Mars Telecom Systems Private Limited, Hyderabad, Hyderabad V. ACIT, Circle-16(2), Hyderabad, Hyderabad

ITA 247/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2275 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: A V RAGHURAM
• Keywords: Depreciation; Opportunity of being heard
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 247/HYD/2017 ASSESSMENT YEAR: 2012-13 MARS TELECOM SYSTEMS PVT. LTD., HYDERABAD. PAN AADCM 8136D VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 16(2) HYD. APPELLANT RESPONDENT ASSESSEE BY: SRI A.V. RAGHURAM REVENUE BY: SMT. SUMAN MALIK DATE OF HEARING: 18/12/2017 DATE OF PRONOUNCEMENT: 22/12/2017 O R D E R PER S. RIFAUR RAHMAN, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT(A) - 4, HYDERABAD DATED 26/12/2016 RELATES TO T HE AY 2012-13. 2. BRIEFLY THE FACTS OF THE CASE, ASSESSEE IS ENGAG ED IN THE BUSINESS OF SOFTWARE DEVELOPMENT AND FILED ITS RETU RN OF INCOME FOR THE AY 2012-13 DECLARING TOTAL INCOME OF RS. 1,88,48,430/-, WHICH WAS PROCESSED U/S 143(1) OF TH E INCOME- TAX ACT, 1961 (IN SHORT THE ACT). SUBSEQUENTLY, T HE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 14 3(2) AND 142(1) WERE ISSUED AND SERVED ON THE ASSESSEE. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT A SSESSEE HAD CLAIMED DEPRECIATION ON THE BLOCK OF COMPUTER & PERIPHERALS @ 60%. ACCORDING TO THE AO, THE RATE OF 60% IS ALLOWABLE ONLY ON COMPUTERS, WHICH ARE HAVING SHORT LIFE, WHEREAS, THE COMPUTER PERIPHERALS HAVE LONG LIFE. H E, I.T.A. NO. 247/HYD/2017 MARS TELECOM SYSTEMS PVT. LTD. 2 THEREFORE, HELD THAT THE DEPRECIATION @ 15% IS ALLO WABLE IN THE COMPUTER PERIPHERALS SIMILAR TO THE BLOCK PLANT AND MACHINERY. ACCORDINGLY, AO RECALCULATED THE DEPRECIATION @ 15% AS AGAINST @ 60% CLAIMED BY THE ASSESSEE AND DISALLOWE D THE EXCESS CLAIM OF DEPRECIATION TO THE EXTENT OF RS. 6 4,11,727/-. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 3. DURING THE APPEAL PROCEEDINGS, ASSESSEE SUBMITTE D THAT THE ITAT IN THE CASE OF USHODAYA ENTERPRISES LTD., HELD THAT DEPRECIATION FOR COMPUTER PERIPHERALS WOULD BE PERM ITTED AT THE SAME RATE AS APPLICABLE TO THE COMPUTERS. 4. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE FOR NON-APPEARANCE. HOWEVER, ON MERITS, BASED ON THE WR ITTEN SUBMISSIONS FILE BY THE ASSESSEE BEFORE HIM, DISMIS SED THE APPEAL OF THE ASSESSEE. 5. THE ASSESSEE IS IN APPEAL BEFORE US MAKING A PLE A THAT ASSESSEE WAS NOT GIVEN SUFFICIENT OPPORTUNITY BEFOR E DISPOSING OF THE APPEAL BY THE CIT(A) AND RAISED ANOTHER PLEA AGAINST THE ACTION OF THE CIT(A) IN SUSTAINING THE ACTION O F THE AO IN RESTRICTING THE DEPRECIATION @ 15% ON THE BLOCK OF COMPUTER AND PERIPHERALS. 