DCIT, New Delhi V. M/s Luthra & Luthra Law Office, New Delhi

ITA 3153/DEL/2013

• Counselvise Citation: 315320114 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: VARSHA BHATTA
• Keywords: Depreciation; Revenue expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI J.S. REDDY ITA NO.3153/DEL/2013 ASSESSMENT YEAR: 2009-10 DEPUTY CIT, VS. M/S. LUTHRA & LUTHRA L AW OFFICE, CIRCLE-3(1), 103-ASHOKA ESTATE, BARAKHAMBA NEW DELHI. ROAD, NEW DELHI-1100 01 (PAN: AABFL3712B) (APPELLANT) (RESPONDENT) ITA NO.2112/DEL/2013 ASSESSMENT YEAR: 2009-10 M/S. LUTHRA & LUTHRA LAW OFFICE, VS. DEPUTY CIT, 103-ASHOKA ESTATE, BARAKHAMBA CIRCLE 37(1 ), ROAD, NEW DELHI-1100 01 NEW DELHI. (PAN: AABFL3712B) (APPELLANT) (RESPONDENT) REVENUE BY: SHRI GAURAV DUDEJA, SR. DR ASSESSEE BY: S/SHRI VIKAS SRI VASTAVA, PARAG MOHANTY & MS. VARSHA BHATTACHARYA, ARS DATE OF HEARING : 07.01.2015 DATE OF PRONOUNCEMENT: :03.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THESE ARE THE CROSS-APPEALS WHEREIN THE REVENUE HA S QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(APPEALS) GROSSLY ERRED IN DELETING THE ADDITION MADE BY THE 2 A.O. ON ACCOUNT OF DEPRECIATION ON COMPUTERS OF RS. 30,82,560 THROUGH THE ASSESSEE COULD NOT PROVE THE GENUINENES S OF THE PURCHASE OF NEW COMPUTERS ON WHICH DEPRECIATION WAS CLAIMED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(APPEALS) GROSSLY ERRED IN DELETING THE ADDITION MADE BY THE A.O. NOT APPRECIATING THE FACT THAT THE ASSESSEE FA ILED TO FURNISH THE DETAILS OF COMPUTERS PURCHASED ON WHICH DEPRECIATIO N WAS CLAIMED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(APPEALS) GROSSLY ERRED IN DELETING THE ADDITION MADE BY THE A.O. NOT APPRECIATING THE FACT THAT JUST MERE OBTAI NING PAN. VAT CERTIFICATED DOES NOT CONCLUSIVELY PROVE THE IDENTI TY OF PARTY FROM WHOM COMPUTERS WERE CLAIMED TO HAVE PURCHASED. FURT HER, PAYMENT THROUGH BANKING CHANNEL ALSO DOES NOT CONCL USIVELY PROVE THE GENUINENESS OF THE TRANSACTIONS. 4. THE APPELLANT CRAVES LEAVE TO ALL AMEND OR MODIFY T HE GROUND OF APPEAL BEFORE OR DURING THE COURSE OF THE APPEAL. IT IS PRAYED THAT THE ORDER OF CIT(A) IS CONTRARY T O THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW; AND THE ORD ER OF THE A.O. DESERVES TO BE RESTORED. 2. THE ISSUE INVOLVED IN THE ABOVE GROUNDS IS AS TO WHETHER DELETION OF DISALLOWANCE OF RS.30,82,560 MADE ON ACCOUNT OF DEP RECIATION ON COMPUTERS BY THE LEARNED CIT(APPEALS) IS JUSTIFIED OR NOT. 3 3. IN SUPPORT OF THE GROUNDS INVOLVING THE ABOVE IS SUE, THE LEARNED SR.DR SUBMITTED THAT DESPITE SEVERAL OPPORTUNITIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT ESTABLISH THE E XISTENCE OF THE COMPANY FROM WHICH IT HAD CLAIMED TO HAVE PURCHASED THE COM PUTERS ON WHICH DEPRECIATION WAS CLAIMED. IN THIS REGARD, HE REFERR ED CONTENTS OF PARA NOS. 3.1 TO 5.7 OF THE ASSESSMENT ORDER. HE SUBMITTED TH AT ONUS OF ESTABLISHMENT OF GENUINENESS OF THE CLAIM WAS LYING UPON THE ASSE SSEE TO WHICH IT HAS FAILED TO. THE LEARNED CIT(APPEALS) WAS THUS NOT JU STIFIED IN DELETING THE DISALLOWANCE. 