DCIT, New Delhi V. M/s. Crabtree India Ltd., New Delhi

ITA 1340/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74304 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 25-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Assessee Lawyers: VED PRAKASH BANSAL
• Keywords: Depreciation

Judgement Text

ITA NO. 1340/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1340/DEL/2013 A.Y. : 2004-05 DCIT, CIRCLE 3(1), NEW DELHI VS. M/S CRABTREE INDIA LTD., 1/7, RAM KISHORE ROAD, CIVIL LINES, DELHI 110 054 (PAN: AABCC6226Q) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : SMT. NIDHI SRIVASTAVA, SR. D.R. ASSESSEE BY : SH. VED PRAKASH BANSAL, CA ORDER ORDER ORDER ORDER PER SHAMIM PER SHAMIM PER SHAMIM PER SHAMIM YAHYA: AM YAHYA: AM YAHYA: AM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-VI), NEW DE LHI DATED 26.12.2012 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE GROUND RAISED IN THE APPEAL IS THAT WHETHER THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDIT ION MADE BY THE AO AMOUNTING TO RS. 9,06,127/- ON ACCOUNT OF DISALL OWANCE OF EXTRA DEPRECATION CLAIMED ON VIDEO CONFERENCING EQUIPMEN TS IGNORING THE FACT THAT AS PER DEPRECIATION RATES MENTIONED IN A PPENDIX 1 (RULE 5) OF THE I.T. RULES, ONLY COMPUTER AND COMPUTER SOFTW ARE WILL BE ENTITLED FOR DEPRECIATION @ 60% AND THE SAME CANNOT BE EXTENDED TO THE OTHER EQUIPMENTS WHERE COMPUTER IS USED. ITA NO. 1340/DEL/2013 2 3. IN THIS CASE AO NOTED THAT THE ASSESSEE HAS CLAI MED DEPRECIATION @60% OF VIDEO CONFERENCING EQUIPMENTS WHICH INCLUDED THE FOLLOWING COMPONENTS.:- S.NO. S.NO. S.NO. S.NO. BILL NO. BILL NO. BILL NO. BILL NO. DATE DATE DATE DATE DESCRIPTION DESCRIPTION DESCRIPTION DESCRIPTION AMOUNT AMOUNT AMOUNT AMOUNT 1 93007659 5.2.04 1 NO. PH0004 VSX 7000 POINT TO POINT 329740 2 603 3.12.03 1 NO. NEC PLASMA DISPLAY MONITOR 42 VP4 270000 3 604 3.12.03 1 NO. NEC PLASMA DISPLAY MONITOR 42 VP4 270000 4 93007114 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 513358 5 1012004 1.1.04 1 NO. SONY XJ 29 WEGA TELEVISION 33500 6 1601 2.2.04 1 NO. CTV SONY 29 32000 7 2328 9.2.04 1 NO. LG FLATRON 29 TV 30000 8 93007159 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 328216 9 93007116 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 330276 10 93007651 5.2.2004 1 NO. PH0004 VSX 7000 POINT TO POINT 329740 11 93007115 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 328216 12 54 10.2.04 1 NO. CTV SONY 29 41300 13 2265 16.1.04 1 NO. LG COLOUR TV 29 28500 14 93007163 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 328372 15 93007126 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 328372 16 93007658 5.2.204 1 NO. PH0004 VSX 7000 POINT TO POINT 329740 17 93007125 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 327420 18 237 7.1.04 1 NO. LG COLOUR TV 29 27000 19 93007109 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 327420 20 6215 26.1.04 1 NO. SAMSUNG 31500 ITA NO. 1340/DEL/2013 3 COLOUR TV 29 21 93007150 27.12.03 1 NO. PH0004 VSX 7000 POINT TO POINT 325448 22 2112 27.1.04 1 NO. LG COLOUR TV 29 30400 23 93007120 27.12.03 1 NO. LG COLOUR TV 29 328216 24 93007111 27.12.03 1 NO. LG COLOUR TV 29 322248 55 5555 55, ,, ,80 8080 80, ,, ,982 982 982 982 3.1 FROM THE ABOVE, AO NOTED THAT THE ABOVE ITEMS A RE MAINLY PLASMA TV AND OTHER TV SETS WHICH CAN WORK EVEN WI THOUT COMPUTER. AO WAS OF THE OPINION THAT THE PROCESS OF VIDEO CONFERENCING MAY INVOLVE THE HELP OF COMPUTER SYS