Esha Media Research Ltd., Hyd, Hyderabad V. DCIT, Circle-2(2), Hyd, Hyderabad

ITA 1301/HYD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6094 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2015
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Revised return
• Section: 115JB; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1301/HYD/2015 ASSESSMENT YEAR: 2011-12 ESHA MEDIA RESEARCH LTD., HYDERABAD [PAN: AAACL6230C] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SMT AMISHA S. GUPT, DR DATE OF HEARING : 02-03-2017 DATE OF PRONOUNCEMENT : 15-03-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-5 , HYDERABAD DATED 15-09-2015, CONFIRMING THE ORDER OF ASSESSING OFFIC ER (AO) DISALLOWING THE DEPRECIATION TO AN EXTENT OF RS. 1,55, 66,368/-. 2. BRIEFLY STATED, ASSESSEE IS STATED TO BE IN THE BUSIN ESS OF MEDIA MONITORING, RESEARCH AND ANALYSIS. IT HAS FIL ED ITS RETURN OF INCOME DECLARING NIL INCOME, BUT OFFERING INCOME U/S . 115JB OF THE INCOME TAX ACT [ACT] AT RS. 65,94,124/-. AO IN THE COURSE OF I.T.A. NO. 1301/HYD/2015 ESHA MEDIA RESEARCH LTD., :- 2 - : SCRUTINY ASSESSMENT NOTICED THAT ASSESSEE HAS MADE AD DITIONS TO FIXED ASSETS UNDER THE HEAD COMPUTERS AT RS. 2,81,80 ,784/- AND CLAIMED DEPRECIATION @ 60%. VIDE QUERY DT. 19-12-201 3, ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF ADDITIONS TOWARDS COMPUTERS ALONG WITH PARTICULARS OF MODEL NUMBER AND MAKE NUMB ER ETC., WITH COPIES OF INVOICES. ASSESSEE VIDE REPLY DT. 11- 03-2014 SUBMITTED DETAILS TO AN EXTENT OF RS. 22,36,836/- WHICH W ERE EXTRACTED IN PAGE 2 OF THE ASSESSMENT ORDER. FOR TH E BALANCE AMOUNT OF RS. 2,59,43,948/-, ASSESSEE NEITHER FURNISH ED THE DETAILS NOR PRODUCED INVOICES TO PROVE THAT ASSESSEE HA S PURCHASED THE COMPUTERS. ACCORDINGLY, THE DEPRECIATION TO AN EXTEN T OF RS. 1,55,66,368/- WAS DISALLOWED ON THE SAID AMOUNT [@ 60 % CLAIM]. ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT IT HAD ACQUIR ED ADDITIONAL FIXED ASSETS AND HAS DONE BUSINESS. FOR T HE SAKE OF CLARITY, THE SUBMISSIONS MADE BY ASSESSEE EXTRACTED I N PARA 5.2 ARE EXTRACTED AS UNDER: 'FOR CARRYING ON ITS BUSINESS ACTIVITIES, IT NEEDED BROADCAST MEDIA RECORDING MONITORING SYSTEMS. THEY ARE NOT AVAILABL E IN INDIA. THE APPELLANT PROCURED THE MATERIAL LOCALLY FROM VARIOU S VENDORS INCLUDING THE SCRAP DEALERS FOR ASSEMBLING SUCH SYSTEMS I.E. CHAS SIS, MOTHER BOARD, PROCESSOR, DIGITAL CARD, CONVERTER CARD, DISPLAY CA RD, DECODER, POWER SUPPLY, DIFFERENT MEDIA SOFT WARES. THE APPELLANT H AS ASSEMBLED THE RECORDING AND MONITORING SYSTEMS WHICH ARE NECESSAR Y FOR THE BUSINESS ACTIVITY OF THE APPELLANT AND UTILIZED THE SAME IN THE PROCESS OF THE BUSINESS. THE APPELLANT THEREBY SAVED COST OF ABOUT 80%, AS OTHERWISE THE SAID MATERIAL WOULD HAVE BEEN IMPORTED. THE AP PELLANT THE MATERIAL WITH WHICH THE APPELLANT OPERATES ITS BUSINESS ACTI VITY IS