YOU TELECOM INDIA P. LTD ( NOW KNOWN AS YOU BROADBAND & CABLE INDIA LTD), MUMBAI V. ACIT 9(3), MUMBAI

ITA 1208/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100780 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 13-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 12-02-2013
• Court: TRIBUNAL
• Department Lawyers: RAKESH KUMAR AGARWAL
• Keywords: Depreciation
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 1208/M/2013 (AY:2008 - 2009 ) YOU TELECOM INDIA PVT LTD., (NOW KNOWN AS YOU BROADBAND & CABLE INDIA LTD), PLOT NO.54, MAROL CO - OPERATIVE INDUSTRIAL AREA, MAKWANA ROAD, OFF ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI - 400 063. / VS. ASST. COMMISSIONER OF INCOME TAX - 9(3), R.NO.229, 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI. ./ PAN : AABCB6062F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NITESH JOSHI, AR / RESPONDENT BY : SHRI RAKESH KUMAR AGARWAL / DATE OF HEARING : 22.07.2015 / DATE OF PRONOUNCEMENT : 19 .08.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 12.2.2013 IS AGAINST THE ORDER OF THE CIT (A) - 30, MUMBAI DATED 30.10.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE CIT (A) HAS ERRED IN IMPOSING THE PENALTY U/S 271(1)(C) AMOUNTING TO RS. 1,52,380/ - ON THE BASIS THAT APPELLANT HAS CLAIMED EXCESSIVE DEPRECIATION OF RS. 4,48,308/ - . 2. THE CIT (A) HAS ERRED IN IMPOSING THE PENALTY WHEN NO INTENTION OF THE APPELLANT WAS PROVED FOR SUCH A NEGLIGIBLE EXCESS CLAIM. 3. THE CIT (A) HAS ERRED IN IMPOSING THE PENALTY OF 100% WHEN THE APPELLANT HAD EXPLAINED / CLARIFIED THE CIRCUMSTANCES UNDER WHICH THE ERRO R HAD CREPT ON THE RECORD. 4. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO THE OTHER. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING INTERNET SERVICES, APPLICATION SERVICES AND OTHER VALUE ADDED SERVICES. ASSESSEE FILED THE E - RETURN OF INCOME DECLARING THE TOTAL LOSS OF RS. 24,07,68,964/ - , WHICH WAS SUBSEQUENTLY REVISED AT A LOSS OF RS. 36,06,05,887/ - . 2 ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE TOTAL LOSS WAS DETERMINED AT RS. 16,19,01,400/ - , WHICH INCLUDES CERTAIN DISALLOWANCES VIZ, (I) DISALLOWANCE OF BANDWIDTH CHARGES U/S 40(A)(IA) OF THE ACT AMOUNTING TO RS. 7,15,32,015/ - ; (II) DISALLOWANCE OF SERVICE TAX CLAIM OF RS. 73,35,547/ - ; (III) DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 5,69,64,029/ - ; (IV) DISALLOWANCE OF LEASE RENTALS PAID OF RS. 6,50,60,230/ - . DURING THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE AO THAT THE ASSESSEE CLAIMED DEPRECIATION ON THE DISCARDED ASSET, WHICH ALREADY FORM PART OF THE BLOCK OF ASSETS. THE ASSESSEE FILED THE REVISED COMPUTATION OF INCOME AND OFFERED THE DEPRECIATION RELATABLE TO SUCH ASSETS. IN THE ASSESSMENT, AO DENIED THE BENEFIT OF DEPRECIATION ON THE SAID ASSETS ON THE GROUND OF NON - USE. ACCORDINGLY, AO LEVIED THE PENALTY U/S 271 (1)(C) OF THE ACT. AGGRIEVED WITH THE SAID DECISION OF THE AO, ASSESSEE IS IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) CONFIRME D THE PENALTY PROCEEDINGS OF THE AO. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE IS SUE RAISED IN THE APPEAL IS NOW COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF G.R. SHIPPING LTD VS. DCIT IN ITA NO.822/M/2005, DATED 17.7.2008, WHICH IS RELEVANT FOR THE PROPOSITION THAT CONSIDERING THE CONCEPT OF BLOCK OF ASSETS WHICH CONSISTS OF DEPRECIABLE ASSETS, THE INDIVIDUAL ASSET LOSE ITS IDENTITY SO FAR AS THE DEPRECIATION IS CONCERNED. THEREFORE, ON THE GROUND OF NON - USE OF THE ASSET, THE DEPRECIATION CANNOT BE DENIED ON SUCH NON - USE OR OBSOLETE / DISCARDED ASSETS. THE COORDINATE BENCH H AS DISCUSSED VARIOUS DECISIONS BEFORE COMING TO THE SAID CONCLUSION. PARAS 9 TO 12 OF THE SAID ORDER OF THE TRIBUNAL ARE RELEVANT IN THIS REGARD. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE SAID ORDER OF THE TRIBUNAL (SUPRA) DATED 17.7.2008, WE ARE OF THE OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN FACT, IF THE AS SESSEE WOULD HAVE CHALLENGED B E F O R E T H E A P P E L L A T E F O R U M THE ISSUE 3 OF DENIAL OF DEPRECIATION ON SUCH ASSETS, THE DECISION WOULD HAVE COME IN ITS FAVOUR. IN FACT, NO ADDITION ON THIS ACCOUNT WOULD HAVE SURVIVED. THEREFORE, THE PENALTY SHOULD NOT BE LEVIED ON SUCH LIKELY UNSUCCESSFUL ADDITION CONSIDERING THE ABOVE CITED DECISION IN THE CASE OF G.R. SHIPPING LTD (SUPRA). IT IS RELEVANT TO MENTION HERE THAT THE ABOVE RATIO LAID DOWN IN THE CASE OF G.R. SHIPPING LTD (SUPRA) APPROVED BY THE HONBLE HIGH COURT IN THE SAME CASE VIDE IT APPEAL NO. 598 OF 2009, DATED 28 TH JULY, 2009, WHEREIN THE HONBLE HIGH COURT REFERRED THE JUDGMENTS IN THE CASE OF WHITTLE ANDERSON LTD VS. CIT 79 ITR 613 AND CIT VS. G.N. AGRAWAL (INDIVIDUAL) 2 17 ITR 250. ALL THESE DECISIONS ARE RELEVANT FOR THE PROPOSITION AFTER ASSETS FORM PART OF THE BLOCK OF ASSETS, THE DEPRECIATION CLAIMED U/S 32 CANNOT BE DENIED ON THE GROUND OF NON - USE OF SUCH DEPRECIABLE ASSETS. THEREFORE, THE DENIAL OF DEPRECIATION O N THAT GROUND IS NOT APPROVED. CONSEQUENTLY, PENALTY U/S 271(1)(C) OF THE ACT ON SUCH ADDITION IS UNSUSTAINABLE IN LAW. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9 T H AUGUST, 2015. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 9 .8. 2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI