Devi Polymers Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1430/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73761 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Reasonable cause; Condonation of delay; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' , # $ BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NOS. 1429 & 1430/MDS/2013 ( / ASSESSMENT YEARS : 2008-09 & 2009-10) M/S. DEVI POLYMERS PVT.LTD TNK HOUSE, 48, ANNA SALAI, CHENNAI-600 002. VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(4) CHENNAI PAN: AAACD1779J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : MR. SHAJI P.JACOB, ADDL. CIT / DATE OF HEARING : 27 TH FEBRUARY, 2014 ! /DATE OF PRONOUNCEMENT : 14 TH MARCH, 2014 % / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAI NST THE DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IX, CHENNAI DATED 22.03.2013 AND 18.01.2 013 FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 RESPECTIVEL Y. 2. THE APPEAL FOR THE ASSESSMENT YEAR 2008-09 IN IT A NO.1429/MDS/2013 IS TIME BARRED BY 17 DAYS AND THE APPEAL FILED FOR ASSESSMENT YEAR 2009-10 IN ITA NO.1430/MD S/2013 ITA NOS.1429 & 1430/MDS/2013 2 IS TIME BARRED BY 54 DAYS. THE ASSESSEE FILED PETIT IONS FOR CONDONATION OF DELAY ALONG WITH AFFIDAVITS EXPLAINI NG REASONS FOR DELAY IN FILING OF APPEALS. COUNSEL FOR THE ASS ESSEE TOOK US THROUGH THE AFFIDAVITS AND EXPLAINED CIRCUMSTANCES UNDER WHICH APPEALS WERE FILED BELATEDLY AND PRAYED FOR C ONDONING THE DELAY AND ADMISSION OF APPEALS FOR ADJUDICATION ON MERITS. REVENUE HAS NO SERIOUS OBJECTION IN CONDONING THE D ELAY IN BOTH THE APPEALS. 3. HAVING GONE THROUGH THE AFFIDAVITS FILED BY THE ASSESSEE EXPLAINING REASONS FOR DELAY, WE FIND THAT THE ASS ESSEE WAS PREVENTED WITH REASONABLE CAUSE IN FILING THE APPEA LS WITH DELAY OF 17 DAYS & 54 DAYS RESPECTIVELY FOR THE AP PEALS OF ASSESSMENT YEARS 2008-09 & 2009-10. WE CONDONE THE DELAY AND ADMIT THE APPEALS FOR ADJUDICATION ON MERITS. ITA NO.1429/MDS/2013:- 4. THE FIRST ISSUE IN THE GROUNDS OF APPEAL OF THE ASSESSMENT YEAR 2008-09 IS THAT COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF S OFTWARE ITA NOS.1429 & 1430/MDS/2013 3 EXPENSES AS CAPITAL EXPENDITURE. THE ASSESSING OFF ICER WHILE COMPLETING THE ASSESSMENT DISALLOWED ` 2,20,920/- OUT OF ` 5,66,881/- STATING THAT NATURE OF SOFTWARE PURCHAS ED BY THE ASSESSEE ARE EITHER OPERATING SYSTEM OR CUSTOMI ZED SOFTWARE APPLICATIONS AND ASSESSEE COULD BE DERIVED ENDURING BENEFITS AND THEREFORE HE TREATED AS CAPIT AL EXPENSES. THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE SAME. 5. COUNSEL FOR THE ASSESSEE SUBMITS THAT EXPENSES INCURRED ON SOFTWARE IS ONLY FOR UPDATION OF EXISTI NG SOFTWARE AND IT IS ONLY REVENUE EXPENSES AND CANNOT BE TREAT ED AS CAPITAL EXPENSES. 6. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT COST OF SOFTWARE AUTODESK INVERTOR PROFESSIONAL, 2008 AMOUN TING TO ` 1,59,120/- CANNOT BE CONSIDERED AS REVENUE EXPENDIT URE SINCE IT IS AN APPLICATION SOFTWARE WHICH HAS ENDUR ING BENEFIT TO THE ASSESSEE AND IT IS NOT AN UPGRADATION OF THE EXISTING ITA NOS.1429 & 1430/MDS/2013 4 SOFTWARE. THEREFORE, HE PRAYS TO SUSTAIN THE DISAL LOWANCE TO THAT EXTENT. 