6. LD. AR SUBMITTED THAT AO HAS RESTRICTED THE DEPR ECIATION ON THE ADDITIONS MADE DURING THE YEAR ON COMPUTER A ND PERIPHERALS. HE SUBMITTED THAT THE PERIPHERALS ARE AN INTEGRAL PART OF THE COMPUTERS AND ITS FUNCTIONS ARE DEPENDE NT ON THE SAME. TO SUBSTANTIATE HIS CLAIM, HE BROUGHT ON RECO RD, THE SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. DATA CRAFT INDIA LTD., [2011] 9 ITR 712 AND FURTHER RELIED ON THE DE CISION IN THE CASE OF USHODAYA ENTERPRISES LTD. VS. DCIT IN ITA N OS. I.T.A. NO. 247/HYD/2017 MARS TELECOM SYSTEMS PVT. LTD. 3 676/HYD/2009 AND 411/HYD/201, ORDER DATED 07/01/201 5. FURTHER, BROUGHT TO OUR NOTICE THE DETAILS OF ADDIT IONS MADE DURING THE AY IN COMPUTERS AND PERIPHERALS, WHICH I S PLACED ON RECORD AT PAGE 15 OF THE PAPER BOOK. HE SUBMITTE D THAT AO SHOULD HAVE TREATED THE EQUIPMENTS AND PERIPHERALS AS COMPUTERS AS THE FUNCTIONS CARRIED ON BY THE PERIPH ERALS ARE INTER-LINKED WITH THE COMPUTERS. HE, THEREFORE, SUB MITTED THAT THESE PERIPHERALS HAS TO BE TREATED SAME AS COMPUTE RS AND THE DEPRECIATION CLAIM OF THE ASSESSEE MAY BE ALLOW ED. 7. LD. DR SUPPORTED THE FINDINGS OF THE AO AND SUBM ITTED THAT IT NEEDS INDEPENDENT VERIFICATION OF THE COMPU TER PERIPHERALS BEFORE CONSIDERING THE SAME AS COMPUTER . 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. AS PER THE DEPRECIATION S CHEDULE SUBMITTED BEFORE US, ASSESSEE HAS PURCHASED NEW EQU IPMENT OF COMPUTER AND COMPUTER PERIPHERALS TO THE VALUE O F RS. 1,16,15,265/-. ASSESSEE HAS CLAIMED DEPRECIATION @ 60% WHEREAS AO ALLOWED DEPRECIATION TO THE EXTENT OF 15 % BY TREATING THE COMPUTER PERIPHERALS AS PLANT AND MAC HINERY. HOWEVER, ASSESSEE HAS SUBMITTED THE DETAILS OF ADDI TIONS MADE DURING THIS YEAR, WHICH ARE RELEVANT FOR THE A SSESSEE TO CARRY ON ITS BUSINESS OF TELECOM SERVICES, WHICH IN CLUDE COMPUTER ALSO. NO DOUBT, THE SPECIAL BENCH IN THE C ASE OF DATACRAFT INDIA LTD. (SUPRA) HAS ADJUDICATED THAT F UNCTIONS PERFORMED BY THE PERIPHERALS CAN BE CLASSIFIED AS C OMPUTER HARDWARE WHEN THEY ARE USED ALONG WITH COMPUTER AND WHEN THEIR FUNCTIONS ARE INTEGRATED WITH COMPUTER. IN OT HER WORDS, THE DEVICE IS USED AS PART OF THE COMPUTER IN ITS F UNCTION, THEN, IT WOULD BE TERMED AS COMPUTER. WE HAVE NOTICED THA T AO HAS NOT BROUGHT ON RECORD ANY FINDING ABOUT THE FUNCTIO NS OF THE EQUIPMENT. IT IS RELEVANT, PARTICULARLY, WHEN THE A SSESSEE IS I.T.A. NO. 247/HYD/2017 MARS TELECOM SYSTEMS PVT. LTD. 4 RUNNING A BUSINESS OF TELECOM SERVICES, IN WHICH, T HERE ARE EQUIPMENTS, WHICH MAY BE AN INTEGRAL PART OF THE CO MPUTER, IN WHICH FUNCTIONS ARE INTEGRATED WITH THE HELP OF THE COMPUTER SOFTWARE, WHICH MAY BE CONSIDERED AS HARDWARE. THER EFORE, IN OUR CONSIDERED VIEW, IT HAS TO BE VERIFIED PROPERLY KEEPING IN MIND THE FUNCTIONS OF THE PERIPHERALS WHETHER IT IS AN INTEGRAL PART OF THE COMPUTER OR NOT. THEREFORE, WE REMIT TH IS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERI FY THE FUNCTIONS OF THE EQUIPMENT PURCHASED DURING THIS FY FOR THE USAGE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW A FTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE ARE TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND DECEMBER, 2017 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 22 ND DECEMBER, 2017 KV COPY FORWARDED TO: 1. MARS TELECOM SYSTEMS PVT. LTD., C/O S/SHRI K. VASANTKUMAR, AV RAGHURAM, P. VINOD & M. NEELIMA DE VI, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERA BAD 500 001. 2. ACIT, CIRCLE 16(3), IT TOWERS, AC GUARDS, HYD - 4 3. CIT(A) - 4, HYDERABAD 4 PR. CIT - 4, HYDERABAD 5 THE DR, ITAT, HYDERABAD 6 GUARD FILE