4. THE LEARNED AR ON THE OTHER HAND TRIED TO JUSTIF Y FIRST APPELLATE ORDER REITERATING THE SUBMISSIONS MADE BEFORE HIM. HE SUBMITTED THAT ALL THE NECESSARY DETAILS OF THE PURCHASE OF THE COMPUTERS WERE FILED BEFORE THE ASSESSING OFFICER AND THE PAYMENTS WERE MADE THROUG H CHEQUES. THE COMPANY FROM WHOM 100 COMPUTER SYSTEMS WERE PURCHAS ED HAD RAISED AN INVOICE FOR PAYMENTS AND HAD ALSO LEVIED VALUE ADDE D TAX ON THE SAME, A COPY WHEREOF WAS FURNISHED BEFORE THE ASSESSING OFF ICER. THE PAYMENT MADE THROUGH CHEQUE TO THE SAID COMPANY FOR THE COM PUTERS WAS DULY CLEARED FROM THE BANK ACCOUNT OF THE ASSESSEE. HE C ONTENDED THAT THE COMPUTERS WERE PURCHASED BY THE ASSESSEE IN JULY 20 08 AND THE ASSESSING OFFICER HAD GOT EXAMINED THEIR PHYSICAL PRESENCE BY SENDING SOMEBODY ON 4 THEIR GIVEN ADDRESS IN DECEMBER 2011. THUS, IT WAS POSSIBLE THAT THE COMPANY MIGHT HAVE SHIFTED ITS ADDRESS OR MIGHT HAV E REORGANIZED ITS BUSINESS. THE LEARNED AR ALSO POINTED OUT THAT TH E DELHI VALUE ADDED-TAX WEBSITE CONTAINS DETAILS OF THE VAT REGISTRATION FO R THE COMPANY AND THE ADDRESS OF THE COMPANY ON THE WEBSITE MATCHES WITH THE ADDRESS PROVIDED ON THE INVOICE. THE LEARNED AR SUBMITTED FURTHER THAT SECTION 32 OF THE INCOME-TAX ACT, 1961 PROVIDES THAT AN ASSESSEE NEED S TO OWN (WHOLLY OR PARTLY) AN ASSETS AND USE IT FOR THE PURPOSE OF ITS BUSINESS/PROFESSION TO CLAIM DEPRECIATION ON SUCH ASSETS. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) U.B. ENGINEERING LTD. VS. JCIT 113 ITD 577 (P UNE); II) MATHER & PLATT (INDIA) LTD. VS. CIT (1987) 3 2 TAXMAN 38 (CALCUTTA); III) CIT VS. M.K. BROTHERS (1987) 30 TAXMAN 547 (GUJ.); IV ) DCIT VS. RAJEEV JI KALATHIL (2014) 51 TAXMA N.COM 514 (MUM.) 5. CONSIDERING THE ABOVE SUBMISSIONS AND HAVI NG GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE DECI SIONS RELIED UPON, WE FIND THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY D ETAILS OF THE PURCHASES OF 100 COMPUTER SYSTEMS FROM LAVENA SALES CO. PVT. LTD . LIKE INVOICE FOR PAYMENT RAISED BY THE SELLER COMPANY WHEREIN THEY H AD ALSO LEVIED VALUE ADDED TAX ON THE SAME, THEIR ADDRESS AND THAT THE A MOUNT FOR THESE COMPUTERS 5 WAS PAID THROUGH A CHEQUE WHICH WAS DULY CLEARED FR OM THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAD ALSO OBTAINED COPIES OF ITS VAT REGISTRATION, MEMORANDUM AND ARTICLES OF ASSOCIATION ETC. ONLY BE CAUSE THE SAID COMPANY