Eicher Motors Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 3438/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58428 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 05-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROHIT GARG SENIOR
• Assessee Lawyers: GAURAV JAIN S; PINKY KAPOOR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3438/DEL./2011 (ASSESSMENT YEAR : 2007-08) M/S. EICHER MOTORS LIMITED, VS. ADDL.CIT, RANGE 1 1, EICHER HOUSE, NEW DELHI. 12, COMMERCIAL COMPLEX, GREATER KAILASH II, NEW DELHI 110 048. (PAN : AAACE3882D) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI AJAY VOHRA & GAURAV JAIN, ADV OCATES AND MS. PINKY KAPOOR, ADVOCATE REVENUE BY : SHRI ROHIT GARG, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE ORDER OF CIT (APPEALS)-V, NEW DELHI DATED 13.05.2011 FOR THE ASS ESSMENT YEAR 2007-08. THE GROUNDS OF APPEAL READ AS UNDER :- 01. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A )-V, NEW DELHI AS GROSSLY ERRED ON FACTS AND IN LAW IN C ONFIRMING THE ACTION OF A.O. THAT DEPRECIATION ON COMPUTER PERIPH ERALS A) WORK STATION, UPS AND B) SERVER RACK IS ALLOWABLE @ 35% AS APPLICABLE TO PLANT & MACHINERY & @ 1% AS APPLICABL E TO FURNITURE & FIXTURE RESPECTIVELY INSTEAD OF 60% AS APPLICABLE TO THE COMPUTER. ITA NO.3438/DEL./2011 2 02. THAT THE APPELLANT MAY PLEASE BE PERMITTED TO A MEND OR ALTER ANY OF THE FOREGOING GROUNDS OR TO ADDUCE ANY ADDITIONAL GROUND AT OR BEFORE THE TIME OF HEARING. 2. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE MANUFACTURE OF COMMERCIAL VEHICLES, TWO WHEELERS AND GEARS. TH E ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 21.12.2009. 3. THE ONLY ISSUE INVOLVED IN THE GROUNDS OF APPEAL IS RESTRICTING THE RATE OF DEPRECIATION ON (I) WORK STATION; (II) UPS; AND (III) SERVER RACK. 4. DURING THE PREVIOUS YEAR, THE ASSESSEE HAS PURCH ASED 20 KVA UPS SYSTEM, NETWORK SWITCHES, UPS, 1 KVA UPS APC, 5 KVA UPS APC, MICROSOFT LICENCE, WORK STATION, CD WRITER, 40 KVA UPS WITH BATTERIES AND STEEL SERVER RACK ETC., WHICH WERE SHOWN AS ADDITIO N TO COMPUTERS. THE TOTAL ADDITION OF ABOVE ITEMS WAS RS.77,31,921/-. OUT OF WHICH ADDITION OF RS.50,07,439/- WAS BEFORE 30.09.2006 AND REMAINING ADDITION OF RS.27,24,482/- WAS MADE AFTER 01.10.2006. APPELLAN T CLAIMED DEPRECIATION @ 60% FOR THE ADDITIONS MADE IN FIRST HALF AND 30% ON THE ADDITIONS MADE IN THE SECOND HALF, AS PER DEPRECIATION RATES PRESCRIB ED IN THE INCOME TAX RULES. THE ASSESSEE CLAIMED THAT ALL THESE ITEMS ARE COVER ED UNDER THE DEFINITION OF COMPUTER BY STATING THAT THEY ARE USED AS ACCESSORI ES, ESSENTIAL PART FOR THE OPERATION OF COMPUTER SYSTEMS. CIT(A) GRANTED THE RELIEF IN RESPECT OF THE CD WRITER AND NETWORK SWITCHES AND MICROSOFT LICENC ES. THE CLAIM OF THE ITA NO.3438/DEL./2011 3 ASSESSEE OF HIGHER RATE OF DEPRECIATION ON UPS, WOR K STATION AND SERVER RACK WAS DECIDED AGAINST THE ASSESSEE BY HOLDING AS UNDE R :- 1. WORK STATION : THE WORK STATION IS NOTHING BU T WORK AREA WHEREIN COMPUTER AN OTHER RELATED ACCESSORIES CAN B E PLACED. THE AFORESAID ASSET CLEARLY DOES NOT FALL WITHIN TH E MEANING OF COMPUTER AND THERE IS NO NEED TO GET INTO THE DIS CUSSION WHETHER THE SAME FORMS INTEGRAL PART OF THE COMPUTE R TO CONSIDER THE APPLICABLE RATE OF DEPRECIATION. IN VIEW OF TH E ABOVE, I HOLD THAT DEPRECIATION AND ADDITION TO ASSET IN THE NATU RE OF WORK STATION IS NOT TO BE ALLOWED AT 60% AND DISALLOWANC E MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ABOVE IS UPHELD . 3. UPS : THE HON'BLE ITAT DELHI BENCH IN THE CASE OF NESTLE INDIA LTD V/S DCIT (ITAT, DEL) 111 TTJ 498 HAS HELD THAT UPS IS NOT AN INTEGRAL PART OF COMPUTER AND IS ONLY AN ALTERNATE SOURCE OF SUPPLY OF POWER TO COMPUTER, THEREFORE HIGHER RA TE OF DEPRECIATION IS NOT ALLOWABLE. RESPECTFULLY FOLLOWI NG THE SAME, THE ACTION OF THE A.O IS UPHELD. 