AVAILABLE AT ITS PREMISES. THE HARD WARE AND SOFTWARE CONSULTANTS CO RE MEDIA SYSTEMS WITH ITS OFFICE AT C-11 2ND FLOOR, SATYAM SHOPPING CENTRE, M.G.ROAD, GHATKOPAR MURNBAI CERTIFIED THE FACT THAT THE APPEL LANT WAS ABLE TO OBTAIN THE MATERIAL IN THE SECOND HAND MARKET AND FROM OTH ER PLACES AND ASSEMBLED THE SAME INTO A BROADCASTING AND MONITORI NG SYSTEM. IN FACT CINEOM BROADCAST INDIA PVT. LTD MUMBAI VIDE LETTER DATED 20.06.2013 OFFERED TO ASSEMBLE THE REQUIRED SET AT A COST OF R S. 1,72,28,000. THIS MATERIAL WAS PLACED BEFORE THE ASSESSING OFFICER. T HE ASSESSING OFFICER, I.T.A. NO. 1301/HYD/2015 ESHA MEDIA RESEARCH LTD., :- 3 - : WITHOUT EXAMINING THE MATERIAL AVAILABLE ON RECORD: WITHOUT INSPECTING THE PREMISES AND WITHOUT CONSIDERING THE FACT THAT THE BUSINESS ACTIVITY OF THE APPELLANT COULD NOT HAVE BEEN RUN WITHOUT THE SAID MACHINERY DISALLOWED DEPRECIATION, ON A COST PRICE OF RS.2,59,43,948/-. THE APPELLANT SUBMITS THAT- IT IS IN THE BUSINESS OF MEDIA MONITORING, RESEARCH AND ANALYSIS; A. IT CARRIED ON THE BUSINESS ACTIVITY AND DERIVED REC EIPT OF RS.8,90,83,747 ; B. IT OPERATED MACHINERY IN THE PROCESS OF ITS BUSINES S ACTIVITY AND WAS ABLE TO CARRY ON THE BUSINESS; C. THE MACHINERY REQUIRED WAS AVAILABLE AT ITS PREMISE S AND THE SAID MACHINERY WAS USED AND INCOME DERIVED. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER IS NOT JUSTIFIED IN HOLDING THAT THE DEPRECIATION ON SUCH MACHINERY IS NOT ALLOWABLE AS A DEDUCTION; PARTICULARLY WHEN THE APPELLANT WAS ABLE TO FURNISH A CERTIFICATE ISSUED BY EXPERTS IN THE LINE. 3. LD.CIT(A), HOWEVER, AFTER CONSIDERING SECTION 32( 1) AND THE SUBMISSIONS OF ASSESSEE, DID NOT ACCEPT THE SAME BY HO LDING AS UNDER: 5.3 SECTION 32( 1) LAYS DOWNS THE FOLLOWING ASPE CTS FOR ELIGIBILITY TO CLAIM DEPRECIATION. DEPRECIATION IS ALLOWABLE ON CERTAIN KINDS OF ASSETS ONLY. IT WAS OBSERVED BY THE CALCUTTA HIGH COURT IN OIL INDIA LTD. VS. CIT (1978) 114 ITR 323 (CAL), 'IT NOT THAT DEPRECIATION ON EVERY TYPE OF ASSETS OWNED BY AN ASSESSEE IS AN ALLOWABLE DEDUCTION UNDE R THE IT ACTS. SECTION 32 ALLOWS DEPRECIATION ONLY ON BUILDINGS, M ACHINERY, PLANT OR FURNITURE OWNED BY AN ASSESSEE AND USED BY HIM DURI NG THE RELEVANT YEAR FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION.' SU CH AN ASSET SHOULD BE OWNED BY THE ASSESSEE. IT SHOULD BE USED FOR THE PU RPOSES OF THE BUSINESS OR PROFESSION. IN ORDER TO CLAIM DEPRECIATION WITH RESPECT ANY ADD ITION TO FIXED ASSETS IN A YEAR THE ASSESSE HAS TO PROVIDE EVIDENCE OF PURCH ASE OR ACQUISITION OF MACHINERY AND THE COST, WHICH THE ASSESSEE HAD ACTU ALLY INCURRED. EVIDENCE SHOULD BE BROUGHT ON RECORD, WHAT IS THE A CTUAL COST EXCLUDING THE COLLUSIVE, UNDULY INFLATED OR FICTITIOUS COST. I.T.A. NO. 1301/HYD/2015 ESHA MEDIA RESEARCH LTD., :- 4 - : THE DEFINITION OF 'ACTUAL COST' IS TO BE FOUND IN S . 43(1) AND THAT OF 'WRITTEN DOWN VALUE' IN S. 43(6). THE LATTER DEFINES IT TO M EAN: (A) IN THE CASE OF ASSETS ACQUIRED IN THE PREVIOUS YEAR, THE ACTUAL COST TO THE ASSESSEE; (B) IN THE CASE OF ASSETS ACQUIRED BEFORE THE PREVI OUS YEAR, THE ACTUAL COST TO THE ASSESSEE LESS ALL DEPRECIATION ACTUALLY ALLO WED TO HIM UNDER THIS ACT, OR UNDER THE 1922 ACT, OR ANY .ACT REPEALED BY THAT ACT, OR UNDER ANY EXECUTIVE ORDERS ISSUED WHEN THE INDIAN IT ACT, 188 6, WAS IN FORCE. WHERE THE ASSET WAS ACQUIRED AND ALSO USED FOR THE BUSINESS IN THE PREVIOUS YEAR, SUCH VALUE 'WOULD BE ITS FUN ACTUAL COST AND DEPRECIATION FOR THAT YEAR WOULD BE ALLOWED AT THE PRESCRIBED ON SUCH COST. IN THE SUBSEQUENT YEAR, DEPRECIATION WOULD BE CALCULATED O N THE BASIS OF ACTUAL COST LESS DEPRECIATION ACTUALLY ALLOWED. THE KEY W ORD IN CL. (A) IS ACTUAL. 5.4 IN THE INSTANT CASE THERE IS NO EVIDENCE OF PUR CHASE OF ASSETS BY THE APPELLANT DURING THE YEAR. THE APPELLANT FIL ED TO PRODUCE ANY DETAILS, PURCHASE INVOICES, BILLS ETC. WITH RESPEC T TO ADDITION TOWARDS FIXED ASSETS UNDER THE HEAD COMPUTERS AMOUNTING TO RS. 2,59,43,948/- NETHER DURING THE ASSESSMENT NOR IN APPELLATE PROCEEDINGS . DURING THE APPELLATE PROCEEDINGS, INSTEAD OF ANY DETAILS OR EVIDENCES TH E APPELLANT SUBMITTED ONLY A WRITTEN EXPLANATION. SOME BIZARRE ARGUMENTS WERE PLACED BY THE APPELLANT. ON THE ONE HAND IT WAS CLAIMED THAT THE MATERIALS AND SPARES ETC. WERE LOCALLY PURCHASED. AT THE SAME TIME IT I S ARGUED THAT BROADCAST MEDIA RECORDING MONITORING SYSTEMS ARE NOT AVAILABL E IN INDIA. THESE CONTRADICTORY STATEMENTS WERE DESCRIBED IN THE WRIT TEN EXPLANATION. BUT NO EVIDENCE OF PURCHASE OF SUCH COMPUTER PARTS OR M ATERIALS OR ANY OTHER ASSETS WERE PRODUCED. BUT IN SUPPORT OF CLAIM OF DEPRECIATION, A CERTIFIC ATE FROM SOME CORE MEDIA SYSTEMS WAS FURNISHED, CERTIFYING THAT THE APPELLAN T WAS ABLE TO OBTAIN THE MATERIAL IN SECOND HAND MARKET. THIS KIND OF CE RTIFICATE NEITHER HAD ANY EVIDENTIARY VALUE NOR IT PROVIDES ANY EVIDENCE THAT THE MACHINERY OR PARTS OF MACHINERY WERE PROCURED. AGAIN AT THE COST OF REPETITION I MENTION THAT THERE IS NO EVIDENCE OF PURCHASE OF ASSETS OR PURCHASE OF MATERIALS FOR INSTALLATION OF ASSETS. THE DEPRECIATION CANNOT BE GRANTED ON THE BASIS OF A FICTITIOUS CLAIM OR ON THE BASIS OF SOME CERTIFIC ATES OF THIRD PARTY. THUS I HOLD THAT THE ASSESSING OFFICER IS JUSTIFIED IN DIS ALLOWING THE DEPRECIATION AS THE CLAIM OF THE APPELLANT IS FICTITIOUS. HENCE THE GROUND NO.3 SET OUT IN GROUNDS OF APPEAL IS DISMISSED. I.T.A. NO. 1301/HYD/2015 ESHA MEDIA RESEARCH LTD., :- 5 - : 4. IT WAS THE CONTENTION OF LD. COUNSEL THAT ASSESSEE HA S INDEED PURCHASED MACHINERY IN SECOND HAND AND THE SAID MACHINERY/COMPUTERS WERE AVAILABLE WITH ASSESSEE. I T WAS ALSO FURTHER SUBMITTED THAT AO WAS REQUESTED TO INSPECT AVAILABI LITY OF ASSETS SO AS TO CONSIDER THE DEPRECIATION CLAIM BUT THE S AME WAS NOT DONE. 