Dinamalar, CHENNAI V. ITO, Tirunelveli

ITA 2829/CHNY/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2635 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 12-11-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2014
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN JCITD R
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2829 /MDS./2013 ( !' #' / ASSESSMENT YEAR :2011-12) M/S.DINAMALAR , 5D,I.V.S. HOUSE, THRIVANDRAM ROAD,VANNARPETTI, TIRUNELVELI 727 003. VS. THE INCOME TAX OFFICER, WARD II(1), TIRUNELVELI. PAN AAAFD 6640 G ( / APPELLANT ) ( / RESPONDENT ) $% & ' / APPELLANT BY : MR.S.SRIDHAR, ADVOCATE ()$% & ' / RESPONDENT BY : MR.P,RADHAKRISHNANJCIT, D.R * + & ,- / DATE OF HEARING : 12.11.2015 .# & ,- /DATE OF PRONOUNCEMENT : 14.01.2016 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-II, MADUR AI DATED ITA NO.2829 /MDS/2013 2 21.10.2014 IN ITA NO.0012/2014-15 PASSED UNDER SEC. 143(3) READ WITH SECTION SEC. 250 OF THE ACT. 2. THE ASSESSEE HAS RAISED TEN ELABORATE GROUNDS I N ITS APPEAL, HOWEVER THE CRUXES OF THE ISSUES ARE THAT:- (I) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE AD DITION OF ` 1,80,229/- BEING THE DISALLOWANCE OF THE CLAIM OF DEPRECIATION AT 80% AND THE GRANT OF DEPRECIATION AT 15% BY THE REVENUE, SI NCE THESE EQUIPMENTS CANNOT BE CLASSIFIED IN ANY OF THE ITEMS MENTIONED IN THE DEPRECIATION TABLE NEW APPENDIX-I-III-(8)(IX) O F THE INCOME TAX RULES. (II) THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADD ITION OF RS.17,13,508/- & ` 9,01,181/- BEING THE DISALLOWANCE OF THE CLAIM OF DEPRECIATION AT 60% AND THE GRANT OF DEPRECIATIO N AT 15% BY THE REVENUE SINCE THESE ITEMS CANNOT BE CONSIDERED AS COMPUTERS FALLING IN APPENDIX-I III (5) OF THE INCOME TAX RULES. ITA NO.2829 /MDS/2013 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A FIRM, ENGAGED IN THE BUSINESS OF PUBLICATION OF DAILY NEW SPAPER, FILED ITS E-RETURN FOR THE ASSESSMENT YEAR 2011-12 ON 21.03.2 013 ADMITTING TOTAL INCOME OF ` 40,69,56,311/-. SUBSEQUENTLY, THE RETURN WAS TAKEN UP FOR SCRUTINY UNDER CASS AND ASSESSMENT U/S.143(3 ) OF THE ACT WAS COMPLETED ON 28.03.2014 WHEREIN THE LD. ASSESSI NG OFFICER MADE CERTAIN ADDITION DUE TO DISALLOWANCE OF HIGHER DEPRECIATION CLAIMED BY THE ASSESSEE ON CERTAIN ITEMS. 4.1 GROUND NO.1: - THE CLAIM OF DEPRECIATION ON E LECTRICAL EQUIPMENTS. THE ASSESSEE HAD CLAIMED 80% DEPRECIATION AGAINST THE CONTROL PANEL BOARD AND TRANSFORMER TREATING IT T O BE ELECTRICAL EQUIPMENTS CLASSIFIED UNDER THE HEAD B. INSTRUMENT ATION AND MONETARY SYSTEMS FOR MONITORING ENERGY FLOWS IN TH E DEPRECIATION TABLE NEW APPENDIX-I-III-(8)(IX)B WHICH WORKS TO ` 1,80,229/-. THE LD. ASSESSING OFFICER WAS OF THE VIEW THAT THESE ITEMS WOULD NOT FALL IN THE ABOVE STATED CATEGORY AND THEREFORE DISALLOWED THE SAME AND ITA NO.2829 /MDS/2013 4 GRANTED DEPRECIATION @ 15% AS PROVIDED UNDER NEW AP PENDIX IIII- (1) OF THE ACT CLASSIFIED AS MACHINERY AND PLANT. 4.2 ON APPEAL, THE LD. CIT (A) UPHELD THE ORDER OF THE LD. ASSESSING OFFICER BY OBSERVING AS UNDER:- 4 .1. ASSESSING OFFICER HELD AS UNDER: THE ELECTRICAL EQUIPMENTS MENTIONED ABOVE DO NO T QUALIFY FOR DEPRECIATION AT 80% AS THESE EQUIPMENTS ARE NOT CLA SSIFIED UNDER THE HEADING E.ELECTRICAL EQUIPMENT, OF THE DEPRECIATION TABLE. ACCORDINGLY THE EXCESS DEPRECIATION OF RS.1,80,229/- CALCULATED ABO VE IS DISALLOWED AND ADDED TO THE TOTAL INCOME. 4.2 ---- 4.5. THE DEFINITION OF A TRANSFORMER AS PER WIKEPE DIA IS AS UNDER:- A TRANSFORMER IS AN ELECTRICAL DEVICE THAT TRANSFERS ENERGY BETWE EN TWO OR MORE CIRCUITS THROUGH ELECTROMAGNETIC INDUCTION AND ARE DESIGNED TO EFFICIENTLY CHANGE AC VOLTAGES FROM ONE VOLTE LEVEL TO ANOTHER INCREASE OR DECREASE. 4.6. APPELLANT IS ARGUING THAT DEPRECIATION OF 8 0% IS ALLOWABLE UNDER THE ACT FOR AUTOMATIC ELECTRICAL LOAD MONITORING SYSTEM S AND AUTOMATIC VOLTAGE CONTROLLER, POWER FACTOR CONTROLLER FOR AC MOTOR AND THAT TRANSFORMER AND CONTROL PANEL BOARD REPRESENT AUTOM ATIC ELECTRICAL LOAD MONITORING SYSTEM AND AUTOMATIC VOLTAGE CONTROLLER. A TRANSFORMER IS USED TO STEP UP OR STEP DOWN THE VOLTAGE AND IS NOT SAME AS AUTOMATIC ELECTRICAL LOAD MONITORING SYSTEMS AND AUTOMATIC VO LTAGE CONTROLLER, POWER FACTOR CONTROLLER FOR AC MOTOR. THEREFORE THE DECISION OF THE ASSESSING OFFICER TO RESTRICT THE DEPRECIATION IS I N ORDER AND THE ADDITION IS UPHELD. ITA NO.2829 /MDS/2013 5 4.3 THE LD. A.R. REITERATED HIS ARGUMENT MADE BEFO RE THE REVENUE ON THE EARLIER OCCASION BY STATING THAT THE CONTRO L PANEL BOARD AND TRANSFORMER CAN BE CLASSIFIED UNDER THE HEAD B. I NSTRUMENTATION AND MONETARY SYSTEMS FOR MONITORING ENERGY FLOWS AS ME NTIONED IN NEW APPENDIX-I-III-(8)(IX)B AND THEREFORE THE ASSESSEE HAS RIGHTLY CLAIMED DEPRECIATION @ 80% AS PROVIDED UNDER THE ACT. HENC E IT WAS PLEADED THAT THE CLAIM OF THE ASSESSEE MAY BE ALLOW ED. THE LD. D.R ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDERS O F THE REVENUE. 4.4 WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE CONTENTION OF THE LD. A.R. CONTROL PANEL BOARD AND TRANSFORMERS ARE MORE OR LESS ITEMS EITHER FALLING IN THE CATEGORY OF INSTRUMENT ATION AND MONITORING SYSTEMS AS STATED IN THE DEPRECIATION SCHEDULE IN NEW APPENDIX-I- III-(8)(IX)B OF INCOME TAX RULES OR ELECTRICAL EQU IPMENT AS STATED IN THE NEW APPENDIX-I-III-(8)(IX)E UNDER THE HEAD ELEC TRICAL EQUIPMENTS TAKING INTO ACCOUNT OF THE PRINCIPLES OF EJUSDEM GE NERIS. ITA NO.2829 /MDS/2013 6 THEREFORE WE HEREBY DIRECT THE LD. ASSESSING OFFICE R TO GRANT DEPRECIATION @ 80% TO THE ASSESSEE ON THESE ABOVE S TATED ITEMS. 5.1 GROUND NO.2: - THE CLAIM OF DEPRECIATION ON CO MPUTERS AND COMPUTER PERIPHERALS. THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE FOLL OWING ITEMS VIZ., CANNON LIDE, SCANNER, COMPUTERIZED COUNTING & STACKING MACHINES, TRANSPORTATION CHARGES, CTP MACHINE, SCAN NER, SISCO ROUTER, MODEM, COMPUTERIZED COUNTING & STACKING(F/C ), CTP MACHINE(CLEARING CHARGES), CTP MACHINE(ERECTION) TR EATING IT AS COMPUTERS AS MENTIONED IN NEW APPENDIX-I III (5 ) OF THE INCOME TAX RULES WHICH ARE ELIGIBLE FOR DEPRECIATION @ 60% . HOWEVER, THE LD. ASSESSING OFFICER ALLOWED DEPRECIATION @ 15% AS PROVIDED UNDER NEW APPENDIX-I-(III)(1) OF THE INCOME TAX RULES. 5.2 ON APPEAL, THE LD. CIT (A) ALLOWED DEPRECIATIO N @60% IN REGARD TO SCANNER, SISCO ROUTER, MODEM AND ALLOWED DEPRECIATION FOR REST OF THE ITEMS @ 15% BY HOLDING AS UNDER:- 5.5 SURPRISINGLY, THE NAME OF THE MACHINE IN THE INVOICE IS LOGIC STACKER WITH STRAPPER . ASSESSEE CLASSIFIED THIS MACHINE WITH THE DESCR IPTION COMPUTER COUNTER AND STACKER. IT IS SURPRISING HOW APPELLANT HAS MODIFIED ITA NO.2829 /MDS/2013 7 THE NAME OF THE MACHINE. NORMALLY THE NAME OF THE M ACHINE IN THE ACCOUNTS SHOULD ALWAYS BE WHAT IS INDICATED IN THE INVOICE A ND IN: MY VIEW APPELLANT HAS NO CHOICE OF WRITING THE DESCRIPTION AS IT WISH ES. WHEN QUESTIONED, APPELLANT STATED THAT IT IS BASED ON THE FUNCTION I T PERFORMS. 5.6 WITH REGARD TO THE 2 MACHINE ASSESSEE HAS RECOR DED THE NAME IN THE ACCOUNTS AS, CTP MACHINE, IT WAS EXPLAINED DURING A PPEAL THAT CTP MEANS COMPUTER TO PRINTE R . THIS IS THE LATEST MACHINE WHEREIN THE DRAFT OF T HE LAYOUT OF THE NEWSPAPER IS MADE ON THE COMPUTER WHICH IS T HEN TRANSMITTED TO THE PRINTING PRESS. THIS MACHINE REPLACES THE EARLIER M ETHOD OF MANUAL TYPESETTING AND PREPARING THE BLOCK FOR PRINTING PR ESS APPELLANT WAS ASKED TO PRODUCE COPY OF INVOICE OF THIS MACHINE WHICH IS EN CLOSED AS ANNEXURE 2 OF THIS ORDER THIS MACHINE IS IMPORTED FROM TAIWAN AND NAME IN THE INVOICE AS REGISTER TY-800 AOL VISION PLATE PUNCHING AND BENDI NG SYSTEM . THE INVOICE MENTIONS THAT REGISTER TY-800 AOL VISION PL ATE PUNCHING AND BENDING SYSTEM IS A MACHINE WITH 3 DIFFERENT COMPON ENTS AS UNDER: A) ONE TY-800 AOL AUTO VISION PUNCHING AND BENDING; B) ONE STANDARD CONVEYOR; C) ONE PLATE STACKER. 