M/s Diamond Signages (P) Ltd., Bangalore V. CIT, Bangalore

ITA 1165/BANG/2011

• Counselvise Citation: 116521114 RSA 2011
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 28-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Depreciation; Condonation of delay
• Section: 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1 165/BANG/2011 (ASST. YEAR - 2006-07) M/S DIAMOND SIGNAGES (P) LTD., NO.2283, 14 TH A MAIN, H.A.L 2 ND STAGE, INDIRANAGAR, BANGALORE-560 038. . APPELLANT PAN AABCD 8668 H. VS. THE COMMISSIONER OF INCOME-TAX, BANGALORE-I, BANGALORE. . RESPONDENT APPELLANT BY : SHRI V CHANDRASHEKAR, C.A RESPONDENT BY : SHRI ETWA MUNDA, CIT DATE OF HEARING : 03-10-2012 DATE OF PRONOUNCEMENT : 11-10-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE ITA NO.1165/B/11 2 COMMISSIONER OF INCOME-TAX AT BANGALORE DATED 29.1 2.2010. THE APPEAL ARISES OUT OF THE ORDER U/S 263 OF THE INCOM E-TAX ACT, 1961. 2. INITIALLY, IT IS OBSERVED THAT THE APPEAL IS TIM E BARRED BY 259 DAYS AND THE ASSESSEE HAS APPLIED FOR CONDONATION O F DELAY. IN THE AFFIDAVIT ACCOMPANYING THE APPLICATION TO CONDONE T HE DELAY, THE ASSESSEE HAS STATED THAT THE ENTIRE ASSESSMENT PROC EEDINGS AND ALSO THE PROCEEDINGS BEFORE THE CIT U/S 263 OF THE INCOME-TA X ACT WAS HANDLED BY THE CEO OF THE ASSESSEE COMPANY AND THE MANAGEMENT OF THE COMPANY WAS NOT INFORMED ABOUT THE STATUS OF TH E PROCEEDINGS NOR THE NEXT COURSE OF ACTION AS REGARDS THE ORDERS PAS SED BY THE COMMISSIONER AND ALSO THE CONSEQUENT ORDER PASSED B Y THE LEARNED ASSESSING AUTHORITY. IT WAS SUBMITTED THAT THE CEO OF THE COMPANY WHO WAS LOOKING AFTER THE INCOME-TAX PROCEEDINGS, R ESIGNED FROM HIS EMPLOYMENT ON 31.8.2011 AND ONLY THEREAFTER, AFTER GOING THROUGH THE INCOME-TAX FILE OF THE ASSESSEE COMPANY, THE MANAGE MENT OF THE COMPANY CAME TO KNOW ABOUT THE ORDERS OF THE CIT U/ S 263 AND ALSO THE CONSEQUENTIAL ASSESSMENT ORDER PASSED U/S 143(3 ) READ WITH SEC. 263 OF THE INCOME-TAX ACT. IT IS SUBMITTED THAT TH E ASSESSEE IMMEDIATELY APPROACHED ITS CA WHO SUGGESTED FILING OF THE APPEAL BEFORE THE APPROPRIATE AUTHORITIES I.E BEFORE THE I TAT AND THE CIT(A) ITA NO.1165/B/11 3 AND THAT DELAY OF 259 DAYS IN FILING THE APPEAL B EFORE THE TRIBUNAL HAS RESULTED DUE TO THESE REASONS. THE ASSESSEE, TH EREFORE, REQUESTED FOR CONDONATION OF DELAY. IN SUPPORT OF ITS CONTEN TION THAT THE DELAY SHOULD BE CONDONED, AS THE ASSESSEE WOULD BE PUT TO SEVERE HARDSHIP AND IRREPARABLE INJURY IF THE DELAY IS NOT CONDONED , THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE DECISIONS OF THE APEX COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI AND OTHERS (1987) 167 ITR 471 AND ALSO IN THE CASE OF CONCORD OF INDIA INSURANCE CO. LTD., VS. SMT. NIRMALA DEVI AND OTHER S 118 ITR 507. 