M/s Anurag & Co., New Delhi V. ACIT, New Delhi

ITA 2160/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66050 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-12-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 02-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PIRTHI LAL
• Assessee Lawyers: SANJAY K BINDLA
• Keywords: Depreciation; Revenue expenditure
• Section: 153A

Judgement Text

ITA NO. 2160/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2160/DEL/2011 A.Y. : 2001-02 M/S ANURAG & CO., C/O VINOD KUMAR BINDAL & CO., CHARTERED ACCOUNTANTS, SHIV SUSHIL BHAWAR, D-219, VIVEK VIHAR, PHASE-I, NEW DELHI 110 095 (PAN/GIR NO. : AADCA2536P) VS. ACIT, CENTRAL CIRCLE - 25, NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SANJAY K. BINDLA, CA DEPARTMENT BY : SH. PIRTHI LAL, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX PASSED U/S. 263 OF THE I.T. ACT FOR ASSESSMENT YEAR 2001-02 VIDE ORDER DATED 29.3.2011. 2. IN THIS CASE ASSESSING OFFICER WHILE PASSING ORDER U/S. 153A OF THE I.T. ACT, 1961 ASSESSED INCOME AT ` 18,14,527/-. LD. COMMISSIONER OF INCOME TAX OBSERVED THAT IT WAS FOU ND THAT THE ASSESSING OFFICER TREATED THE EXPENSES OF COMPUTER SOFTWARE AMOUNTING ` 2,86,000/- AS REVENUE EXPENSES INSTEAD OF CAPITAL EXPENSES. HE FURTHER OBSERVED THAT ASSESSING OF FICER HAS ALLOWED THE DEPRECIATION ON ELECTRICAL FITTINGS @ 25% INSTE AD OF 10% AND THUS ALLOWING THE ENHANCED DEPRECIATION OF ` 12,286/-. ITA NO. 2160/DEL/2011 2 2.1 ASSESSEE CONTENDED BEFORE THE LD. COMMISSIONER O F INCOME TAX THAT TWO VIEWS ARE POSSIBLE ON THE ISSUE IN THIS C ASE AND ASSESSING OFFICER HAS ADOPTED ONE SUCH VIEW. HENCE, THE V IEW TAKEN BY THE ASSESSING OFFICER CANNOT BE CONSIDERED AS ERRONEOU S OR PREJUDICIAL TO THE INTEREST OF REVENUE SO AS TO ASSUME THE JURISDI CTION TO REVISE THE ASSESSMENT ORDER U/S. 263 OF THE I.T. ACT, 1961. LD. COMMISSIONER OF INCOME TAX HELD THAT EVEN IF DEBATE IS POSSIBLE IT IS NECESSARY FOR THE ASSESSING OFFICER TO ADOPT THE MOST GENUINE AND MOST REASONABLE VIEW. HE OBSERVED THAT THE PERUSAL OF THE ASSESSM ENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS NOT DISCUSSED THIS ASPECT AND NO QUERY WAS RAISED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS TO ASCERTAIN WHETHER THE EXPENSES OF COMPUTER SOFTWARE WERE IN TH E NATURE OF REVENUE EXPENSES OR UNDER THE HEAD CAPITAL EXPENDIT URE. 2.2 AS REGARDS DEPRECIATION OF ELECTRICAL FITTINGS, ASSESSEE HAD SUBMITTED THAT THE ELECTRICAL FITTINGS WERE USED F OR GENERATOR AND COMPUTER AND THEREFORE, THE SAME WERE IN THE NATURE OF PLANT AND MACHINERY ON WHICH DEPRECIATION @ 25% WAS CORRECTLY CLAIMED AND CORRECTLY ALLOWED IN THE ASSESSMENT ORDER. LD. CO MMISSIONER OF INCOME TAX DID NOT ACCEPT THIS CONTENTION. HE OBS ERVED THAT THE PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSE SSING OFFICER HAS NOT MADE EFFORTS TO KNOW WHETHER THESE ELECTRICAL F ITTINGS WERE PART OF GENERATOR, COMPUTER OR OTHERWISE. HE HELD THAT ALL OWING 25% DEPRECIATION ON THESE ELECTRICAL FITTINGS WITHOUT M AKING AN ENQUIRY REGARDING THE NATURE OF THESE ELECTRICAL FITTINGS I S ERRONEOUS AND PRE- JUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY , LD. COMMISSIONER OF INCOME TAX CONCLUDED THAT ASSESSING OFFICER WAS D IRECTED TO MODIFY THE ASSESSMENT ORDER AND TO ENHANCE THE INCOME BY WAY OF TREATING THE EXPENSES ON COMPUTER SOFTWARE AS CAPITAL EXPENDI TURE AND BY WAY ITA NO. 2160/DEL/2011 3 OF ALLOWING 10% DEPRECIATION ON ELECTRICAL FITTINGS INSTEAD OF 25% AFTER MAKING ENQUIRY REGARDING THE NATURE OF ELECTRICAL FI TTINGS. 3. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS INVOLVED IS DEBATABLE ON WHICH TWO VIEWS WAS POSSIBLE AND THE A SSESSING OFFICER HAS ADOPTED ONE OF THE VIEWS. IN SUCH CIRCUMSTANC ES, HE CONTENDED THAT ASSUMPTION OF JURISDICTION U/S. 263 WAS NOT VALI D. HE FURTHER SUBMITTED THAT DUE ENQUIRIES WERE MADE BY THE ASSESS ING OFFICER ON THIS ISSUE. HENCE HE PLEADED THAT THIS CANNOT BE A CASE OF NO ENQUIRY ON THE ISSUES. HE FURTHER SUBMITTED THAT THERE IS A DIFFERENCE BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. IN THIS REGARD, HE PLACED RELIANCE UPON THE HONBLE JURISDICTIONAL HIG H COURT DECISION IN THE CASE OF C.I.T. VS. VODAFONE ESSAR SOUTH LTD. IN I.T.A. NO. 119/2012 VIDE ORDER DATED 20.11.2012. 4.1 AS REGARDS ISSUE OF DEPRECIATION @ 25% ON ELEC TRICAL FITTINGS, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT UPTO THE PRES ENT ASSESSMENT YEAR, THERE IS NO SEPARATE HEADING FOR ELECTRICAL FITTINGS AND DEPRECIATION WAS BEING CLAIMED @25% ON SUCH ITEMS. HE SUBMITTED THAT ONLY W.E.F. A.Y. 2003-04, IT WAS SPECIFIED THA T ON FURNITURE, FIXTURE AND FITTINGS AND ELECTRICAL FITTINGS, THE DEPRECI ATION IS ALLOWABLE @ 15% ON IT. HENCE, LD. COUNSEL OF THE ASSESSEE PL EADED THAT ASSESSING OFFICER HAS TAKEN A CORRECT DECISION AND HENCE, T HERE IS NO GROUND FOR THE LD. COMMISSIONER OF INCOME TAX TO ASSUME THE JURI SDICTION U/S. 263 OF THE I.T. ACT. 4.2 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D RELIED UPON THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX. ITA NO. 2160/DEL/2011 4 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT DURING THE RELEVANT PREVIOUS YEAR, ASSESSEES FIRM WAS A STOCKIEST OF M/S MAHASHIAN DI HATTI LTD. DEALING IN VARIOUS SPICES AND OTHER PRODUCTS MANUFACTURED BY THAT COMPAN Y. THE ASSESSEE INCURRED A SUM OF ` 2,86,000/- TOWARDS A N APPLICATION SOFTWARE USED FOR RECORDING ITS FINANCIAL TRANSAC TIONS AND CONTROLLING INVENTORY BY UPGRADING ITS EXISTING COMPUTER SOFTWA RE PROGRAMMES. THE SAME WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR AND CLAIMED AS REVENUE EXPENDITURE. IN THIS REGARD, AS SESSING OFFICER HAS MADE THE ENQUIRY ON THE SUBJECT VIDE LETTER DATED 26 .8.2008 VIDE ITEM NO. 26 ASSESSING OFFICER HAS DULY ASKED THE FOLLO WING NATURE OF SOFTWARE EXPENSES OF ` 2,86,000/- AND PROVE THAT IT IS NOT OF CAPITAL NATURE. HENCE, IT IS CLEAR FROM THE ABOVE, THAT A SSESSING OFFICER HAS MADE DUE ENQUIRY ON THE SUBJECT OF TREATMENT OF SOFTW ARE EXPENSES. IN THIS REGARD, CASE LAWS RELIED UPON BY THE LD. CO UNSEL OF THE ASSESSEE IN THE CASE OF C.I.T. VS. VODAFONE ESSAR SOUTH LTD. (SUPRA) IS CLEARLY APPLICABLE. IN THIS CASE THE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER:- IN