5.7 CUSTOMS AUTHORITIES HAVE ALSO CLASSIFIED THIS M ACHINE AND CHARGED THE APPLICABLE CUSTOMS DUTY WITH THE FOLLOWING DESCRIPT ION REGISTER TY-800 AOL VISION PLATE PUNCHING AND BEND ING SYSTEM AND HAS 3 COMPONENTS: A) ONE TY-800 AOL AUTO VISION PUNCHING AND BENDING; B) ONE STANDARD CONVEYOR; C) ONE PLATE STACKER. 5.8 NAME OF ASSET IN THE INVOICE AS REGISTER TY-800 AOL VISION PLATE PUNCHING AND BENDING SYSTEM . ASSESSEE CLASSIFIED THIS MACHINE WITH THE DESCRIPTION CTP MACHINE. IT IS SURPRISING HOW APPEL LANT HAS MODIFIED THE NAME OF THE ASSET. NORMALLY THE NAME OF THE MACHINE IN THE ACCOUNTS SHOULD ALWAYS BE WHAT IS INDICATED IN THE INVOICE AND IN M Y VIEW APPELLANT HAS NO ITA NO.2829 /MDS/2013 8 CHOICE OF WRITING THE DESCRIPTION AS IT WISHES. WHE N APPELLANT QUESTIONED STATED THAT IT IS BASED ON THE FUNCTION IT PERFORMS . 5.9 INCREASINGLY ORGANIZATIONS ARE MOVING TOWARDS C OMPUTERIZED INTEGRATED MANUFACTURING, WHERE MORE AND MORE COMPUTERS, ROBOT S, AND MICROPROCESSORS ARE USED IN CONJUNCTION WITH THE MA CHINES. BUT THE MACHINES CANNOT BE CALLED AS COMPUTERS EVEN THOUGH COMPUTER IS AN INTEGRAL AND DEDICATED PART OF THE WHOLE MACHINE. T HAT COMPUTER IN THE MACHINE CANNOT BE USED FOR ANY OTHER PURPOSE. FOR E XAMPLE A CNC (COMPUTERIZED NUMERICALLY CONTROLLED) LATHE MACHINE HAS A COMPUTER AND MICROPROCESSOR TO CONTROL THE MOVEMENT OF THE SPIND LE BUT THAT CANNOT MAKE A CNC LATHE AS A COMPUTER. IT STILL DOES MACHINING, CUTTING METAL AND CREATING SHAPES IN THE METAL BUT IT IS MORE AUTOMAT ED AND DRIVEN BY PREPROGRAMMED INSTRUCTIONS THROUGH THE COMPUTER. IT IS STILL A MACHINE ASSISTED BY A COMPUTER AND MICROPROCESSOR. 5.9 AS PER THE SCHEDULE OF DEPRECIATION, THE RATE 6 0% .OF DEPRECIATION IS ALLOWABLE ONLY TO COMPUTERS AND AT BEST MAY INCLUDE ACCESSORIES LIKE SERVERS, SCANNER SISCO ROUTER MODEM ETC AS HELD IN THE DECISIONS CITED BY THE APPELLANT BUT CAN NEVER INCLUDE THE 2 MACHINES ACQUIRED BY THE ASSESSEE. THE DESCRIPTION OF THE MACHINES AS PER THE INVOICE IS DIFFERENT AND APPELLANTS DECISION TO USE ITS OWN NAMES ADDING TH E WORD COMPUTER IS INCORRECT. ASSESSEE CANNOT INVENT ITS OWN NOMENCLAT URE ADD THE WORD COMPUTER WHICH IS NOT THERE IN INVOICE AND THEN PRO CEED TO CLAIM DEPRECIATION AT 60% WITH THE ARGUMENT THAT THEY ARE COMPUTERS . 