5. THE BENCH HAS ASKED ASSESSEE-COUNSEL TO RECONCILE THE SCHEDULE-7 (SCHEDULE PLACED AT PG. 27 OF THE PAPER B OOK) OF THE BALANCE SHEET WITH THAT OF THE CLAIMS. IT IS NOTICED THAT IN SCHEDULE-7 I.E., ASSETS SCHEDULE TO THE BALANCE SHEET, THE BALANCE AS ON 01-04-2010 SHOWN IN THE GROSS BLOCK WAS TO THE TUNE OF RS. 8,08,98,327/- AND ADDITIONS TO THE ASSETS INCLUDING CO MPUTERS WERE SHOWN AT RS. 2,84,20,742/-. THE BALANCE AS AT 31-03-2011 HAS COME TO RS. 10,93,17,069/-. THE ACCUMULATED DEPR ECIATION HAS COME TO RS. 6,42,35,226/- AND THE NET BALANCE AS O N 31-03- 2011 WAS AT RS. 4,50,81,843/-. THE BALANCE AS AT 01- 04-2010 WAS SHOWN AT RS. 3,75,60,712/-. AS AGAINST THESE AMOUNTS STATED IN SCHEDULE-7, THE BALANCE SHEET PLACED IN THE PAPER BOO K AT PG. 19 SHOW THE FIXED ASSETS AT RS. 23,48,947/- AS ON 31-03- 2010, WHEREAS THE CLOSING BALANCE TALLIES WITH SCHEDULE-7. ASSESSEES COUNSEL WAS ASKED TO RECONCILE THE AMOUNTS AS THERE IS SO MUCH VARIATION IN THE AMOUNTS REFLECTED IN SCHEDULE-7. IT WAS SUBMITTED THAT ASSESSEE WAS EARLIER KNOWN AS LASER DOT LTD., AND IT HAS AMALGAMATED A CONCERN M/S ESHA NEWS MONITORING SERVIC ES PRIVATE LIMITED VIDE ORDER OF THE HON'BLE HIGH COURT OF BOMBAY DT. 02-12-2011. ACCORDINGLY, THE EARLIER ASSESSEE, LASER DOT LTD., CHANGED ITS NAME AS ESHA MEDIA RESEARCH LIMITED. I.T.A. NO. 1301/HYD/2015 ESHA MEDIA RESEARCH LTD., :- 6 - : 5.1. IT WAS FURTHER SUBMITTED THAT INITIALLY LASER DOT LTD., FILED ITS RETURN OF INCOME ON 29-09-2011 ADMITTING NIL INCOME. AFTER THE ORDER OF THE HON'BLE HIGH COURT, A REVISED RETURN WAS FILED ADMITTING LOSS OF RS. 36,677/- ON 31-03-2013. AT THE TIME OF FILING REVISED RETURN, THE ACCOUNTS OF LASER DOT LTD., WERE MER GED WITH ESHA NEWS MONITORING SERVICES PRIVATE LIMITED AND ACCORDINGLY, ASSESSEE-COUNSEL FURNISHED COPY OF THE FINAL ACCOUNTS BEFORE MERGER AND AFTER MERGER FOR CONSIDERATION. AS SEEN FROM THE ASSESSMENT ORDER, THERE IS NO MENTION OF ANY OF THESE ISSUES OF EITHER LASER DOT LTD., OR MERGER OF ESHA NEWS MONITORING SERVICES PRIVATE LIMITED. ACCORDINGLY, WE ARE NOT GOING INTO THOSE ASPECTS AS AO HAS NOT CONSIDERED THESE ISSUES AT ALL IN THE ASS ESSMENT ORDER. 6. LD.DR HOWEVER, SUBMITTED THAT ASSESSEE HAS NOT FURNI SHED ANY OF THE DETAILS AND IT IS FOR ASSESSEE TO SUBMIT THE DETAILS SO THAT THE DEPRECIATION CAN BE VERIFIED AND ALLOWED. LD.DR REFERRED TO THE DETAILED ORDER OF THE CIT(A) AND FAILURE OF ASSESSEE IN SUBMITTING THE DETAILS TO SUPPORT THE ACTION OF THE AO. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE DOCUMENTS PLACED ON RECORD. IT IS A FACT THAT ASSESSEE HAS NOT FURNISHED EITHER DETAILS OF THE ASSETS OR THE VALUES O F INDIVIDUAL ASSETS OR ANY INVOICES IN ORDER TO SUPPORT THE ACQUIS ITION OF COMPUTERS FOR THE PURPOSE OF BUSINESS. AS SEEN FROM THE BALANCE SHEET OF LASER DOT LTD., THE WDV AS PER THE BOOKS OF ACC OUNT AS ON 31-03-2010 WAS ONLY RS. 23,46,947/-. THERE ARE NO ADDITIONS TO THE FIXED ASSETS DURING THE YEAR AS FAR AS THE STATEMEN T OF ACCOUNTS OF LASER DOT LTD., WAS CONCERNED. THIS INDICATES THAT THE I.T.A. NO. 1301/HYD/2015 ESHA MEDIA RESEARCH LTD., :- 7 - : ACQUISITION OF ASSETS WAS IN THE HANDS OF MERGED COMP ANY AND HAVE BEEN CLAIMED AS PART OF NEW COMPANY IN THE REVIS ED ACCOUNTS. IN THAT CASE, IT IS THE ONUS OF ASSESSEE TO SUBMIT THE D ETAILS OF ASSETS WHICH WERE MERGED INTO ASSESSEE-COMPANY AND THE PARTICULARS OF ACQUISITION. AS SEEN FROM THE RECORD, ASSESSEE NOT ONLY FAILED TO PROVIDE THE DETAILS OF THE ASSETS BUT ALSO FAILED TO PROVIDE THE BASIC DETAILS OF COST, NATURE OF ASSET AND H OW THE AMOUNTS WERE PAID FROM THE BOOKS OF ACCOUNT. AS SEEN FROM THE SUBMISSIONS BEFORE THE CIT(A), IT WAS THE ASSESSEES C ONTENTION THAT HIGHLY SOPHISTICATED RECORDING AND MONITORING SYSTEM S WERE SUPPOSED TO HAVE BEEN ACQUIRED FROM SECOND-HAND MARK ET AND FROM OTHER PLACES AND GOT THEM ASSEMBLED INTO BROADC ASTING AND MONITORING SYSTEM. THIS EXPLANATION OF ASSESSEE SEE MS TO BE NOT PLAUSIBLE CONSIDERING THAT THE EQUIPMENT REQUIRED FOR SUCH BUSINESS IS OF SOPHISTICATED NATURE. IN CASE IF IT IS PURCHASED FROM SECOND HAND MARKET, AT LEAST THERE WILL BE SOME SELF-M ADE VOUCHERS AND ALSO THE PAYMENTS TO PERSONS WHO ASSEMBLE D THE SAME. SINCE NOTHING WAS BROUGHT ON RECORD TO ESTABLIS H THAT ASSESSEE HAS INDEED PURCHASED/ ASSEMBLED THE SAID COMPUTERS/MEDIA EQUIPMENT, WE ARE OF THE VIEW THAT AO A ND CIT(A) ARE JUSTIFIED IN DISALLOWING THE DEPRECIATION. AT LEAST ASSESSEE COULD HAVE FURNISHED THE COPY OF THE RETURNS FILED BEFORE THE AO OF ERSTWHILE COMPANY IN DUE TIME, AS THE ASSETS WERE NOT ACQUIRED BY LASER DOT LTD., BUT SEEMS TO BE PART OF MERG ED COMPANY, ESHA NEWS MONITORING SERVICES PRIVATE LIMI TED. SINCE NOTHING WAS PLACED ON RECORD TO SUBSTANTIATE THE CLAIM, WE ARE UNABLE TO APPRECIATE ASSESSEES CONTENTION THAT THE MAC HINERY SHOULD HAVE BEEN INSPECTED BY THE AO AND DEPRECIATION ALLOWED. IT IS FOR ASSESSEE TO SUBSTANTIATE THE ACQUISITION OF ASSETS , ATLEAST I.T.A. NO. 1301/HYD/2015 ESHA MEDIA RESEARCH LTD., :- 8 - : PRIMA-FACIE, BY FURNISHING NECESSARY VOUCHERS, INVOICES, VALUES AND MAKE ETC., SO THAT THERE IS SOME BASIS FOR VERIFICATION. IN THE ABSENCE OF THE SAME, THE BURDEN CANNOT BE SHIFTED. IN VIEW OF THAT, WE UPHOLD THE ORDER OF THE AO/ CIT(A) AND DISMISS ASS ESSEES GROUNDS. 8. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2017 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 15 TH MARCH, 2017 TNMM COPY TO : 1. ESHA MEDIA RESEARCH LTD., HYDERABAD. C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6 -643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD. 2.THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-2 (2), HYDERABAD. 3. CIT (APPEALS)-5, HYDERABAD. 4. PR.CIT-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.