DCIT, Bangalore V. M/s BSS Micro Finance P. Ltd., Bangalore

ITA 1446/BANG/2012

• Counselvise Citation: 144621114 RSA 2012
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P CHANDRASHEKAR DIT
• Assessee Lawyers: S KUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1446/BANG/2012 ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. VS. M/S. BSS MICRO FINANCE P. LTD., COM.9, DEVARAJ URS TRUCK TERMINAL, PEENYA INDL. AREA, PEENYA MAIN ROAD, YESHWANTHPUR, BANGALORE 560 022. PAN : AAACO 1061G APPELLANT RESPONDENT APPELLANT BY : SHRI P. CHANDRASHEKAR, ADDL.DIT RESPONDENT BY : SHRI S. KUMAR, C.A. DATE OF HEARING : 28.08.2013 DATE OF PRONOUNCEMENT : 30.08.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 24.08.2012 OF THE CIT(APPEALS)-I, BANGALORE RELATING TO ASSESSMEN T YEAR 2009-10. ITA NO.1446/BANG/2012 PAGE 2 OF 5 2. GROUNDS NO.1, 4 & 5 ARE GENERAL IN NATURE AND C ALLS FOR NO ADJUDICATION. GROUND NO. 2 RAISED BY THE REVENUE R EADS AS UNDER:- 2. THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE SO FTWARE UPGRADATION EXPENSE AS REVENUE EXPENSES WITHOUT APP RECIATING THE FACT THAT THE NATURE OF SOFTWARE UPGRADATION WA S SUCH AS TO ENHANCE THE CAPACITY OF SOFTWARE THEREBY DERIVING E NDURING BENEFITS TO THE ASSESSEE. 3. THE ASSESSEE IS A COMPANY ENGAGED IN MICRO FINAN CE BUSINESS. THE ASSESSEE INCURRED A SUM OF RS.1,61,360 ON ACCOU NT OF SOFTWARE UPGRADATION. THE AO WAS OF THE VIEW THAT THE AFORE SAID EXPENDITURE WOULD GIVE THE ASSESSEE AN ENDURING BENEFIT AND WAS THERE FORE CAPITAL EXPENDITURE WHICH CANNOT BE ALLOWED AS DEDUCTION WH ILE COMPUTING INCOME. THE AO HOWEVER ALLOWED DEPRECIATION ON THE SOFTWARE UPGRADATION EXPENSES. 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) HELD THAT THE EXPENDITURE IN QUESTION WAS PERIODICAL UP-GRADATION OF SOFTWARE FO R EFFECTING FUNCTIONING OF THE SOFTWARE AND WAS THEREFORE NOT AN EXPENDITURE I NCURRED WHICH WILL GIVE ENDURING BENEFIT TO THE ASSESSEE. HE THEREFORE HEL D THAT THE EXPENDITURE WAS REVENUE IN NATURE AND IT BE ALLOWED AS A DEDUCT ION. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. ITA NO.1446/BANG/2012 PAGE 3 OF 5 6. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO RELIED ON THE ORDER OF THE AO. WE ARE OF THE VIEW THAT IN THE LI GHT OF THE ADMITTED POSITION THAT THE EXPENDITURE IN QUESTION WAS FOR UPGRADATIO N OF EXISTING SOFTWARE WHICH WAS NECESSARY FOR THE PURPOSE OF USE OF THE S OFTWARE, THE SAME WAS RIGHTLY HELD TO BE REVENUE EXPENDITURE. WE THEREFO RE CONFIRM THE ORDER OF THE CIT(APPEALS) AND DISMISS GROUND NO.2 RAISED BY THE REVENUE. 7. GROUND NO.3 RAISED BY THE REVENUE READS AS UNDER :- 3. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT TH E UPS FORMS PART OF THE COMPUTER AND SOFTWARE BLOCK AND I S ELIGIBLE FOR DEPRECIATION AT THE RATE OF 60% WITHOUT APPRECIATIN G THE FACT THAT UPS IS AN INDEPENDENT UNIT WHICH PROVIDES UNINTERRU PTED POWER AND THE SAME FALLS UNDER THE BLOCK OF PLANT AND MAC HINERY ELIGIBLE FOR DEPRECIATION AT 15%. 8. THE ASSESSEE CLAIMED DEPRECIATION ON UPS WHICH A RE CONNECTED TO THE COMPUTERS @ 60% CLAIMING THE SAME TO BE PART OF BLOCK OF ASSETS COMPUTERS. THE DEPRECIATION ALLOWABLE ON COMPUTERS IS @ 60%, WHEREAS DEPRECIATION ON BLOCK OF ASSETS PLANT & MACHINERY IS ONLY @ 15%. THE AO WAS OF THE VIEW THAT UPS CANNOT BE TREATED AS PA RT OF COMPUTERS AND THEREFORE RESTRICTED DEPRECIATION @ 15% AS AGAINST 60% CLAIMED BY THE ASSESSEE. 9. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) ALLO WED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISIONS OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ORIENT CERAMICS & INDUSTRIES LTD., 56 DTR 39 7 (DEL) , ITA ITA NO.1446/BANG/2012 PAGE 4 OF 5 NO.65/2011 DATED 20.01.2011. AGGRIEVED BY THE ORD ER OF THE CIT(A), THE REVENUE HAS PREFERRED GROUND NO.3 BEFORE THE TRIBUN AL. 10. THE LD. DR RELIED ON THE ORDER OF THE AO. WE A RE OF THE VIEW THAT THIS ISSUE HAS BEEN ADDRESSED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. ORIENT CERAMICS & INDUSTRIES LTD. (SUPRA) . THE HONBLE DELHI HIGH COURT IN CIT V. BSES YAMUNA POWERS LTD. IN ITA NO.1267/2011 DATED 31.08.2010 TOOK THE VIEW THAT THE COMPUTER ACCESSORIES AND PER IPHERALS SUCH AS PRINTERS, SCANNERS AND SERVERS FORM AN INTE GRAL PART OF COMPUTER SYSTEM AND THEREFORE ARE ENTITLED TO DEPRECIATION A T A HIGHER RATE. THE DELHI HIGH COURT IN THE CASE OF CIT V. ORIENT CERAMICS & INDUSTRIES LTD. (SUPRA) FOLLOWING THE AFORESAID DECISION, OBSERVED AS FOLL OWS:- 13. THE THIRD ISSUE PERTAINING TO DEPRECIATION ON UPS ARISES ONLY IN THE ASSESSMENT YEAR 2005-06. THE ASSESSEE HAD CLAIMED DEPRECIATION ON UPS @ 60% WHEREAS THE AO HAD ALLOWE D IT @ 25% AND ON THIS BASIS, DISALLOWANCE OF RS.1,470 WAS MADE. THE ISSUE NOW STANDS COVERED BY THE JUDGMENT OF THIS CO URT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BSES YAMUNA POWERS LTD. (IN ITA NO.1267 DECIDED ON 31.08.2010) WHEREIN IT WAS HELD THAT THE DEPRECIATION @ 60% ON SUCH ITEMS SHALL BE ALLOWED. 11. IN THE LIGHT OF THE AFORESAID DECISION OF THE H ONBLE HIGH COURT OF DELHI, WE ARE OF THE VIEW THAT THE CIT(A) WAS JUSTI FIED IN ALLOWING DEPRECIATION @ 60% ON UPS. CONSEQUENTLY, GROUND NO .3 RAISED BY THE REVENUE IS ALSO DISMISSED. ITA NO.1446/BANG/2012 PAGE 5 OF 5 12. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2013. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 30 TH AUGUST, 2013. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.