WAS NOT FOUND ON THE GIVEN ADDRESS AFTER THE LAPSE OF THREE YEARS FROM THE DATE OF THE PURCHASE, THE ASSESSING OFFICER DISALLO WED THE CLAIMED DEPRECIATION BY THE ASSESSEE ON THOSE COMPUTERS. T HERE IS NO DISPUTE THAT TO EXAMINE GENUINENESS OF DEPRECIATION CLAIMED UNDER T HE PROVISIONS OF SEC. 32 OF THE ACT, ALL THAT NEEDS TO BE ESTABLISHED IS OWN ERSHIP OF DEPRECIABLE ASSETS AND THEIR USE IN THE BUSINESS OF THE ASSESSEE. TH E PUNE BENCH OF THE ITAT IN THE CASE OF U.B. ENGINEERING LTD. VS. JCIT (SUPR A) WHERE THE GENUINENESS OF PURCHASE OF CERTAIN GAS CYLINDER WAS QUESTIONED IN A CLAIM OF DEPRECIATION FOR THE SAME, HELD THAT THE OWNERSHIP OF THE GAS CY LINDER, THEIR USE IN THE BUSINESS OF THE ASSESSEE AND GENUINENESS OF PAYMENT FOR SUCH GAS CYLINDERS WAS DEEMED TO BE SUFFICIENT TO PROVE THE GENUINENES S OF THE TRANSACTION. SIMILAR VIEW HAS BEEN EXPRESSED IN THE ABOVE CITED DECISIONS ON THE ISSUE OF GENUINENESS OF THE PURCHASES TRANSACTION. WE ARE TH US OF THE VIEW THAT THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF THE CLAIMED DEPRECIATION MADE BY THE ASSESSING OFFICER. THE SAME IS UPHELD. THE GROUNDS INVOLVING THE ISSUE ARE ACCORDINGLY REJ ECTED. 6. THE APPEAL IS ACCORDINGLY DISMISSED. 6 ITA NO.2112/DEL/2013 : 7. THE ASSESSEE HAS IMPUGNED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LEARNED CIT(APPEALS)-XXV III, NEW DELHI (LD.CIT(A) UNDER SEC. 250 OF THE INCOME-TAX A CT, 1961(THE ACT) IS BAD IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(APPEALS) AS WELL AS LEANED ASSES SING OFFICER (HEREINAFTER REFERRED AS LD.A.O.) HAVE ERRED IN L AW AND ON FACTS AND CIRCUMSTANCES OF THE CASE BY DISALLOWING A PROPORTI ON OF THE REVENUE EXPENDITURE INCURRED BY THE APPELLANT TOWARDS PAYME NT OF SOFTWARE LICENSE FEES ON THE GROUND THAT THE LICENSE WAS VAL ID FOR A PERIOD OUTSIDE THE RELEVANT PERIOD. 3. THE LEARNED CIT(APPEALS) AS WELL AS LD.A.O., WHI LE DISALLOWING THE REVENUE EXPENDITURE INCURRED BY THE APPELLANT, HAVE ERRED IN IGNORING THE FACT THAT THE APPELLANT WAS M AINTAINING ITS BOOKS OF ACCOUNT ON CASH BASIS OF ACCOUNTING AND THUS, TH E EXPENDITURE CANNOT BE DISALLOWED ON THE BASIS OF PERIOD OF SOFT WARE LICENSE. 8. GROUND NO.1 IS GENERAL IN NATURE, HENCE, DOES NO T NEED INDEPENDENCE ADJUDICATION. 7 9. GROUND NOS. 2 AND 3 INVOLVE THE ISSUE AS TO WHET HER THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN UPHOLDING THE DISALLO WANCE OF PROPORTION OF THE REVENUE EXPENDITURE INCURRED BY THE ASSESSEE TO WARDS PAYMENT OF SOFTWARE LICENSE FEE ON THE BASIS THAT THE LICENSE FEE WAS VALID FOR A PERIOD OUTSIDE THE ASSESSMENT YEAR? 10. AT THE OUTSET OF HEARING, THE LEARNED AR POINTE D OUT THAT THE ISSUE RAISED IN THE ABOVE GROUNDS IS SQUARELY COVERED BY THE DECISION OF DELHI BENCH OF THE ITAT IN THE CASE OF ASSESSEE ITSELF FO R THE ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 06.09.2012 IN ITA NO. 2497 /DEL/2012. THE LEARNED AR REFERRED PARA NO.18 OF THE ORDER OF THE ITAT IN SUPPORT. 11. THE LEARNED SR.DR ON THE OTHER HAND PLACED RELI ANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 12. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND THE ABOVE CITED DECISIONS OF THE ITAT, WE FIND THAT THE AUTHO RITIES BELOW HAVE DENIED THE CLAIMED EXPENSES OF RS.32,58,667 HOLDING THAT T HE AMOUNT PERTAINED TO FINANCIAL YEAR 2009-10 WHEREAS THE CASE OF THE ASSE SSEE IS OF FINANCIAL YEAR 8 2008-09. THE ASSESSEE HAD PURCHASED SOFTWARE WHICH WERE ANNUAL LICENSES TO BE USED FOR THE PERIOD OF ONE YEAR. THESE SOFTWA RE LICENSES WERE NOT RENEWED IN THE NEXT YEAR. THE ASSESSEE BOUGHT ANOTH ER SOFTWARE. THE LICENSES WERE BOUGHT IN BETWEEN THE FINANCIAL YEARS AND WORKED FOR SOME PART OF THE NEXT FINANCIAL YEAR ALSO. KEEPING IN VI EW THIS MATERIAL FACT, THE DISALLOWANCE HAS BEEN MADE ON PROPORTIONATE BASIS. THE ASSESSING OFFICER HAS DEALT WITH THE ISSUE IN PARA NOS. 6.1 TO 6.6 OF THE ASSESSMENT ORDER. IN CONCLUDING PARA NO. 6.6, HE HELD THAT OUT OF RS.78, 20,800 CLAIMED BY THE ASSESSEE, ONLY RS.45,62,133 BELONG TO FINANCIAL YEA R 2008-09 AND REMAINING AMOUNT OF RS.32,58,667 BELONG TO FINANCIAL YEAR 200 9-10. THEREFORE, ONLY RS.45,62,133 IS BEING ALLOWED AS EXPENSES AND REMAI NING AMOUNT OF RS.32,58,667 IS BEING ADDED TO THE INCOME. THE LEAR NED CIT(APPEALS) HAS UPHELD THIS FINDING OF THE ASSESSING OFFICER. THE O RDERS OF THE AUTHORITIES BELOW ON THE ISSUE IS REASONED ONE, HENCE, WE ARE N OT INCLINED TO INTERFERE THEREWITH. THE CITED DECISION OF THE ITAT IN THE CA SE OF ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2008-09 DOES NOT COVER THE ISSU E. IN PARA NO. 18 OF THE SAID ORDER, AS REFERRED BY THE LEARNED AR, THE ISSU E INVOLVED WAS AS TO WHETHER THE SOFTWARE EXPENSES CLAIMED WAS REVENUE O R CAPITAL IN NATURE. THUS, THIS DECISION DOES NOT HELP TO THE ASSESSEE O N DIFFERENT ISSUE IN THE PRESENT CASE. THE GROUND NOS. 2 AND 3 ARE ACCORDING LY REJECTED. 9 13. IN RESULT, THE APPEAL IS DISMISSED. 14. IN SUMMARY, BOTH THE APPEALS ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 23.03.2015 SD/- SD/- ( J.S. REDDY ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 /03/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 19.03.2015 DRAFT PLACED BEFORE AUTHOR 19.03.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 23.03.20 15 APPROVED DRAFT COMES TO THE SR.PS/PS 26.03.2015 KEPT FOR PRONOUNCEMENT ON 23.03.2015 FILE SENT TO THE BENCH CLERK 26.03.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. 10