ACIT, Erode V. The Zigma Technologies India (P) Ltd., Erode

ITA 2722/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4951 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 16-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 20-09-2016
• Court: TRIBUNAL
• Department Lawyers: R DURAIPANDIAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , ! ' ! # . $ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS. 2175 MDS./14, 699 & 2722/MDS./2016 / ASSESSMENT YEARS : 2010-11, 2011-12 & 2012-13 THE ACIT, CIRCLE -!, ERODE. VS. M/S.THE ZIGMA TECHNOLOGIES (I) (P) LTD., NO.747,AMAR COMPLEX, S.K.C.ROAD, ERODE 638 001. [PAN AACCT 0611 K ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.R.DURAI PANDIAN, JCIT DR /RESPONDENT BY : MR.S.SRIDHAR, ADVOCATE / DATE OF HEARING : 16.03.2017 / DATE OF PRONOUNCEMENT : 03 - 04 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE THREE APPEALS OF THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME -TAX (APPEALS)-I, COIMBATORE PERTAINING TO ASSESSMENT YEARS 2010-11, 2011-12 & 2012-13. ITA NOS.2175,699 ,2722/16 :- 2 -: 2. THERE WAS A DELAY OF 07 DAYS IN FILING THE APP EAL IN ITA NO.2175/MDS./14 BY THE DEPARTMENT. THE AO HAS FI LED A PETITION FOR CONDONATION OF DELAY. WE HAVE HEARD THE LD. DR. W E FIND THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE APPEAL WITH IN THE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEA L. FIRST WE TAKE THE APPEAL IN ITA NO.2175/MDS./2014 3. THE FIRST ISSUE RAISED BY THE REVENUE IN THIS A PPEAL IS THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF DEPRECIATION CLAIMED ON TEMPORARY STRUCTURE. SINCE THE STRUCTURE IS NOT OLDER EXISTING STRUCTURE BUT IT IS A NEW STRUCTURE AND AL SO THIS STRUCTURE CANNOT BE CONSIDERED AS TEMPORARY STRUCTURE. 4. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE CL AIMED 100% DEPRECIATION ON TEMPORARY STRUCTURES NEEDED FOR RUN NING THE COMPUTER SYSTEMS AS A PART OF THE CONTRACT JOB I.E. MAINTENA NCE OF THE FACILITIES ERECTED FOR ELCOT ON BEHALF OF THE INSPECTOR GENERA L OF REGISTRATION, GOVERNMENT OF TAMILNADU. SINCE THE CONTRACT WORK F OR FIVE YEARS, THE EXPENDITURE INCURRED TOWARDS TEMPORARY STRUCTURE WH ICH CONSISTS OF VINYL FLOORING, FALSE CEILING, GLASS AND WOODEN PAR TITIONING, ELECTRICAL WIRING, NET WORK CABLING ETC.,. IN THE ASSESSMENT O RDER, THE AO DISALLOWED 80% DEPRECIATION AND ALLOWING ONLY 20% O F EXPENDITURE FOR ITA NOS.2175,699 ,2722/16 :- 3 -: AMORTIZATION FOR 5 YEARS PERIOD. AGGRIEVED WITH TH E ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, LD.CIT(A) DIRECTED THE AO TO ALLOW THE EXPENDITURE U/S.37 OF THE ACT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD.D.R IS THAT T HE CONTRACT IS FOR 5 YEARS ENTERED INTO BY INSPECTOR GENERAL OF REGISTRATION, GOVERNMENT OF TAMILNADU AND THE ASSESSEE. THE REGISTRATION DEPART MENT HAD INVITED TENDER FOR THE LEASING OF COMPUTER HARDWARE, SOFTWA RE AND CONNECTED ACCESSORIES AND SITE PREPARATION IN REGISTRATION OF FICES IN TAMILNADU. AS SUCH THE TEMPORARY STRUCTURE IN THE FORM OF VINY L FLOORING, FALSE CEILING, GLASS AND WOODEN PARTITIONING, ELECTRICAL WIRING, NET WORK CABLING ETC.,. CARRIED OUT ON THE LEASED PREMISES T O BE CONSIDERED AS A FIXED ASSETS AND ENTITLED FOR DEPRECIATION FOR A PE RIOD 5 YEARS. 5.1 CONTRARY TO THIS, LD.A.R RELIED IN THE JUDGEMN ET OF JURISDICTION HIGH COURT IN THE CASE OF CIT VS. TVS LEAN LOGISTIC S LTD. IN [2007] 293 ITR 432 (MAD) WHEREIN HELD THAT EXPENDITURE INC URRED BY IT ON CONSTRUCTION OF A BUILDING IN LEASEHOLD PREMISES AS REVENUE IN NATURE AND IT IS NOT A CAPITAL EXPENDITURE. THUS, THE ASSE SSEE IS ENTITLED FOR DEDUCTION AS REVENUE EXPENDITURE. ITA NOS.2175,699 ,2722/16 :- 4 -: 5.2 IN OUR OPINION, THERE IS A FORCE IN THE ARGUME NT OF LD.A.R THAT THE TEMPORARY STRUCTURE CREATED IN LEASED OUT PREMI SES CANNOT BE CONSIDERED AS A CAPITAL EXPENDITURE SO AS TO GRANT DEPRECIATION OVER A PERIOD OF 5 YEARS. THE JUDGEMENT RELIED BY THE LD.A .R IS RIGHTLY CONSIDERED BY THE LD.CIT(A) ON THE ISSUE. ACCORDING LY, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR 100% DEP RECIATION IN RESPECT OF VINYL FLOORING, FALSE CEILING, GLASS AND WOODEN PARTITIONING, ELECTRICAL WIRING, NET WORK CABLING ETC.,. IN THE LEASED PREMI SES AS THEY ARE TEMPORARY STRUCTURES. ACCORDINGLY, WE DISMISS THE APPEAL OF REVENUE NEXT WE TAKE THE APPEAL IN ITA NO.2722/MDS./2016 6. SINCE THE ISSUE IN THIS APPEAL IS IDENTICAL IN ITA NO.2175/MDS./14 REGARDING ALLOWABILITY OF EXPENDITU RE INCURRED IN DOING THE INTERIOR DECORATION OF THE OFFICE LAY FAL SE CEILING, VINYL FLOORING ETC. TO AS TO GIVE THEM A MODEL OFFICE APPEARANCE, WE HAVE CONFIRMED THE DELETION OF ADDITION MADE BY THE LD.CIT(A) ON T HIS COUNT. ACCORDINGLY, THIS APPEAL STANDS REJECTED. NEXT WE TAKE THE APPEAL IN ITA NO.699/MDS./2016 7. THE ISSUE IN THIS APPEAL IS WITH REGARD TO LEVY OF PENALTY U/S.271(1)(C) OF THE ACT ON CLAIMING DEPRECIATION A T 100% IN RESPECT OF TEMPORARY STRUCTURE CREATED AT LEASED PREMISES. SIN CE WE HAVE ITA NOS.2175,699 ,2722/16 :- 5 -: CONFIRMED THE DELETION OF ADDITION MADE BY THE LD.C IT(A) ON THIS COUNT, THE PENALTY ORDER CANNOT BE SURVIVED. HENCE THE DELETION OF PENALTY BY THE LD.CIT(A) IS CONFIRMED. THIS APPEAL ALSO STANDS DISMISSED. 8. IN THE RESULT, ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 03 RD APRIL,, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 03 RD APRIL, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF