ACIT, CHENNAI V. TNQ Books and Journals Private Limited, CHENNAI

ITA 330/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9140 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN IRS
• Assessee Lawyers: V RA VICHANDRAN
• Keywords: Capital asset; Depreciation
• Section: 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , #'$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.330/MDS/2016 # % &% / ASSESSMENT YEAR : 2012-2013. THE ASSISTANT COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 3(1) CHENNAI 600 034. VS. M/S. TNQ BOOKS AND JOURNAL PRIVATE LIMITED, NO.4/600, 4/197, PHASE II, VSI ESTATE, KOTTIVAKKAM, CHENNAI 600 041. [PAN AABCT 3050B] ( / APPELLANT) ( /RESPONDENT) '( ) * / APPELLANT BY : SHRI. P. RADHAKRISHNAN, IRS, JCIT. +,'( ) * /RESPONDENT BY : SHRI. V. RAVICHANDRAN, C.A. ! ) - / DATE OF HEARING : 06-06-2016 ./& ) - / DATE OF PRONOUNCEMENT : 14-06-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-11, CHE NNAI IN ITA NO.427/2014-2015/CIT(A)-11, DT 26.11.2015 FOR THE A SSESSMENT YEAR 2012-2013 PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). ITA NO.330/MDS/2016. :- 2 -: 2. THE REVENUE HAS RAISED SOLE SUBSTANTIVE GROUND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOW ING DEPRECIATION FOR SOFTWARE LICENSE AT THE RATE OF 60% INSTEAD OF 25% ALLOWABLE AS PER INCOME TAX RULES AND FURTHER ERRED ON RELYING O N THE JUDICIAL DECISIONS WHICH ARE NOT RELEVANT TO THE ASSESSEES CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS IN THE BUSINESS OF DATA PROCESSING, PREPRESS SERVIC ES AND EXPORT OF SOFTWARE AND FILED RETURN OF INCOME ELECTRONICALLY ON 27.09.2012 WITH TOTAL INCOME OF ?16,27,41,050/- AND WAS PROCESSED U/S.143(1) OF THE ACT AND SUBSEQUENTLY, THE CASE WAS SELECTED FOR SC RUTINY AND NOTICE U/S.143(2) AND 142(1) OF THE ACT WAS ISSUED. IN CO MPLIANCE TO NOTICE, THE LD. AUTHORISED REPRESENTATIVE OF ASSESSEE APPEA RED FROM TIME TO TIME AND FURNISHED DETAILS AS CALLED FOR BY THE LD. ASSESSING OFFICER. IN THE ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFIC ER ON PERUSAL OF FORM NO. 3CD FOUND THAT THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION ON SOFTWARE LICENCE AT THE RATE OF 60 % INSTEAD OF 25% ALLOWABLE ON INTANGIBLE ASSETS AS THE SOFTWARE LICE NSE BEING INTANGIBLE AMOUNT AS PER PART B OF DEPRECIATION SCHEDULE AND THE LD. AUTHORISED REPRESENTATIVE SUBMITTED BREAK UP WRITTEN DOWN VAL UE (WDV) OF COMPUTER AND SOFTWARE LICENSE. THE LD. ASSESSING OF FICER CONSIDERING THE CLAIM OF THE ASSESSEE ON DEPRECIATION RATE AND APPLICABILITY OF INCLUSIVE DEFINITION OF INTANGIBLE ASSETS HAS DISA LLOWED THE EXCESS ITA NO.330/MDS/2016. :- 3 -: CLAIM OF DEPRECIATION AND ASSESSED TOTAL INCOME OF ?16,80,88,230/- VIDE ORDER U/S.143(3) OF THE ACT DATED 18.03.2015. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE US. 