Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 4950 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 4 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-05-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
Not Allotted
Assessment Year
2012-2013
Appeal Filed On
13-01-2017
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER SL. NOS. ITA NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 124/AHD/2017 2012-13 DCIT CIRC-4(1)(2) AHMEDABAD (REVENUE) VODAFONE SHARED SERVICES LTD. (FORMERLY KNOWN AS VODAFONE ESSAR SHARED SERVICES LTD) BLDG-B, VODAFONE HOUSE CORPORATE ROAD PRAHLADNAGAR, AHMEDABAD PAN: AADCV 1145 K (ASSESSEE) 2. 162/AHD/16 2010-11 JT.CIT RANGE-8, AHMEDABAD DO-ASSESSEE 3. 1468/AHD/16 2011-12 DCIT CIRCLE- 4(1)92) AHMEDABAD -DO-ASSESSEE 4. 1923/AHD/16 2011-12 ASSESSEE DCIT CIR-4(1)(2) AHMEDABAD REVENUE BY : SHRI O.P. VAISHNAV, CIT-DR ASSESSEE BY : SHRI S.N. SOPARKAR, SR.ADV. WITH SHRI BANDISH SOPARKAR !' / DATE OF HEARING 03/04/2019 #$%& !' / DATE OF PRONOUNCEMENT 28/ 05/2019 / O R D E R ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 2 - PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSESS EE AS WELL AS THE REVENUE RELEVANT TO ASSESSMENT YEARS (AYS) 2010 -11, 2011-12 & 2012-13 AGAINST THE SEPARATE ORDERS OF THE COMMISSI ONER OF INCOME TAX(APPEALS)-8/9, AHMEDABAD [CIT(A) IN SHORT] DATE D 16/11/2015, 15/03/2016 & 22/11/2016 FOR AYS 2012-13 RESPECTIVE LY SINCE THE CAPTIONED APPEALS PERTAINS TO SAME ASSESSEE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WE SHALL FIRST TAKE UP REVENUES APPEAL IN ITA NO.1468/AHD/2016 RELEVANT TO AY 2011-12, WHERE THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE: 1) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS.5,44,00,853/- ON ACCOUNT OF DEPR ECIATION CLAIMED ON SPECIAL SOFTWARE. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 2.1. BRIEFLY STATED, THE ASSESSEE-COMPANY IS ENGAGE D IN PROVIDING OUTSOURCING SERVICES FOR FINANCE, ACCOUNTS, HUMAN R ESOURCES AND SUPPLY CHAIN MANAGEMENT AND DATA CENTRE TO VODAFONE INDIA LIMITED AND ITS ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 3 - INDIAN SUBSIDIARIES. IN THE COURSE OF THE ASSESSM ENT, THE ASSESSING OFFICER INTER ALIA NOTICED THAT THE ASSESSEE-COMPANY (VSSL) HAS SHOWN A TOTAL ADDITION TO COMPUTERS ON ACCOUNT OF COMPUTER SOFTWARES AMOUNTING TO RS.15,54,31,008/-. THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 60% ON SUCH COMPUTER SOFTWAR ES IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE AFORESAI D PURCHASES WERE MADE MAINLY ON SAP PRODUCT WHICH IS A CUSTOMIZED PR ODUCT HAVING SOFTWARE JUST A MINOR COMPONENT OF IT. THIS PRODUC T WAS STATED TO BE DELIVERED TO THE ASSESSEE ALONG WITH LOADS OF OTHER TECHNICAL SERVICES AND KNOW HOW TO OPERATE AND UTILIZE SUCH SPECIALIZED PR ODUCT FOR ENDURING BENEFITS TO ITS BUSINESS. THE ASSESSING OFFICER TH US DISPUTED THE ELIGIBILITY OF CLAIM OF HIGHER DEPRECIATION @ 60% E LIGIBLE TO COMPUTER OR COMPUTER SOFTWARES AND OPINED