5.10 EVEN ON FUNCTIONALITY TEST, THESE MACHINES REP RESENTS PLANT AND MACHINE WHICH HELPS IN EASIER TYPESETTING AND FASTE R PRINTING OF THE NEWSPAPER AND AUTOMATED STACKING OF NEWSPAPER IN CO RRECT NUMBERS. THE MACHINES DO CONTAIN COMPUTER AS ONE PART OF THE WHO LE MACHINERY, BUT IT SHOULD BE NOTED THAT THE COMPUTER IS DEDICATED TO T HAT MACHINE AND DOES ONLY THE FUNCTIONS FOR THAT MACHINE. THIS IN MY VIEW DOES NOT MAKE MACHINES AS COMPUTERS TO BE ELIGIBLE FOR CLAIMING THE DEPREC IATION AT 60% . ITA NO.2829 /MDS/2013 9 5.11 THE GIST OF THE DECISIONS RELIED BY THE APPELL ANT ARE AS UNDER: - - - - - 5.12 THE DECISIONS RELIED BY THE APPELLANT ONLY CO VER ASSETS LIKE LAPTOPS, SERVERS, PRINTERS, SCANNER, SISCO ROUTER, MODEM, LA PTOP MOUSE, PROJECTOR, PENDRIVE, NETWORK EQUIPMENT, ROUTER PACK DESKTOP WI TH MONITOR. IBM SAN SWITCHES WHICH ARE INTEGRAL PARTS OF COMPUTER BAND THOSE WHICH CANNOT BE USED WITHOUT BEING ATTACHED TO THE COMPUTERS. NONE OF THESE DECISIONS COVER THE ANY MACHINE USED FOR MANUFACTURING WHICH HAS CO MPUTER AS ONE OF THE COMPONENTS . 5.13 IN VIEW OF THIS FACTUAL AND LEGAL POSITION, IT IS HELD THAT OUT OF THE ASSETS LISTED BY THE AC, ONLY SCANNER, SISCO ROUTER MODEM IS, ELIGIBLE FOR DEPRECIATION AT 60%. REST OF THE ASSETS LISTED BY T HE AC FORM PART OF PLANT AND MACHINERY AND THUS IS ELIGIBLE FOR DEPRECIATIO N ONLY AT 15%. THE AOS DECISION TO TREAT THE MACHINES NOT AS COMPUTERS BUT AS PLANT & MACHINERY AND RESTRICTING THE CLAIM OF DEPRECIATION TO 15% ON THESE MACHINES IS IN ORDER AND THE ASSESSEES ARGUMENTS ARE REJECTED. 5.3 WE AGREE WITH THE VIEW OF THE LD. CIT (A). ONL Y COMPUTER PERIPHERALS CAN BE AT THE MOST CONSIDERED AS COMPUT ERS FOR THE PURPOSE OF CLAIMING DEPRECIATION AT THE RATE PRESCR IBED IN NEW APPENDIX-III(5) OF THE INCOME TAX RULES. ALL OTHER ITEMS FALL IN THE CATEGORY MENTIONED IN NEW APPENDIX-III(1) OF THE IN COME TAX RULES AS HELD BY THE LD. CIT (A). THEREFORE, WE DO NOT F IND ANY REASON TO ITA NO.2829 /MDS/2013 10 INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE WHO HAS ELABORATELY CONSIDERED THIS MATTER IN HIS ORDER. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 14 TH JANUARY, 2016 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 14 TH JANUARY, 2016 K S SUNDARAM. & (,/0 1 0#, /COPY TO: 1. $% /APPELLANT 2. ()$% /RESPONDENT 3. * 2, ( ) /CIT(A) 4. * 2, /CIT 5. 05 (,6! /DR 6. 7' 8+ /GF