TEM, BUT IT CANNOT BE TERMED AS PART AND PARCEL OF THE COMPUTER AS SUCH. AO FURTHER OBSERVED THAT FOR THE SAKE OF DISCUSSION I F THE ASSESSEE COMPANYS SUBMISSIONS ARE ACCEPTABLE THEN BY THAT JUSTIFICATION, ALL THE BIG INPUT AND OUTPUT DEVICES, PROCESSING UNITS, STORAGE UNITS LIKE MRI SCANNING MACHINES, COORDINATE MEASURING MA CHINES USED IN THE INDUSTRIES FOR WELDING ETC. WILL BE ENTITLED TO 60% DEPRECIATION. IN THAT WAY, IT CAN BE EXTENDED TO ANY MACHINERY WH ERE THE COMPUTER IS USED FULLY OR PARTIALLY. HENCE, AO OBS ERVED THAT THE IT RULES SPECIFICALLY PROVIDED THE DEPRECIATION @ 60% ONLY ON COMPUTERS AND COMPUTER SOFTWARE. THUS, AO HELD THA T THE AS PER THE DEPRECIATION RATES MENTIONED IN THE IT RULES T HE COMPUTER AND COMPUTER SOFTWARE WILL BE ENTITLED OF 60% DEPRECATI ON AND THE SAME CANNOT BE EXTENDED TO OTHER EQUIPMENTS WHERE COMPU TER IS USED. ACCORDINGLY, AO DISALLOWED THE EXCESS DEPRECIATION CLAIM. 4. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED B EFORE THE LD. CIT(A). LD. CIT(A) DECIDE THE ISSUE IN FAVOR OF TH E ASSESSEE BY HOLDING AS UNDER:- ITA NO. 1340/DEL/2013 4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. IT IS AN UNDISPUTED FACT THAT THE APPELLANT COMPANY HAS INST ALLED THE VIDEO CONFERENCE SYSTEM IN THEIR BRANCHES AND FACTORIES FOR THE PURPOSES OF COMMUNICATION. THE APPELLATE COMPANY IS MANUFACTURING AND TRADING HIGH LY TECHNICAL ELECTRICAL ITEMS AND BATH FITTINGS AS PER NATIONAL AND INTERNATIONAL QUALITY STANDARD. THE NEW FEATURE S OF THE PRODUCT HAS TO BE COMMUNICATED TO THE MARKET ST AFF AND CUSTOMERS OF THE APPELLANT COMPANY FOR THE PURP OSES OF EXCHANGING THE TECHNICAL KNOWLEDGE. A COMPUTER IS DEFINED AS PER SECTION 2(1)(T) OF THE INFORMATION TECHNOLOGY ACT 2000 AS FOLLOWS:- 'THE EXPRESSION 'COMPUTER' HAS NOT BEEN DEFINED IN THE ACT. HOWEVER, IT HAS BEEN DEFINED BY SECTION 2(1)(T) OF THE INFORMATION TECHNOLOGY ACT, 2000. AS PER THE SAID ACT, 'COMPUTER' MEANS ANY ELECTRONIC, MAGNET, OPTICAL OR OTHER HIGH SPEED DATA PROCESSING DEVICE OR SYSTEM WHICH PERFORMS LOGICAL, ARITHMETIC AND MEMORY FUNCTIONS BY MANIPULATION OF ELECTRONICS OR MAGNETIC OR OPTICAL IMPULSES AND INCLUDES ALL INPUT - OUTPUT PROCESSING, STORAGE, COMPUTER, SOFTWARE OR COMMUNICATION FACILITIES WHICH ARE CONNECTED OR RELATED TO THE COMPUTER IN A COMPUTER SYSTEM OR COMPUTER NET WORK. ' FROM THE ABOVE DEFINITION, IT IS CLEAR THAT THE COMMUNICATION FACILITIES WHICH ARE CONNECTED OR REL ATED ITA NO. 1340/DEL/2013 5 TO THE COMPUTER ARE ALSO A PART OF COMPUTER. THE VI DEO CONFERENCE SYSTEM IS A SET OF INTERACTIVE TELECOMMUNICATION TECHNOLOGY WHICH ALLOW TO OR MORE LOCATION TO INTERACT VIA TWO WAY VIDEO AND AUDIO TRANSMISSION SIMULTANEOUSLY. THE VIDEO CONFERENCING USES TELECOMMUNICATIONS OF AUDIO 'AND VIDEO TO BRIN G PEOPLE AT DIFFERENT SITES TOGETHER FOR A MEETING. B ESIDES, THE AUDIO AND VIDEO TRANSMISSION OF MEETING ACTIVIT IES, VIDEO CONFERENCES CAN ALSO BE USED TO SHARE DOCUMEN TS, COMPUTER DISPLAYED INFORMATION AND WHITE BOARDS. TH E CORE TECHNOLOGY USED IN A VIDEO CONFERENCES SYSTEM IS A DIGITAL COMPRESSION OF AUDIO AND VIDEO STREAMS IN R EAL TIME. THUS, IN MY OPINION, VIDEO CONFERENCES SYSTEM IS ALSO A COMPUTER DEVICE THAT ACCEPTS INFORMATION ( I N THE FORM OF DIGITALIZED DATA) BY WAY OF VIDEO INPUT (WE BCAM OR VIDEO CAMERA) AND AUDIO INPUT (MICROPHONES) AND PROCESS THE DATA AND TRANSFER THROUGH ANALOG OR DIG ITAL TELEPHONE NETWORK OR LAN AND GIVES THE OUTPUT DATA BY WAY OF VIDEO