THAT THE AFORESAID SO FTWARES OF RS.15.54 CRORES SHOULD BE DEALT WITH AS LICENCE IN THE NAT URE OF INTANGIBLE ASSETS UNDER THE PROVISIONS OF S.32(1)(II) OF THE ACT WHER E THE DEPRECIATION ALLOWANCE IS SET OUT @ 25%. THE ASSESSING OFFICER ACCORDINGLY RECOMPUTED THE DEPRECIATION ON EXPENSES INCURRED T OWARDS PURCHASE OF SAP PRODUCTS AMOUNTING TO RS.15,54,31,008/- @ 25% I N PLACE OF 60% CLAIMED BY THE ASSESSEE APPLICABLE TO BLOCK COMPUT ER AND COMPUTER SOFTWARES. THE ASSESSED INCOME OF THE ASSESSEE WAS ACCORDINGLY INCREASED BY AN AMOUNT OF RS.5,44,00,853/- OWING TO REVERSAL OF ALLEGED EXCESS CLAIM OF DEPRECIATION. ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 4 - 2.2. THE CIT(A), HOWEVER, IN FIRST APPEAL, DID NOT FIND MERIT IN THE ACTION OF THE ASSESSING OFFICER. THE CIT(A) FOLLOW ED THE DECISION OF THE PREDECESSOR CIT(A) CONCERNING THE AY 2010-11 WHERE IN THE DEPRECIATION WAS ALLOWED @ 60% FOLLOWING THE DECIS ION OF THE TRIBUNAL IN THE CASE OF ACIT VS. VOLTAMP TRANSFORMER LTD. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPROD UCED HEREUNDER: 4.2. I HAVE CONSIDERED THE ASSESSMENT ORDER AND T HE SUBMISSIONS MADE BY THE APPELLANT. A PERUSAL OF THE SUBMISSION MADE BY THE APPELLANT SHOWS THAT THE SAME ISSUE WAS BEFORE THE CIT(A) IN THE EARLIER YEAR AS WELL I.E. FOR THE ASST.YEAR 2010-11 WHEREIN THE CIT (A) DIRECTED THE AO TO ALLOW DEPRECIATION @ 60% ON COMPUTER SOFTWARE FO LLOWING THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF ACIT VS. VOLTAMP TRANSFORMER LTD. ITA NO.1676/AHD/2012. ACCORDING LY, THE ADDITION OF RS.5,44,00,853/- MADE BY THE ASSESSING OFFICER I S DELETED. GROUND OF APPEAL NO.1 IS ALLOWED. 2.3. THE CIT(A) ACCORDINGLY, DELETED THE DISALLOWAN CE OF DEPRECIATION IN COMPUTER SOFTWARES. AGGRIEVED BY THE RELIEF GRA NTED BY THE LD.CIT(A), THE REVENUE HAS PREFERRED THE APPEAL BEF ORE THE TRIBUNAL. IT IS THE CASE OF THE REVENUE THAT THE DEPRECIATION ON COMPUTER SOFTWARES IS ALLOWABLE @ 25% BEING INTANGIBLE ASSETS AND NOT @ 6 0% APPLICABLE TO COMPUTER SOFTWARES AS CLAIMED. WE STRAIGHTAWAY NOT ICE THAT THE IDENTICAL ISSUE HAS COME UP BEFORE THE TRIBUNAL IN LARGE NUMB ER OF CASES INCLUDING M/S.NAVNEET PUBLICATIONS (I) LTD. VS. ADDL. CIT IN ITA NO.1137/MUM/2010 ORDER DATED 17/01/2011 & ACIT VS. ZYDUS INFRASTRUCTURE (P.) LTD. 72 TAXMANN.COM 199 (AHMEDA BAD TRIB.) ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 5 - WHEREIN IT WAS HELD THAT LICENCED SOFTWARE IS ALSO ELIGIBLE FOR DEPRECIATION @ 60%. IN VIEW OF THE ISSUE HAS ALREADY BEEN ADJUD ICATED IN THIS FASHION, WE DO NOT SEE ANY PERCEPTIBLE REASON TO INTERFERE W ITH THE ORDER OF THE CIT(A). THE APPEAL OF THE REVENUE IS THUS BEREFT OF ANY MERITS. 2.4. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.1468/AHD/2016 FOR AY 2011-12 IS DISMISSED. 3. WE SHALL NOW TURN TO THE CROSS-APPEAL OF THE ASS ESSEE IN ITA NO.1923/AHD/2016 FOR AY 2011-12. 