THE PRESENT CASE, THE RECORDS RE VEAL THAT THE ASSESSEE WAS SPECIFICALLY QUERIED REGARDING THE NATURE AND CHARACTER OF THE ONE-TIME REGULATORY FE E PAID BY IT AS WELL AS THE BANK AND STAMP DUTY CHARGES. A DETA ILED EXPLANATION IN THE FORM OF STATEMENTS A ND OTHER DOCUMENTS REQUIRED OF BY THE ASSESSING OFFIC ER WERE PRODUCED AT THE STAGE OF ORIGINAL ASSESSMENT. CLEARLY THIS WAS NOT A CASE OF NO ENQUIRY. THE LACK OF ANY DISCUSSION ON THIS CANNOT LEAD TO THE ASSUMPTION THAT THE ASSESSING OFFICER DID NOT APPLY HIS MIND. THE ITA NO. 2160/DEL/2011 5 PROCEEDING IN FACT SHOWS THAT ASSESSING OFFICER DIR ECTED HIS MIND SPECIFICALLY ON THIS ASPECT AND THEN CONCLUD ED THAT THE EXPENDITURE WAS IN THE REVENUE FIELD. MOREOVER THE DECISION IN COMSAT MAX LTD. HAS RULED THAT THE EXP ENDITURE WAS REVENUE; IT CONSTITUTED ONE PLAUSIBLE OR REASONABLE VIEW. UNDER THESE CIRCUMSTANCES, THE COMMISSIONER COULD NOT HAVE VALIDLY EXERCISED HIS SUPERVISORY OR REVISIONARY POWER UNDER SECT ION 263. AS FAR AS THE OTHER ISSUES I.E. BANK GUAR ANTEE CHARGES AND STAMP DUTY ARE CONCERNED, THIS COURT IS OF THE OPINION THAT THE DECISION IN INDIA CEMENTS V S. CIT 60 ITR 52 CONCLUDE THE ISSUE. THESE EXPENSES HAD TO BE REGARDED AS FALLING PROPERLY IN REVENUE FILED. RE PORT FURTHER NOTICES THAT CIT (APPEALS) DID NOT SPECIFICALLY FURNISH ANY REASONS TO SAY WHY THE ORIGINAL ASSESSMENT ORDER WAS UNSUPPORTABL E IN LAW, IN THE FINAL ORDER MADE BY HIM. 6. FROM THE ABOVE, WE FIND THAT THE ASSESSEE WAS SPEC IFICALLY QUERIED REGARDING THE NATURE AND CHARACTER OF SOFTW ARE EXPENSES. HENCE, IT IS CLEARLY NOT A CASE OF NO ENQUIRY. THE LACK OF ANY DISCUSSION ON THIS ASPECT IN ASSESSMENT ORDER CANNOT LEAD TO T HE CONCLUSION THAT ASSESSING OFFICER DID NOT APPLY HIS MIND. HENCE, W E FIND THAT IN LIGHT OF THE HONBLE JURISDICTIONAL HIGH COURT DECISION A S CITED ABOVE, THE LD. COMMISSIONER OF INCOME TAX COULD NOT HAVE VALIDLY E XERCISED HIS SUPERVISORY OR REVISIONARY POWERS U/S. 263 AS REGAR DS TREATMENT OF SOFTWARE EXPENSES. ITA NO. 2160/DEL/2011 6 7. AS REGARDS THE ISSUE OF CLAIM OF DEPRECIATION OF ELECTRICAL FITTINGS @25% INSTEAD OF 15%, WE FIND THAT IN THE PRESENT YE AR UNDER CONSIDERATION IN THE TABLE OF DEPRECIATION RATES, N O SEPARATE MENTION WAS MADE FOR ELECTRICAL FITTINGS. IT WAS ONLY W.E.F . A.Y. 2003-04 THAT THE ELECTRICAL FITTINGS WERE INCLUDED IN THE FURNITURE & FIXTURE @ 15% RATE WAS SPECIFIED. HENCE, IN THE PRESENT ASSESSMENT Y EAR THE VIEW THAT ELECTRICAL FITTINGS WERE ENTITLED FOR DEPRECIATION @25% AS APPLICABLE TO MACHINERY CANNOT BE SAID DEVOID OF COGENCY. ASSESS ING OFFICER HAS ADOPTED ONE VIEW OUT OF THE POSSIBLE TWO VIEWS. HENCE, WE FIND THAT ON THIS ISSUE ALSO LD. COMMISSIONER OF INCOME TAX COU LD NOT HAVE ASSUMED THE JURISDICTION U/S. 263. 8. IN LIGHT OF THE AFORESAID DISCUSSIONS AND PRECED ENTS, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX PASS ED U/S. 263 OF THE I.T. ACT AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/12/2012. 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 14/12/2012 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