OUTPUT (MONITOR, TELEVISION OR PROJECT OR) AND AUDIO OUTPUT (LOUDSPEAKERS ASSOCIATED WITH DISPLAY DEVICE OR TELEPHONE). FOR DISPLAYING THE VIDEO OUTPUT TVS ARE USUALLY REQUIRED. THEREFORE, IN MY HUMBLE OPINION, THE TVS SET USED BY THE APPELLANT COMPANY ARE ALSO A PART OF TH E COMPUTER SYSTEM WITHOUT WHICH THE A VIDEO CONFERENC ES CANNOT TAKE PLACE. IN THIS REGARD, I AM ALSO OF THE OPINION THAT IT IS THE USE OF AN ASSET WHICH IS THE PARAMOU NT AND SIGNIFICANT FOR THE PURPOSE OF DECIDING THE ALLOWAN CE OF RATE OF DEPRECIATION. THEREFORE, IN MY CONSIDERED O PINION A VIDEO CONFERENCES SYSTEM IS ALSO A COMPUTER DEVIC E ITA NO. 1340/DEL/2013 6 WHICH IS ELIGIBLE FOR DEPRECIATION @60%AS PER THE PROVISIONS OF THE I T ACT. THEREFORE, THE AO IS DIR ECTED TO ALLOW DEPRECIATION ON THE VIDEO CONFERENCE SYSTEM A T THE RATE OF 60%. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. 6.1 IN OUR CONSIDERED OPINION THE PROCESS OF VIDEO CONFERENCING MAY INVOLVE THE HELP OF COMPUTER SYSTEM, BUT THE EN TIRE VIDEO CONFERENCING SYSTEM CANNOT BE THE TERMED AS PART AN D PARCEL OF THE COMPUTER AS SUCH. INCOME TAX RULES SPECIFICALLY PRO VIDE DEPRECIATION @ 60% ONLY ON COMPUTERS AND COMPUTER S OFTWARE. THE DEPRECIATION RATES AS MENTIONED ABOVE CANNOT BE EXT ENDED TO THE OTHER EQUIPMENTS WHERE COMPUTER IS USED. WE AGREE W ITH THE AO THAT IF THE ASSESSEE COMPANY SUBMISSIONS ARE ACCEP TED THEN BY THAT JUSTIFICATION, ALL THE BIG INPUT AND OUTPUT D EVICES, PROCESSING UNITS, STORAGE UNITS LIKE MRI SCANNING MACHINES, CO ORDINATE MEASURING MACHINES USED IN THE INDUSTRIES FOR WELDI NG ETC. WILL BE ENTITLED TO 60% DEPRECIATION. 6.2 IN THIS REGARD, WE NOTE THAT THE ISSUE HAD ARIS EN EARLIER WHETHER PRINTER, SCANNER AND SERVER ARE INTEGRAL PA RT OF COMPUTER OR NOT. IN THIS REGARD, HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS. BSES YAMUNA POWER LIMITED HAD AFFIRMED THE TRIBUNALS VIEW THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS P RINTER, SCANNER AND SERVER ETC. FORMA AN INTEGRAL PART OF COMPUTER SYSTEM. IT WAS HELD THAT IN FACT THE COMPUTER ACCESSORIES AND PE RIPHERALS CANNOT BE USED WITHOUT THE COMPUTER. HENCE, IT WAS HELD THAT THEY ARE THE PART OF THE COMPUTER SYSTEM AND THEY ARE ENTITLED T O DEPRECIATION AT THE HIGHER RATE OF 60%. NOW, WE FIND THAT ABOVE AN ALOGY CANNOT BE EXTENDED TO TV SETS USED IN THE VIDEO CONFERENCING EQUIPMENTS. ITA NO. 1340/DEL/2013 7 THE TV SETS USED BY THE ASSESSEE CANNOT BE A PART O F THE COMPUTER SYSTEM. THE TV SETS CAN FUNCTION INDEPENDENTLY. AS SUCH THEY CANNOT BE ALLOWED DEPRECIATION @ 60% AS APPLICABLE TO COMPUTERS. HENCE, WE HOLD THAT IN THE LIST OF THE VIDEO CONFE RENCING EQUIPMENTS AS MENTIONED IN THE AOS ORDER REPRODUCE D HEREINABOVE, THE TV SETS CANNOT BE ALLOWED DEPREC IATION AS ABOVE. HENCE, WE MODIFY THE ORDER OF THE LD. CIT(A) AS AB OVE AND DIRECT THE AO TO ALLOW DEPRECIATION @ 60% ON OTHER ITEMS M ENTIONED IN THE LIST EXCEPT TV SETS. THE OTHER ITEMS MENTIONED IN THE LIST EXCEPT TV SETS, IN OUR CONSIDERED OPINION, CAN BE CONSIDERED A PART OF THE COMPUTER SYSTEM AND HENCE THEY WILL BE ALLOWED DEPR ECIATION @ 60%. HOWEVER, THE TV SETS USED CANNOT BE ALLOWED D EPRECIATION @ 60%, AS APPLICABLE TO COMPUTERS. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/3/2014. SD/- SD/- [ [[ [U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI U.B.S. BEDI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 14/3/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES