The ACIT, Circle-9, Surat V. The Varachha Co.Op.Bank Ltd., Surat

ITA 1733/AHD/2011

• Counselvise Citation: 173320514 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Capital asset; Gift; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI G. D. AGRAWAL , VICE PRESIDENT AND SHR I RAJPAL YADAV , JUDICIAL MEMBER THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 9, SURAT (APPELLANT) VS THE VARACHHA CO.OP. BANK LTD. 1 ST FLOOR, AFFIL TOWER, L.H. ROAD, SURAT PAN: AABAT4356N (RESPONDENT) REVENUE BY : SMT. SONIA KUMAR, SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 15 - 06 - 2 015 DATE OF PRONOUNCEMENT : 24 - 06 - 2 015 / ORDER P ER : RAJPAL YADAV , JUDICIAL MEMBER : - T HE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 17 TH MARCH, 2011 PASSED FOR ASSESSMENT YEAR 2007 - 08. I T A NO . 1733 / A HD/20 11 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 1733 /AHD/20 11 A.Y. 20 07 - 08 PAGE NO A CIT V S. THE VARACHHA CO.OP BANK LTD 2 2. GROUND NO. 1 & 2 ARE INTER - CONNECTED WITH EACH OTHER. IN THESE GROUNDS OF APPEAL , REVENUE HAS PL EADED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF R S. 20, 0 4,069/ - AND RS. 5,30,590/ - . 3. IN RESPONSE TO THE NOTICE OF HEARING, NO - ONE HAS COME PRESENT ON BEHALF O F TH E ASSESSEE. WITH THE ASSISTANCE OF LD. DR, WE HA VE GONE THROUGH THE RECORD CAREFULLY AND PROCEED TO DECIDE THIS APPEAL EX - PARTE QUA THE ASSESSEE. 4. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING. IT HAS FILED ITS RETURN OF INCOME ON 23 - 10 - 2007 DECLARING TOTAL INCO ME AT RS. 2,74,17,250/ - . THE CASE OF THE ASSESSE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S. 143(2) WAS ISSUED AND SERVED UPON IT. ON SCRUTINY OF THE ACCOUNTS , IT REVEALED THAT ASSESSEE HAS DEBITED A SUM OF RS. 28,62,956/ - ON SOFTWARE PURCHASE S. THE PURCHASE INVOICE WAS PRODUCED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSERVED THAT IN THE TAX RULES THE ITEMS PURCHASED BY THE ASSESSEE HAVE BEEN INCLUDED IN SCHEDULE OF ASSETS ELIGIBLE FOR DEPRECIATION, THEREFORE, IT CANNOT CLAIM THE ALLEGED EXPENDITURE ON SOFTWARE PURCHASES AS REVENUE EXPENDITURE. IN OTHER WORDS, ACCORDING TO THE ASSESSING OFFICER , THE EXPENDITURE IS TO BE TREATED AS CAPITAL EXPENDITURE AND DEPRECIATION @ 60% IS ADMISSIBLE TO THE ASSESSEE WHEREAS ASSESSEE IS CLAIMIN G 100% EXPENDITURE IN THE GARB OF AN ARGUMENT THAT IT IS A REVENUE EXPENDITURE. THE LD. ASSESSING OFFICER CONFRONTED THE ASSESSEE AS TO WHY ITS CLAIM BE NOT DISALLOWED. THE AS SESSEE FI L E D A REPLY VIDE LETTER DATED 14 - 12 - 2009. IT POINTED OUT THAT EXPENDI TURE OF RS. 28,62,956/ - WAS INCURRED FOR UPGRADATION OF THE EXISTING SOFTWARE INSTALLED BY THE BANK I.E. ORACLE I.T.A NO. 1733 /AHD/20 11 A.Y. 20 07 - 08 PAGE NO A CIT V S. THE VARACHHA CO.OP BANK LTD 3 DATA BASE , AUTOMATION OF SOFTWARE AT HEADQUARTER AND BRANCHES. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSE. HE TREATED THE EXPENDITURE AS CAPITAL IN NATURE AND ALLOWED THE DEPRECIATION @ 6 0%. 5. THE ASSESSEE HAS FURTHER INCURRED EXPENDITURE ON LCD, MONITOR, UPS, PRINTER, PORT S WITCHES. THE LD. ASSESSING OFFICER DID INTO TREAT THESE EXPENDITURES AT PAR WITH COM P UTER BUT TREATED THEM AS ELECTRI CAL INSTALLATION AND GRANTED DEPRECIATION AT A LOWER RATE. THE ASSESS EE HAS CLAIMED DEPRECIATION OF R S. 5,30,590/ - ON THESE ITEMS @ 60% WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER. 6. ON APPEAL, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE EXPENDITURE INCURRED BY THE ASSESSEE ON UP - GRADAT I ON OF THE COMPUTERS AS REVENUE EXPENDITURE AND ALSO DELETED THE DISALLOWANCE OF DEPRECIATION ON PRINTERS, LCD, MONITOR ET C . 7. WITH THE ASSISTANCE OF LD. DR, WE HAVE GONE THROUGH THE RECORD CAREFULLY. AS FAR AS THE DISALLOWANCE OF DEPRECIATION @ 60% ON PRINTERS, SCANNERS, MONITORS, UPS, PORT SWITCHES ARE CONCERNED; THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. BSES RAJDHANI 1266/2010 DECIDED ON 31 ST AUGUST, 2010. THE ITAT HAS ALSO CONSIDERED THIS ISSUE IN T H E CASE OF SAMIRAN MAZUMDAR REPORTED IN 98 ITD PAGE 119. IN THESE DECISIONS, IT HAS BEEN OBSERVED THAT PRINTERS AND SCANNERS ARE INTEGRA L PART OF COMPUTERS, THEY CANNOT FUNCTION INDEPENDENTLY, THEREFORE, THE DEPRECIATION ADMISSIBLE TO THEM IS AT PART WITH A COMPUTER. I.T.A NO. 1733 /AHD/20 11 A.Y. 20 07 - 08 PAGE NO A CIT V S. THE VARACHHA CO.OP BANK LTD 4 8. AS FAR AS THE FIRST ISSUE IS CONCERNED, WE ARE OF THE VIEW THAT ASSESSEE HAS NOT ACQUIRED ANY NEW ASSET IN THE FORM OF COMPUTERS RATHER IT HAS JUST GOT UPGRADED ITS SOFTWARE ALREADY INSTALLED I N SOME OF THE COMPUTERS. IT IS ALSO PERTINENT TO NOTE THAT SOME OF THE SOFTWARE MIGHT BE REQUIRED TO UPGRADE ANNUALLY, THEREFORE, IT IS BASICALLY A REVENUE EXPENDITURE. THE ASSESS ING OFFICER HAS NOT DISPUTED THE FUNCTIONS OF THE SOFTWARE UPGRADED BY THE ASSESSEE . HE SIMPLY OBSERVED THAT SINCE IT IS AN ASSE T INCLUDED IN THE SCHEDULE ON WHICH DEPRECIATION IS ADMISSIBLE , THEREFORE, IT IS TO BE TREATED AS A CAPITAL ASSET AND EXPENDITU RE INCURRED ON IT WOULD FALL WITHIN THE AMBIT OF CAPITAL EXPENDITURE . ON THE OTHER HAND, LD. FIRST APPELLATE AUTHORITY HAS APPRECIATED THE CONTENTIONS OF THE ASSSESSEE AND THEREAFTER ALLOWED THE EXPENDITURE. WE DO NOT FIND ANY ERROR IN THE ORDER OF LD. CO MMISSIONER OF INCOME TAX (APPEALS) ON THESE ISSUES. 9. IN THE NEXT GROUND, THE GRIEVANCE OF THE REVENUE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 5,43,527/ - . ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS DISTRIBUTED GIFTS AMONGST THE CHILDREN OF THE MEMBERS. HE DISALLOWED THE CLAIM ON THE GROUND THAT EXPENDITURE WAS NOT INCURRED FOR THE PURPOSE OF THE BUSINESS. ON THE OTHER HAND, THE CONTENTIONS OF THE ASSESSEE WAS TH AT GIFTS WERE GIVEN TO THE CHILDREN OF THE MEMBERS WHO HAD SECURED HIGH MARKS IN THE EXAMINATION. THE ASSESSEE WAS ABLE TO PROMOTE ITS BUSINESS BY INTRODUCING SUCH SCHEMES AND MAKING POPULAR AMONG THE MEMBERS. LD. FIRST APPELLATE AUTHORITY HAS ACCEPTED T HIS CONTENTION OF THE ASSESSEE AND ALLOWED THE CLAIM. 10. LD. DR RELIED UPON THE ORDER OF ASSESSING OFFICER. ON DUE CONSIDERATION OF FACTS AND CIRCUMSTANCES, WE FIND THAT LD. ASSESSING OFFICER I.T.A NO. 1733 /AHD/20 11 A.Y. 20 07 - 08 PAGE NO A CIT V S. THE VARACHHA CO.OP BANK LTD 5 HAS NOT POINTED OUT AS TO HOW ELEMENT OF PERSONAL NATURE I N THESE EXPENDITURES IS INVOLVED. IF ASSESSEE HAS FORMED A UNIFORM POLICY BY GIVIN G GIFTS TO MERITORIOUS CHILDREN OF ITS MEMBERS , THEN, IT IS JUST BUILDING THE BRAND NAME OF I TS BANK AMONGST ITS MEMBERS. IT IS ONE OF THE POLICIES WHICH WILL MAKE THE BANK POPULAR AMONGST THE MEMBERS. T H EREFORE, L D. FIRST APPELLATE AUTHORITY HAS RIGHTLY ALLOWED THE EXPENDITURE TO THE ASSESSEE. THIS GROUND OF APPEAL IS REJECTED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED I N THE OPEN COURT ON 24 - 06 - 2015 SD/ - SD/ - ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD : DATED 24 /06 /2015 AK / COPY OF ORDER FORWAR DED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,