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE ARGUED ON THE GROUNDS AND EXPLAINED THE FACTS AN REASONS ON CLAIM OF DEPRECIATION ON SOFTWARE LIC ENSE. THE ASSESSEE COMPANY PURCHASED SOFTWARE LICENSE AND ADDED TO T HE OPENING WRITTEN DOWN VALUE (WDV) OF BLOCK OF COMPUTERS AND COMPUTER SOFTWARE AND LICENSE AS ON 01.04.2011 AND THE SA ME BEING PART OF THE BLOCK CANNOT BE SEGREGATED AND ENTITLED FOR DE PRECIATION AT 60% AND NOT THE RATE APPLICABLE TO THE INTANGIBLE ASSET S. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE GROUNDS, ARGUMENTS, FACTS OF THE CASE, FINDINGS OF THE LD. ASSESSING OFFICER, AND WRITTEN SUBMISSIONS WITH THE JUDICIAL DECISIONS OF AMWAY INDIA ENTERPRISES VS. DCIT 111 ITR 112 AND NAVNEET PUBLIC ATIONS INDIA LTD IN ITA NO.1137/MUM/2010, AND FOUND THAT SIMILAR ISS UE IN ASSESSEE CASE WAS DECIDED FAVORABLY AND OBSERVED AT PARA 7. 2.1 OF THE ORDER:- 7.2.1. FURTHER, THE APPELLANTS AUTHORISED REPRE SENTATIVE SUBMITTED THAT THE SAME ISSUE WAS DECIDED IN FAVOR OF THE APPELLANT BY THE COMMISSIONER OF INCOME TAX (APPEAL S) FOR THE EARLIER A.Y. 2010-2011 VIDE ORDER IN IAT NO.188 9/2013- 14 DATED 31.12.2014. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ABOVE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS) IS REPRODUCED HEREUNDER:- ITA NO.330/MDS/2016. :- 4 -: THE AO RESTRICTED THE DEPRECIATION CLAIM ON THE APPELLANT TO 25% AS AGAINST 60% IN DOING SO HE RELI ED ON THE DECISION OF SONY INDI VS. ADDL. CIT 56 DTR 1 56. ON THE ISSUE OF DEPRECIATION THE ASSESSING OFFICER DISALLOWED STATING THAT THE APPELLANT HAD PAID MONE Y FOR THE USE OF SOFTWARE WHEREAS THE APPELLANT SUBMITS T HAT THE AMOUNTS WERE PAID TOWARDS PURCHASE OF LICENSE VERSION OF SOFTWARE AND THE COMPANY IS ABSOLUTE OWN ER OF THE SAME WITHOUT RESTRICTION OF TIME LIMIT. ON GOING THROUGH THE RELEVANT DECISION, THE ISSUES MENTIONE D THERE IS THE CASE LAW CITED BY THE ASSESSING OFFICE R IS ON 35DDA AND 37(1). SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE SPECIAL BENCH OF ITAT, DELHI IN THE CASE OF AMYWAY INDIA ENTERPRISES VS. DCIT CIRCLE 1(1) NEW DELHI WHEREIN THE HONBLE ITAT HELD THAT COMPUTER SOFTWARE HAS BEEN CLASSIFIED AS TANGIBLE ASSET UNDE R HEADING PLANT AND WOULD BE ENTITLED TO DEPRECIATION AT THE RATE OF 60% W.E.F. 01.04.2013 (111 ITD 112 DEL HI SB). HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELETED AND THE GROUND IS ALLOWED. AND DELETED THE ADDITION OF EXCESS CLAIM OF DEPREC IATION AND ALLOWED THE APPEAL. AGGRIEVED BY THE COMMISSIONER OF INCOM E TAX (APPEALS) ORDER, THE REVENUE HAS ASSAILED AN APPEAL BEFORE TR IBUNAL. 5. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE RE ITERATED THE FACTS AND ARGUED THE GROUNDS AND RELIED ON THE FINDINGS OF THE LD. ASSESSING OFFICER WERE COMPUTER AND COMPUTER SOFTWA RE LICENSE ARE DIFFERENT AS THE SOFTWARE TAKES THE CHARACTER OF TA NGIBLE ASSET WEREAS SOFTWARE LICENSE IS A INTANGIBLE ASSET AND DEPRECIA TION IS ALLOWABLE @25% AS PER PART B OF APPENDIX 1 OF DEPRECIATION T ABLE AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN A LLOWING DEPRECIATION @60% RELYING ON THE JUDICIAL DECISION S NOT RELEVANT TO THE FACTS OF THE ASSESSEE AND PRAYED FOR ALLOWING THE APPEAL. ITA NO.330/MDS/2016. :- 5 -: 6. CONTRA, THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-2011 ALLOWED IN FAVOUR OF THE ASSESSEE ON SIMILAR ISSUE AND SUBMITTED JUDICIAL D ECISIONS AND PRAYED FOR DISMISSING THE APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIA L ON RECORD AND JUDICIAL DECISIONS CITED. THE CRUX OF T HE ISSUE DEALT AS PER THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIV E THAT THE DEPRECIATION ON SOFTWARE LICENSE SHOULD BE RESTRIC TED TO 25% RATE AND TREATED AS INTANGIBLE ASSET AND SHALL NOT BE INCLU DED IN BLOCK OF COMPUTERS. THE LD. AUTHORISED REPRESENTATIVE CONTR AVENED THE ARGUMENTS AND SUBSTANTIATE THAT IN ASSESSEES OWN C ASE THE CO- ORDINATE OF THIS TRIBUNAL HAS ALLOWED THE DEPRECIAT ION ON SOFTWARE LICENCE @60% AND SUPPORTED HIS SUBMISSIONS WITH THE DECISION OF HYDERABAD TRIBUNAL IN THE CASE OF SRINIVASA RESORTS VS. ACIT (2014) 41 TAXMANN.COM 350 (HYD. TRIB) WERE IT WAS OBSERVED THAT THE COMPUTER SOFTWARE ALONGWITH COMPUTER HAS TO BE TREA TED AS CAPITAL ASSET AND HIGHER RATE OF DEPRECIATION @60% HAS BEE N ALLOWED BASED ON THE LIFE AND USAGE OF COMPUTER SOFTWARE. WE FO UND THAT SIMILAR ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH IN FAVOU R OF THE ASSESSEE IN ASSESSEES OWN CASE IN ITA NO.1368/MDS/2015, FO R THE ASSESSMENT ITA NO.330/MDS/2016. :- 6 -: YEAR 2010-2011, DATED 20.1.20166, WHERE THE TRIBUNA L OBSERVED IN PARA NO 8 AS UNDER:- 8. GROUND NO.2 - RESTRICTION OF EXCESS DEPRECIATI ON CLAIMED ON SOFTWARE:- DURING THE COURSE OF ASSESSMENT PROCEEDI NGS IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON PURCHASE OF SOFTWARE OF RS. 1,28,45,163/- @ 60%. HOWEVER, FOLLOWING THE DECISIONS IN THE CASE O F SONY INDIA VS. ADDITIONAL. CIT (ITAT., DELHI) REPORTED IN 56 DTR 1 56), THE LD. ASSESSING OFFICER ALLOWED DEPRECIATION @ 25%. ON AP PEAL, THE LEARNED CIT RELYING ON THE DECISION IN THE CASE OF AMWAY IN DIA ENTERPRISES VS. DCIT HELD THAT THE ASSESSEE WOULD BE ENTITLED FOR D EPRECIATION @ 60% SINCE COMPUTER SOFTWARE FALLS IN THE CATEGORY OF PLANT. ON PERUSING THE FACTS OF THE CASE, WE FIND THE DECISION OF LEAR NED CIT(A) TO BE JUSTIFIED BECAUSE THE SPECIAL BENCH OF THE TRIBUNAL (SUPRA) HAS CATEGORICALLY HELD THAT WITH EFFECT FROM 01.04.2003 COMPUTER SOFTWARE HAS TO BE CLASSIFIED AS TANGIBLE ASSET UNDER THE HEADING PLANT AS MENTIONED IN APPENDIX I TO INCOME TAX RULES, 1962. THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER O F THE CIT (A) ON THIS ISSUE . WE, RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DE CISION, DISMISS THE GROUND OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.330/MDS/2016 IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 14TH DAY OF JUN E, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ' ) (G. PAVAN KUMAR) / JUDICIAL MEMBER / CHENNAI 1 / DATED: 14 .06.2016 KV 2 ) +#-34 54&- / COPY TO: 1. '( / APPELLANT 3. ! 6- () / CIT(A) 5. 4 9: +#-# / DR 2. +,'( / RESPONDENT 4. ! 6- / CIT 6. :;% < / GF