3. THE LEARNED DR HOWEVER OPPOSED THE CONDONATION O F DELAY AND SUBMITTED THAT THE ASSESSEE HAS FAILED TO EXPLAIN T HE EACH DAY OF DELAY IN FILING THE APPEAL. 4. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTIONS, WE FIND THAT THE APEX COURT IN THE CAS ES RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE (CITED SUPRA) HAS HELD THAT THE QUESTION OF CONDONATION OF DELAY SHOULD BE CONSIDER ED LIBERALLY AND UNTIL AND UNLESS THERE IS REASON TO SHOW THAT THE D ELAY WAS CAUSED INTENTIONALLY OR DELIBERATELY, THE DELAY SHOULD BE CONDONED. IN THE CASE BEFORE US, WE FIND THAT THE DELAY IS DUE TO CE OS SUPERVISION OF ITA NO.1165/B/11 4 THE TAX MATTER AND HIS SUBSEQUENT RESIGNATION AND N OT DUE TO ANY WILLFUL OR WANTON ACT OF THE ASSESSEE. THEREFORE, I N ORDER TO ADVANCE SUBSTANTIAL JUSTICE, WE DEEM IT FIT AND PROPER TO C ONDONE THE DELAY OF 259 DAYS AND PROCEED TO DISPOSE OF THE APPEAL ON ME RITS. 5. THE APPEAL IS AGAINST THE ORDER OF THE CIT PASS ED U/S 263 OF THE INCOME-TAX ACT. THE ASSESSEE COMPANY WHICH IS ENGAG ED IN THE BUSINESS OF PRODUCTION OF PRINTING OF DIGITAL SIGNA GES HAD FILED ITS RETURN OF INCOME ON 28.11.2006 FOR THE ASSESSMENT Y EAR 2006-07 DECLARING AN INCOME OF RS.30,98,138/-. THE ASSESS EE HAD CLAIMED CERTAIN ASSETS AS PART OF COMPUTERS AND CLAIMED DEP RECIATION AT 60% THEREON AND THE AO ALLOWED THE SAME. THEREAFTER ON PERUSAL OF THE RECORDS, THE CIT U/S 263 OBSERVED THAT THE ASSESSME NT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE WITHIN THE MEANING OF SEC. 263 OF THE INCOME-TAX ACT. HE OBSE RVED THAT CERTAIN ASSETS WERE ACQUIRED DURING THE YEAR AND WERE USED FOR LESS THAN 180 DAYS AND HAVE BEEN CATEGORIZED AS COMPUTERS AND DE PRECIATION ON THEM HAD BEEN ALLOWED AT 30% (50% OF 60%), WHEREAS THE CONCERNED ITEMS USED IN THE BUSINESS OF DIGITAL PRINTING FALL IN THE CATEGORY OF PLANT AND MACHINERY AND WERE, THEREFORE, ELIGIBLE FOR DEPRECIATION AT 7.5% (50% OF 15%) ONLY. HE OBSERVED THAT THE ASSES SING OFFICER ITA NO.1165/B/11 5 HAVING ALLOWED THE DEPRECIATION ON PLANT AND MACHIN ERY AS ELIGIBLE TO COMPUTERS, THE ASSESSMENT ORDER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY DIRECTED TH E AO TO ALLOW THE DEPRECIATION CORRECTLY IN ACCORDANCE WITH THE PROVI SION OF SEC. 32 OF THE INCOME-TAX ACT READ WITH RULE 5 OF THE IT RULES . 6. AGGRIEVED BY THE SAID ORDER OF THE CIT U/S 263, THE ASSESSE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSETS WHICH HAVE BEEN ACQUIRED AND CATEGORIZED AS COMPUT ERS ARE AS FOLLOWS : 1) SCITEX VISION PRINTER 2) INKJET PRINTER 3) INFINITY FY 3360 4) DIGITAL CAMERA 8. HE SUBMITTED THAT ALL THESE PRINTERS AND THE CAM ERA FALL UNDER THE CATEGORY OF COMPUTERS AS THEY ARE COMPUTER SOF TWARE DRIVEN AND TOTALLY DEPENDENT ON THE COMPUTERS FOR THEIR OPERAT ION AND, THEREFORE, ITA NO.1165/B/11 6 ARE NOT MERELY THE PLANT AND MACHINERY USED IN TH E ASSESSEES DIGITAL PRINTING BUSINESS. HE SUBMITTED THAT ANY DEVICE OP ERATED WITH THE HELP OF COMPUTER OR COMPUTER SOFTWARE HAS TO BE CON SIDERED AS COMPUTERS ONLY. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE UPON THE FOLLOWING DECISIONS : 1) ITO VS. OMNI GLOBE INFORMATION TECHNOLOGIES INDIA PVT. LTD., REPORTED IN 131 ITD 280 2) DCIT MUMBAI VS. DATACRAFT INDIA LTD, (2010) 40 SOT 295 (MUM) SB 3) ITO VS. SAMIRAN MAJUMDAR REPORTED IN 101 TTJ 501, WHEREIN THE PRINTER AND SCANNER USEABLE WITH COMPUT ER SYSTEMS WERE HELD TO BE INTEGRAL PART OF COMPUTER S YSTEM AND HIGHER RATE OF DEPRECIATION I.E 60% IS ALLOWAB LE. HE FURTHER SUBMITTED THAT COMPUTERS ALSO FORM PART OF PLANT AND MACHINERY BUT ARE ELIGIBLE FOR HIGHER RATE OF D EPRECIATION AS COMPUTERS. 9. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE O RDER OF THE CIT AND SUBMITTED THAT EVEN IF THE THREE ITEMS ARE TO BE CONSIDERED AS ITA NO.1165/B/11 7 INTEGRAL PARTS OF THE COMPUTERS, THE DIGITAL CAMERA CANNOT BE CONSIDERED AS PART OF COMPUTER AND IS NOT ELIGIBLE FOR DEPRECIATION AT THE HIGHER RATE. 10. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE FIRST 3 ITEMS I.E PRI NTERS ARE OPERATED THROUGH COMPUTERS ONLY AND HAVE NO INDEPENDENT FUNC TION OF THEIR OWN. AS HELD BY THE HONBLE KOLKATA TRIBUNAL IN THE CASE OF SAMIRAN MAJUMDAR (CITED SUPRA), PRINTERS ARE INTEGRAL PARTS OF THE COMPUTER SYSTEM AND, THEREFORE, THEY ARE TO BE CONSIDERED AS COMPUTERS FOR THE PURPOSE OF ALLOWING HIGHER RATE OF DEPRECIATION I.E 60%. THEREFORE, THE CITS FINDING THAT THE ORDER OF THE AO ALLOWIN G DEPRECIATION @ 60% OF THE PRINTERS AS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE IS NOT CORRECT. HOWEVER, AS REGARDS THE HI GHER RATE OF DEPRECIATION ON DIGITAL CAMERA IS CONCERNED, WE AR E OF THE OPINION THAT THE DIGITAL CAMERA CANNOT BE CONSIDERED AS PAR T OF COMPUTER. IT CAN BE USED INDEPENDENTLY WITHOUT THE ASSISTANCE OR AID OF A COMPUTER THOUGH THE PICTURES TAKEN BY A DIGITAL CAMERA MAY BE PROCESSED IN A COMPUTER. IN VIEW OF THE SAME, WE HOLD THAT THE DI GITAL CAMERA CANNOT BE SAID TO BE PART OF THE COMPUTER AND IS NO T ELIGIBLE FOR THE ITA NO.1165/B/11 8 HIGHER RATE OF DEPRECIATION. WE, THEREFORE, UPHOLD THE FINDING OF THE CIT WITH REGARD TO THIS ITEM OF ASSET ONLY. 11. IN THE RESULT, THE ORDER OF THE CIT U/S 263 IS UPHELD TO THE EXTENT OF ERRONEOUS ALLOWANCE OF DEPRECIATION OF HIGHER R ATE ON DIGITAL CAMERA ONLY AND WITH REGARD TO THE DEPRECIATION ON PRINTERS, WE HOLD THAT THEY ARE ELIGIBLE FOR DEPRECIATION @ 60% AS AL LOWED BY THE AO. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OCT, 2012. SD/- SD/- (JASON P BOAZ) (MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE, DATED : 11/10/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETA RY, ITAT, BANGALORE.