECIATION. TH IS GROUND, THEREFORE, PARTLY SUCCEEDS. 13. IT CAN BE SEEN FROM THE AFORESAID OBSERVATIONS OF THE CIT(APPEALS) THAT HE HAS ONLY DIRECTED THE AO TO EXAMINE WHATEVE R EVIDENCE HAS BEEN ADMITTED BY THE CIT(APPEALS). THE GRIEVANCE PROJEC TED BY THE REVENUE REGARDING VIOLATION OF RULE 46A OF THE I.T. RULES, IN OUR VIEW, THEREFORE IS UNJUSTIFIED AND NOT SUSTAINABLE. 14. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MAY , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 29 TH MAY , 2015 . /D S/ ITA NOS.1115 & 1116/BANG/2014 PAGE 10 OF 10 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.