5. SERVER RACK : STEEL SERVER RACK HAS BEEN EXPLAIN ED TO BE A SPECIAL RACK CREATED TO COVER THE SERVER/COMPUTER. TO MY MIND SERVER RACK CANNOT BE SAID TO FORM INTEGRAL PART OF THE COMPUTER SYSTEM. THE SAID RACKS HAVE BEEN EXPLAINED TO BE NE EDED TO BE COVER THE COMPUTER SYSTEM. THE SAID RACKS, IN MY VI EW, SHOULD BE CLASSIFIED UNDER THE HEAD OF 'FURNITURE AND FIXT URE' AS OPPOSED TO 'COMPUTER'. THE ASSESSING OFFICER IS THEREFORE, JUSTIFIED IN ALLOWING DEPRECIATION ON STEEL SERVER RACKS MEANT F OR COMPUTER AT THE RATE APPLICABLE TO FURNITURE AND FITTINGS. I N VIEW OF THE SAID DISCUSSION, I HOLD THAT DEPRECIATION ON SERVER RACK S IS NOT ELIGIBLE. THE LEARNED AR SUBMITTED THAT THE DEFINITION OF RAC K SERVER AND WORK STATION WHICH IS AVAILABLE IN PUBLIC DOMAIN DOWNLOADED FROM INTERNET PLACED AT PAGES 14 & 15 OF THE PAPER BOOK CLEARLY SHOW THAT THESE W ERE INTEGRAL PART OF THE COMPUTER SYSTEM. IN RESPECT OF THE CLAIM OF DEPREC IATION OF UPS, HE HAS RELIED ON THE DECISION OF HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT ITA NO.3438/DEL./2011 4 VS. BSES RAJDHANI POWERS LIMITED AND ALSO ON THE DE CISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENTAL CERAMICS & IN DS. LIMITED. 5. ON THE OTHER HAND, LEARNED DR SUBMITTED THAT THE PAGES 14 & 15 OF THE PAPER BOOK OF THE ASSESSEE WERE NOT FILED BEFORE TH E CIT (A). THESE DEFINITIONS MAY BE AVAILABLE ON PUBLIC DOMAIN BUT W HETHER THE ASSESSEES ASSETS ARE OF SAME DESCRIPTION AS PROVIDED IN DEFIN ITION NEED VERIFICATION. IN VIEW OF THESE FACTS, HE PLEADED THAT THE ISSUE IN R ESPECT OF THE DEPRECIATION ON RACK SERVER AND WORK STATION MAY BE RESTORED TO THE FILE OF THE CIT (A). AS FAR AS THE RATE OF DEPRECIATION ON THE UPS IS CONCERNED , LEARNED DR FAIRLY CONCEDED THAT THIS ISSUE IS COVERED AGAINST THE REV ENUE BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORI ENT CERAMICS & INDS. LTD. 6. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND AL SO PERUSED THE RECORDS. AS FAR AS THE RATE OF DEPRECIATION ON UPS IS CONCER NED, IT IS COVERED BY DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN FA VOUR OF THE ASSESSEE. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. ORIENTAL CERAMICS & INDS. LIMITED, CITED SUPRA HAD HELD AS UNDER :- 13. THE THIRD ISSUE PERTAINING TO DEPRECIATION ON UPS ARISES ONLY IN THE ASSESSMENT YEAR 2005-06. THE ASSESSEE HAD CLAIMED DEPRECIATION ON UPS @ 60% WHEREAS THE A.O H AD ALLOWED IT @ 25% AND ON THIS BASIS, DISALLOWANCE OF 1,470 WAS MADE. THE ISSUE NOW STANDS COVERED BY THE JUDG MENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TA X VS. BSES YAMUNA POWERS LTD. (IN ITA NO.1267 DECIDED ON 31.08.2010) WHEREIN IT WAS HELD THAT THE DEPRECIATI ON @ 60% ON SUCH ITEMS SHALL BE ALLOWED. ITA NO.3438/DEL./2011 5 RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AUTH ORITIES BELOW TO ALLOW THE DEPRECIATION ON UPS @ 60% ON THE PURCHASE IN FIRST HALF OF THE YEAR AND 30% ON THE PURCHASE OF SECOND HALF OF THE YEAR. SO FAR AS THE CLAIM OF ASSESSEE FOR HIGHER RATE OF DEPRECIATION ON THE WORK STATION AND SERVER RACK IS CONCERNED, WE ARE OF THE VIEW THAT THE DEFINITION OF THESE ITE MS MAY BE AVAILABLE IN PUBLIC DOMAIN BUT SAME WERE NOT PROVIDED TO THE CIT (A) NO R SUCH CLAIM WAS MADE BEFORE HER. THE ASSETS OF ASSESSEE ON WHICH HIGHER RATE OF DEPRECIATION CLAIMED IS OF SAME PRESCRIPTION OR NOT HAD NOT BEEN VERIFIED. IT SHALL BE FAIR IN THE INTEREST OF JUSTICE THAT ISSUE IS RE-LOOKED BY CIT (A). THEREFORE, WE RESTORE THE ISSUE TO THE FILE OF THE CIT (A). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 6 TH DAY OF JANUARY, 2012. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 6 TH DAY OF JANUARY, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-V, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.