7. WE ARE IN AGREEMENT WITH THE VIEW OF THE DEPARTM ENTAL REPRESENTATIVE AND THEREFORE DIRECT THE ASSESSING O FFICER TO TREAT THE COST OF SOFTWARE IN RESPECT OF AUTODESK I NVERTOR PROFESSIONAL, 2008 AMOUNTING TO ` 1,59,120/- AS CAPITAL EXPENSES AND ALLOW DEPRECIATION AND THE BALANCE SO FTWARE EXPENSES SHALL BE TREATED AS REVENUE EXPENSES. 8. THE NEXT ISSUE IN THE GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2008-09 IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ENHANCING ASSESSMENT AND DISALLOWING DEDUCTION UNDER SECTION 80IA ON THE PRO FITS DERIVED FROM WINDMILL ALLOWED BY THE ASSESSING OFFI CER ON THE GROUND THAT ASSESSEE HAS NOT FILED RETURN WITHIN DU E DATE PROVIDED UNDER SECTION 139(1) OF THE ACT. 9. BRIEF FACTS ARE THAT ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IA FOR THE ASSESSMENT YEAR 2008-09 ON THE PROFITS ITA NOS.1429 & 1430/MDS/2013 5 GENERATED FROM WINDMILL WHICH WAS ALLOWED BY THE AS SESSING OFFICER. IN THE COURSE OF PROCEEDINGS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), HE ISSUED A L ETTER TO THE ASSESSEE AS TO WHY THE CLAIM MADE BY THE ASSESS EE UNDER SECTION 80IA SHOULD NOT BE WITHDRAWN AS THE R ETURN WAS FILED BEYOND THE TIME SPECIFIED UNDER SECTION 139(1 ) OF THE ACT. THIS PROPOSAL WAS MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) BASED ON THE LETTER FURNISHED BY THE ASSESSING OFFICER. THE ASSESSEE BEFORE THE COMMISSIONER OF IN COME TAX (APPEALS) DID NOT FURNISH ANY OBJECTIONS. THERE FORE, IN THE ABSENCE OF ANY OBJECTIONS FROM THE ASSESSEE, COMMIS SIONER OF INCOME TAX (APPEALS) ENHANCED THE ASSESSMENT BY DISALLOWING THE CLAIM OF THE ASSESSEE MADE UNDER SE CTION 80IA(4) OF THE ACT. 10. COUNSEL FOR THE ASSESSEE SUBMITS THAT COMMISSIO NER OF INCOME TAX (APPEALS) ENHANCED THE ASSESSMENT BY LET TER DATED 5.3.2013 AND PASSED ORDER ON 22.03.2013 WITHD RAWING THE CLAIM OF THE ASSESSEE WITHOUT GIVING ADEQUATE O PPORTUNITY TO THE ASSESSEE TO PROVIDE ITS OBJECTIONS. COUNSEL FOR THE ITA NOS.1429 & 1430/MDS/2013 6 ASSESSEE RELYING ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MS.JAGRIT I AGGARWAL (339 ITR 610), THE DECISION OF HONBLE GAU HATI HIGH COURT IN THE CASE OF CIT VS. RAJESH KUMAR JALAN (28 6 ITR 274) AND THE DECISION OF HONBLE KARNATAKA HIGH COU RT IN THE CASE OF FATHIMA BAI VS. ITO (32 DTR 243) SUBMITS T HAT RETURN FILED BY THE ASSESSEE BELATEDLY IS WITHIN TH E TIME PROVIDED UNDER SECTION 139(4) OF THE ACT AND THEREF ORE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(4) OF THE ACT. THE COUNSEL SUBMITS THAT COMMISSIONER OF INCO ME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ASSESS EE HAS FILED RETURN WITHIN DUE DATE PROVIDED UNDER SECTION 139(4) OF THE ACT, THEREFORE, THE CLAIM IS IN ORDER. 11. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT FOR CL AIMING DEDUCTION UNDER SECTION 80IA RETURN SHOULD HAVE BE EN FILED BEFORE DUE DATE FOR FURNISHING OF RETURN UNDER SECT ION 139(1) OF THE ACT AND SINCE ASSESSEE DID NOT FILE THE RETU RN WITHIN DUE DATE AS SPECIFIED UNDER SECTION 139(1), EVEN THOUGH ASSESSEE FILED RETURN AS PER DUE DATE SPECIFIED UND ER SECTION ITA NOS.1429 & 1430/MDS/2013 7 139(4) OF THE ACT, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. 12. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE CASE LAWS RELIED ON. ON READING OF THE IMPU GNED ORDER, WE FIND THAT COMMISSIONER OF INCOME TAX (APP EALS) HAS PASSED ORDER ENHANCING THE ASSESSMENT WITHDRAWI NG THE CLAIM OF THE ASSESSEE UNDER SECTION 80IA(4) WITHOUT HEARING THE ASSESSEE. NO PROPER OPPORTUNITY WAS GIVEN TO T HE ASSESSEE. IN THE CIRCUMSTANCES, WE RESTORE THIS ISS UE TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) TO ADJUDICATE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 13. IN GROUND NO.4, ASSESSEE HAS TAKEN AN ALTERNATI VE GROUND FOR DEDUCTION UNDER SECTION 80IA. SINCE WE R ESTORED THE MAIN ISSUE TO THE FILE OF THE COMMISSIONER OF I NCOME TAX (APPEALS) , WE ARE NOT ADJUDICATING THE ALTERNATIVE GROUND. ITA NOS.1429 & 1430/MDS/2013 8 14. THE LAST GROUND OF APPEAL FOR THE ASSESSMENT Y EAR 2008-09 IS THAT COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN NOT ADJUDICATING THE ISSUE OF GRANTING CREDIT FO R TDS OF ` 35,01,596/- CLAIMED BY THE ASSESSEE. THE COUNSEL SU BMITS THAT COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT ADJUDICATED THIS GROUND OF APPEAL. ON READING OF TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WE FIND T HAT THIS GROUND HAS NOT BEEN ADJUDICATED WHICH WAS RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL FILED BEFORE HIM. IN THE CIRCUMSTANCES, WE RESTORE THIS ISSUE TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR ADJUDICATI ON. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1430/MDS/2013:- 16. THE FIRST GROUND OF APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2009-10 IS THAT COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF S OFTWARE EXPENSES OF ` 39,104/- AS CAPITAL EXPENSES. IN THE COURSE OF ITA NOS.1429 & 1430/MDS/2013 9 HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT HE I S NOT PRESSING THIS GROUND. THEREFORE, WE DISMISS THIS GR OUND OF APPEAL AS NOT PRESSED. 17. THE NEXT GROUND OF APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2009-10 IS THAT COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF D EDUCTION UNDER SECTION 80IA ON THE GROUND THAT ASSESSEE HAS NOT FILED RETURN WITHIN DUE DATE PROVIDED UNDER SECTION 139(1 ) OF THE ACT. SINCE WE HAVE ALREADY RESTORED THIS ISSUE TO T HE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2008-09, WE RESTORE THIS ISSUE ALSO FOR THE ASSESSMENT YEAR 2009-10 TO THE FILE OF THE COMMISSI ONER OF INCOME TAX (APPEALS) TO DECIDE THE ISSUE AFRESH ON EXAMINING THE SUBMISSIONS AND THE CASE LAW RELIED O N ON THIS ISSUE. 18. WITH REGARD TO THE ALTERNATIVE GROUND RAISED BY THE ASSESSEE ON DEDUCTION UNDER SECTION 80IA FOR THE ASSESSMENT YEAR 2009-10, AS THE MAIN GROUND IS REST ORED TO ITA NOS.1429 & 1430/MDS/2013 10 THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS ), WE ARE NOT DECIDING THE ALTERNATIVE GROUND. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 20. TO SUM UP, BOTH THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 14 TH DAY OF MARCH, 2014 AT CHENNAI. SD/- SD/- (A.M OHAN ALANKAMONY) (CHALLA NAGENDRA PRASAD) ACCOUNTANT MEMBER JUDI CIAL MEMBER CHENNAI, DATED THE 14 TH MARCH, 2014. SOMU COPY TO: (1) APPELLANT M/S.SUBBARAYA AIYAR PADMANABHAN & RAMAMANI, ADVOCATES 75A, DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI-600 004. (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F