3.1. AS PER ITS APPEAL, THE ASSESSEE HAS IMPUGNED T HE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OF FICER IN UPHOLDING THE DISALLOWANCE OF RENT EQUALIZATION RESERVE AMO UNTING TO RS.41,69,148/- TREATING THE SAME AS MERE PROVISION IN THE BOOKS. 3.2. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD .AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS MADE A PRO VISION AMOUNTING TO RS.41,69,148/- IN RESPECT OF RENT EQUALIZATION EXPE NSES AND DEBITED THE SAME TO PROFITS & LOSS ACCOUNT AND CLAIMED THE SAME AS DEDUCTION WHILE COMPUTING TAXABLE INCOME. THE ASSESSING OFFICER HO WEVER HAS DISALLOWED THE AFORESAID EXPENSES ON THE GROUND THA T IT IS A MERE PROVISION AND THUS CANNOT BE CLAIMED AS DEDUCTION U NDER THE PROVISIONS OF ACT. IN THIS REGARD, THE LD.AR REFERRED TO TH E DECISION OF THE HONBLE ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 6 - SUPREME COURT IN CIT VS. VIRTUAL SOFT SYSTEMS LTD. (2018) 92 TAXMANN.COM 370 (SC) WHEREIN THE METHOD OF BIFURCAT ION OF LEASE RENT BASED ON THE GUIDANCE NOTE ACCOUNTING FOR LEASES ISSUED BY ICAI WAS APPROVED BY THE HONBLE SUPREME COURT. 3.3. IN VIEW OF THE JUDICIAL FIAT AVAILABLE IN THIS REGARD, THE ASSESSEE IS ENTITLED FOR BIFURCATION OF LEASE RENTALS AS PER GU IDANCE NOTE PRESCRIBED BY ICAI, IN THE ABSENCE OF ANY EXPRESS BAR IN THE I NCOME TAX ACT REGARDING THE APPLICATION OF SUCH ACCOUNTING STANDA RDS/GUIDANCE NOTES. THEREFORE, WE FIND MERIT IN THE ACTION OF ASSESSEE BASED ON RECOGNIZED ACCOUNTING GUIDANCE OF ICAI. THE INCOME CAN BE DE DUCED BY ASSESSEE BASED ON SUCH ACCOUNTING STANDARDS/GUIDANCE NOTES W HERE THE STATUTE IS SILENT. THE ORDER OF THE CIT(A) IS ACCORDINGLY SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE TOWARDS RENT EQUALIZATION RESERVE AMOUNTING TO RS.41,69,148 /-. 3.4. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA N O.1923/AHD/2016 FOR AY 2011-12 IS ALLOWED. REVENUES APPEAL IN ITA NO.162/AHD/2016 FOR AY 2010 -11. 4. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPE AL: ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 7 - 1) WHERE THE CIT(A) ERRED IN LAW AND ON FACTS IN ALLO WING DEPRECIATION @ 60% ON LICENSE FEE FOR ACQUIRING THE APPLICATION SOFTWARE AGAINST 25% APPLICABLE TO INTA NGIBLE ASSETS IGNORING THE FINDINGS OF THE A.O. 2) WHETHER THE CIT(A) ERRED IN LAW AND ON FACTS IN DEL ETING THE INTEREST EXPENDITURE OF RS.28,57,416/- U/S.36(1)(II I) OF THE I.T.ACT BY RELYING ON THE DECISION PERTAINING TO A. Y. 1992-93 WHICH IS BEFORE THE INSERTION OF PROVISO OF SECTION 36(1)(III) OF THE I.T.ACT. 5. GROUND NO.1 CONCERNS ELIGIBILITY OF DEPRECIATION ON LICENSED SOFTWARE. THE ISSUE IS IDENTICAL TO THE REVENUES APPEAL IN ITA NO.1468/AHD/2016 CONCERNING AY 2011-12(SUPRA). IN PARITY WITH THE FINDINGS THEREIN, GROUND NO.1 OF REVENUES APPEAL I S DISMISSED. 6. GROUND NO.2 OF THE REVENUES APPEAL CONCERNS ALL OWABILITY OF INTEREST EXPENDITURE OF RS.28,57,416/- AS REVENUE E XPENDITURE UNDER S.36(1)(III) OF THE ACT. 6.1. AT THE TIME OF HEARING, THE LD.AR FOR THE ASSE SSEE SUBMITTED THAT IDENTICAL CONTROVERSY HAS COME UP IN GROUP CASES; N AMELY, M/S.VODAFONE WEST LTD. AY 2009-10 WHEREIN REFERENCE WAS MADE TO THE DECISION OF THE HONBLE SUPREME COURT IN CORE HEALTHCARE LTD. (2008 ) 298 ITR 194 (SC) AND THE ISSUE WAS ADJUDICATED IN FAVOUR OF THE ASSESSEE. ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 8 - 6.2, THE LD.DR FOR THE REVENUE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 6.3. WHILE WE PROCEED TO DEAL WITH THE CONTROVERSY, WE TAKE NOTE OF THE ORDER OF CIT(A) IN THIS REGARD. THE CIT(A) HAS DEA LT WITH THE ISSUE AS UNDER:- 4.2 I HAVE CAREFULLY CONSIDERED THE CONTENTION S AS WELL AS THE CASE LAWS RELIED UPON BY THE APPELLANT AND THE OBSERVATI ON OF THE A.O. THE SIMILAR ISSUE WAS RAISED BEFORE THE DRP, AHMEDABAD IN THE CASE OF VODAFONE WEST LTD.(EARLIER KNOWN AS VODAFONE ESSAR GUJARAT LTD.) FOR A.Y.2009-10. THE FACTS AND THE ISSUE RAISED WERE SI MILAR AS PER GROUNDS OF APPEAL NO.2. THE FINDING OF THE DRP ARE AS FOLLO WS :- '15.3 WE HAVE CAREFULLY CONSIDERED THE FACTS OF T HE CASE AND CONTENTIONS OF THE AO AS INCORPORATED IN THE DRAFT ASSESSMENT ORDER. WE HAVE ALSO GONE THROUGH THE VARIOUS ORAL AND WRITTEN SUBMISSION MADE BY THE ASSESSEE'S REPRESENTATIVE. THE ASSESSEE HAS INCURRED INTEREST EXPENDITURE DURING THE YEAR IN RESPECT OF VARIOUS E CB LOANS OBTAINED FOR ACQUISITION OF CAPITAL ASSETS. THE ASSESSEE HAS ACQUIRED CAPITAL ASSETS FOR ITS EXISTING BUSINESS AND NOT FOR THE PU RPOSE OF EXTENSION OF THE BUSINESS. HENCE, PROVISO TO SECTION 36(1)(III) OF THE ACT CANNOT BE INVOKED AND DEDUCIBILITY OF INTEREST EXPENDITURE WO ULD BE DETERMINED BY SECTION 36(1)(III) OF THE ACT. FURTHER, AS MENTIONED BY THE ASSESSES, IT HAS INCURRED INTEREST EXPENDITURE ON EGBS USED FOR ACQUISITION OF CAPITAL ASSETS AND HENCE, INTEREST EXPENDITURE HAS ALSO BEEN INCURRED EVEN AF TER CAPITAL ASSETS HAVE BEEN PUT TO USE. THUS, PROVISIONS OF EXPLANATI ON 8 TO SECTION 43(1) ARE ALSO NOT APPLICABLE TO THE ASSESSEE AS PER DECI SIONS OF HON'BLE ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 9 - SUPREME COURT IN THE CASE OF CORE HEALTH CARE AS RE LIED ON BY THE ASSESSEE. IN THE SAID DECISION, HON'BLE SUPREME COU RT HELD THAT INTEREST EXPENDITURE INCURRED ON BORROWINGS USED FOR ACQUISI TION OF CAPITAL ASSETS FOR THE PURPOSES OF EXISTING BUSINESS AND NO T FOR THE PURPOSE OF EXPANSION, WOULD BE ALLOWABLE AS A DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. FURTHER, HON'BLE SUPREME COURT HAS AFTE R CONSIDERING PROVISIONS OF EXPLANATION 8 TO SECTION 43(1) HELD T HAT THE SAID EXPLANATION IS NOT RELEVANT WHILE DETERMINING DEDUC TION OF INTEREST EXPENDITURE UNDER SECTION 36(1)(III) OF THE ACT. TH E RELEVANT OBSERVATIONS OF HON'BLE SUPREME COURT IN CASE OF CO RE HEALTH CARE LTD., ARE AS UNDER:- 'THE DETERMINATION OF ACTUAL COST IN SECTION 43(1) HAS RELEVANCY IN RELATION TO SECTION 32 (DEPRECIATION ALLOWANCE), SECTION32A(INVESTMENT ALLOWANCE), SECTION 33 (DEVEL OPMENT REBATE ALLOWANCE), AND SECTION 41(BALANCING CHARGE) . 'ACTUAL COST' OF AN ASSET HAS NO RELEVANCY IN RELATION SECT ION 36(1)(III) OF THE 1961 ACT. THIS REASONING FLOWS FROM A BARE READ ING OF SECTION 43(1). SECTION 43 DEFINES CERTAIN TERMS REL EVANT TO INCOME FROM PROFITS AND GAINS OF BUSINESS AND, THER EFORE, THE SAID SECTION COMMENCES WITH THE WORDS 'IN SECTIONS 28 TO 41 AND UNLESS THE CONTEXT OTHERWISE REQUIRES' 'ACTUAL COST ' SHALL MEAN THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE, REDU CING BY THAT PORTION OF THE COST THEREOF, IF ANY, AS HAS BEEN ME T DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. IN OTH ER WORDS, EXPLANATION 8 APPLIES ONLY TO THOSE /SECTIONS LIKE SECTIONS 32, 32A, 33 AND 41 WHICH DEAL WITH CONCEPTS LIKE DEPREC IATION. THE CONCEPT OF DEPRECIATION IS NOT THERE IN SECTION 36( 1)(III). THAT IS WHY THE LEGISLATURE HAS USED THE WORDS 'UNLESS THE CONTEXT OTHERWISE REQUIRES'. HENCE, EXPLANATION 8 HAS NO RE LEVANCY TO SECTION 36(1)(III). IT HAS RELEVANCY TO THE AFOREME NTIONED ENUMERATED SECTIONS. THEREFORE, IN OUR VIEW EXPLANA TION 8 HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE.... . SECTION 36(1)(III) IS ATTRACTED WHEN THE ASSESSEE BORROWS T HE CAPITAL FOR THE PURPOSE OF HIS BUSINESS. IT DOES NOT MATTER WHE THER THE CAPITAL IS BORROWED IN ORDER TO ACQUIRE A REVENUE A SSET OR & ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 10 - CAPITAL ASSET, BECAUSE OF THAT THE SECTION REQUIRES IS THAT THE ASSESSEE MUST BORROW THE CAPITAL FOR THE PURPOSE OF HIS BUSINESS.....' THE ABOVE PRINCIPLES WERE SUBSEQUENTLY FOLLOWED BY HON'BLE SUPREME COURT IN THE CASE OF UNITED PHOSPHOROUS LTD . (299 ITR 9) AND VARDHMAN POLYTEX LTD. V CIT (349 ITR 690). HENCE, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS O F HON'BLE SUPREME COURT, WE HOLD THAT INTEREST EXPENDITURE IN CURRED BY THE ASSESSEE ON ECB USED FOR ACQUISITION OF CAPITAL ASS ETS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE PROPOSED ADDITION OF IN TEREST EXPENDITURE INCURRED BY ASSESSEE. HENCE, THIS GROUN D OF ASSESSEE IS ALLOWED.' AGREEING WITH THE FINDINGS OF THE DRP AS MENTIONED ABOVE AS WELL AS RELYING ON THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF CORE HEALTHCARE 298 ITR 194, THE A.O I S DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE U/S.36(1)(III) OF THE ACT AMOUNTING TO RS. 28,57,416/-. ACCORDINGLY, GROUND NO.2 IS HEREBY ALLOWED. THE CIT(A) WAS ALLOWED THE CLAIM OF ASSESSEE IN AF ORESAID TERMS. 6.4. IN VIEW OF THE DECISION RENDERED IN SIMILAR C IRCUMSTANCES IN THE CASE OF VODAFONE WEST LTD., WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR CLAIM OF INTEREST EXPENDITURE IN REVENUE ACCOUN T IN TERMS OF SECTION 36(1)(III) OF THE ACT. NOTICEABLY, THE PRE-AMENDED PROVISO TO SECTION 36(1)(III) APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR IN QUESTION (PRIOR TO ITS AMENDMENT BY FINANCE ACT, 2015) PROHIBITED CLAI M OF INTEREST ON ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 11 - REVENUE ACCOUNT ONLY WHERE CAPITAL WAS BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING BUSINESS OR PROFES SION AND THEREFORE, SO LONG AS THE CAPITAL BORROWED RESULTED IN ACQUISITIO N OF ASSET WITHOUT RESULTING IN EXTENSION OF EXISTING BUSINESS PER SE , THE DETERRENCE EMBODIED IN PROVISO WAS NOT APPLICABLE AND CONSEQU ENTLY THE CLAIM WAS GOVERNED BY MAIN PROVISION OF SECTION 36(1)(III) OF THE ACT. IN VIEW OF THE AFORESAID POSITION OF LAW SUBSISTING FOR THE AS SESSMENT YEAR 2010-11 IN QUESTION, WE DO NOT SEE ANY INFIRMITY IN THE ACT ION OF THE CIT(A) IN UPHOLDING THE CLAIM OF THE ASSESSEE UNDER S.36(1)(I II) ON REVENUE ACCOUNT. 6.5. AN ENUNCIATION OF LAW IN THIS REGARD IS AVAIL ABLE IN VARDHMAN POLYTEX LTD. VS. CIT (2012) 25 TAXAMNN.COM 281(SC) WHEREIN THE HONBLE SUPREME COURT ALSO REFERRED TO ANOTHER DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF CORE HEALTHCARE LTD. A ND ANSWERED THE ISSUE IN FAVOUR OF ASSESSEE. IT WAS HELD THAT INTE REST PAID IN RESPECT OF BORROWINGS FOR ACQUISITION OF CAPITAL ASSETS IS AN ALLOWABLE DEDUCTION UNDER S.36(1)(III) OF THE ACT REGARDLESS OF THE FAC T THAT THE CAPITAL ASSETS ACQUIRED WERE NOT PUT TO USE IN THE CONCERNED FINAN CIAL YEAR IN QUESTION. IN THE LIGHT OF POSITION OF LAW EXPLAINED BY THE HO NBLE SUPREME COURT, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A ). GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 12 - 6.6 IN THE RESULT, REVENUES APPEAL IN ITA NO.162/A HD/2016 FOR AY 2010-11 IS DISMISSED. 7. LASTLY, WE TAKE UP THE REVENUES APPEAL IN ITA N O.124/AHD/2017 FOR AY 2012-13, WHEREIN THE FOLLOWING GROUND HAS BE EN RAISED BY THE REVENUE: WHETHER THE LD.CIT(A) IS RIGHT IN LAW AND ON FACTS IN ALLOWING THE DEPRECIATION OF 60% ON SOFTWARE UNDER CONSIDERATION INSTEAD OF 25%. 7.1. THE IDENTICAL ISSUE HAS BEEN DEALT WITH IN AY 2011-12 IN REVENUES APPEAL IN ITA NO.1468/AHD/2016(SUPRA). 7.2. IN PARITY, WE DO NOT SEE ANY SUBSTANCE IN THE OBJECTION RAISED BY THE REVENUE AS PER ITS GROUNDS OF APPEAL. THE ORDE R OF THE CIT(A) IS ACCORDINGLY UPHELD. 7.3. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO .124/AHD/17 FOR AY 2012-13 IS DISMISSED. ITA NOS.124/AHD/2017, 162/AHD/2016 1468/AHD/2016 & 1923/AHD/2016 DCIT VS. VODAFONE SHARED SERVICES LTD. ASST.YEARS 2012-13, 2010-11 & 2011-12 - 13 - 8. IN THE COMBINED RESULT, ASSESSEES APPEAL IS ALL OWED, WHEREAS ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 28/ 05/2019 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 28/ 05 /2019 ,..,.../ T.C. NAIR, SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. ./0 / THE APPELLANT 2. 1/0 / THE RESPONDENT. 3. 234' 5' / CONCERNED CIT 4. 5' ( . ) / THE CIT(A)-8/9, AHMEDABAD 5. 678'34 , ..34 & , . 2 / DR, ITAT, AHMEDABAD 6. 89 / GUARD FILE. / BY ORDER, 16'' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 24.5.19 (DICTATION-PAD 25+P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.5.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.28.5.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.5.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER
