IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E BENCH BEFORE SHRI B.RAMA KOTAIAH(ACCOUNTANT MEMBER) AND SHRI VIVEK VARMA (JUDICIAL MEMBER) ITA NO.3606 /MUM/2011 ASSESSMENT YEAR: 2008-09 SARASWAT INFOTECH LTD., PLOT NO.85, MADHUSHREE, SECTOR-17, VASHI, NAVI MUMBAI. PA NO.AAJCS 4303 A ACIT 10(C), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20 (APPELLANT) VS. (RESPONDENT) APPELLANT BY : MR M.C.NANIWADEKAR RESPONDENT BY: MR C.G.K. NAIR DATE OF HEARING: 5.3.2012 DATE OF PRONOUNCEMENT: 14.3.2012 ORDER PER VIVEK VARMA, JM: THE APPEAL HEREIN EMANATES FROM THE ORDER DATED 2 3.2.2011 OF THE CIT(A)-22, MUMBAI, WHEREIN, THE CIT(A) HAS UPHELD THE ADDITION S MADE BY THE AO IN ORDER DATED 23.12.2010, PASSED UNDER SECTION 143(3) OF THE INCO ME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008-09. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS A SUBSIDIARY OF SARASWAT CO.OP.BANK LTD., AND THE ASSESSEE COMPANY PROVIDES SOFTWARE DEVELOPMENT AND INFORMATION TECHNOLOGY ENABLED SERVICES TO ITS HOLD ING COMPANY, I.E. SARASWAT BANK. DURING THE YEAR, THE HOLDING COMPANY I.E. SARASWAT BANK ACQUIRED THREE BANKS, I.E. NASIK PEOPLES CO.OP.BANK, MURGHA RAJENDRA SAHAKARI BANK AND ANNA SAHEB KARALE SAHAKARI BANK. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSEE COMPANY HAD ACQUIRED CERTAIN CAPITAL ASSETS WHICH WOULD PRO VIDE CERTAIN COMPUTERS AND TECHNOLOGY SERVICES TO ITS HOLDING COMPANY, I.E. SA RASWAT CO.OP. BANK LTD. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE CO MPANY HAD CAPITALIZED PURCHASE OF UPS UNDER THE BLOCK OF COMPUTERS AND CLAIMED DEPR ECIATION @ 60%. THE AO FURTHER NOTED THAT THE ASSESSEE COMPANY HAD CLAIMED DEPRECI ATION @ 60% ON THE ATM ITA NO.3606 /MUM/2011 ASSESSMENT YEAR: 2008-09 2 MACHINES. THE ASSESSING OFFICER, WHILE DEALING WIT H BOTH THESE INDEPENDENT ITEMS HELD THAT SO FAR AS UPS IS CONCERNED, IT IS AN ELECTRICA L APPLIANCE FOR TEMPORARY SUPPLY OF ELECTRICITY IN THE EVENT OF POWER FAILURE AND IS JU ST ANOTHER FORM OF INVERTER AND, THEREFORE, AT BEST, CAN BE CONSIDERED AS A PART OF PLANT AND MACHINERY/OFFICE EQUIPMENT ELIGIBLE FOR DEPRECIATION @ 15%. HE, THEREFORE, DI SALLOWED THE EXCESS CLAIM AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. SO F AR AS ATM WAS CONCERNED, HELD THAT THIS CASH DISPENSING MACHINE WITH A PROJECTOR, AND HERE TOO, THE AO HELD THAT THERE WERE ONLY PART OF PLANT AND MACHINERY/OFFICE EQUIPM ENT AND ELIGIBLE FOR DEPRECIATION @ 15%. THE AO, THEREFORE, DISALLOWED EXCESS DEPRECIA TION AMOUNTING TO RS. 11,02,442 AND ADDED IT BACK TO THE INCOME OF THE ASSESSEE COM PANY. THE AO, FURTHER DISALLOWED DEPRECIATION OF RS. 50,54,400 ON ACCOUNT OF PURCHAS E OF SOFTWARE LICENCE, HOLDING THAT THE ASSESSEE COMPANY COULD NOT PROVE THAT THE ASSES SEE PHYSICALLY RECEIVED THE LICENCE BY 31.3.2008 AND SENT THEM TO ITS BRANCHES WHO IN T URN INSTALLED AND PUT THE SAME IN USE ON 31.3.2008. THE AO, THEREFORE, DISALLOWED TH E DEPRECIATION AND ADDED IT BACK TO THE ASSESSEES INCOME. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED APPEAL ON ALL THE THREE ISSUES BEFORE THE CIT(A), WHO AFTER GOING THROUGH T HE ENTIRE FACTS, AS STATED ABOVE, PREFERRED NOT TO DISTURB THE FINDINGS OF THE AO AND SUSTAINED THE ADDITIONS. 4. AGGRIEVED BY THE VIEW TAKEN BY THE CIT(A), THE A SSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LEARNED A.R. OF THE ASSESSEE SUBMITTE D THAT UPS IS AN INTEGRAL PART OF THE COMPUTER SYSTEM AS THEY CAN BE USED ONLY ALONGW ITH THE COMPUTERS. UPS, ACCORDING TO THE A.R. ARE CONNECTED TO LOCAL AREA NETWORK, PC S, SERVERS, ROUTERS, V-SATS AND THEREFORM INTEGRAL PART OF THE OVERALL COMPUTES SYS TEMS AS THEY REGULATE THE FLOW OF THE POWER TO AVOID ANY KIND OF DAMAGE TO THE COMPUTER N ETWORK DONE TO FLUCTUATION IN POWER ON SUDDEN LOSS OF POWER, WHICH COULD BRING TH E WHOLE OPERATION TO A HALT, CAUSING LOSS OF VALUABLE DATA. THE A.R. PLACED BEFORE US A DECISION OF HONBLE DELHI HIGH COURT IN ITA NO.65 OF 2011 AND ITA NO.66 OF 2011 IN THE C ASES OF CIT VS. ORIENT CERAMICS & INDS LTD, WHEREIN, THE HONBLE HIGH COURT IN PARA 1 3, DEALING WITH THE ISSUE OF UPS, ITA NO.3606 /MUM/2011 ASSESSMENT YEAR: 2008-09 3 HAVE ACCEPTED THE FINDINGS OF THE SAME HONBLE HIGH COURT IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD. (ITA NO.1267 DECIDED ON 31.8.201 0). IT WAS POINTED OUT BY THE LEARNED A.R THAT SINCE THE ISSUE HAS BEEN DECIDED B Y AN HONBLE HIGH COURT, EVEN IF NOT A JURISDICTIONAL HIGH COURT AND, THERE BEING NO OTH ER CONTRARY DECISION, THE DECISION OF HONBLE DELHI HIGH COURT AS PLACED IN THE PAPER BOO K IN THE CASE OF ORIENT CERAMICS & IND LTD (SUPRA) SHOULD BE FOLLOWED. 6. COMING TO THE RESTRICTION OF DEPRECIATION ON ATM , THE AR INVITED OUR ATTENTION TO THE OBSERVATIONS OF THE REVENUE AUTHORITIES, WHEREI N, THEY HAD OBSERVED THAT THE ATMS WERE JUST CASH DISPENSER AND PROJECTOR AND NOT A CO MPUTER AIDED PERIPHERAL. THE A.R. HAS PLACED CERTAIN PHOTOGRAPHS ALONGWITH SHORT DESC RIPTIONS AS TO HOW THE ATM FUNCTIONS. FROM THE SHORT DESCRIPTIONS, IT CAN BE SEEN THAT ATM FUNCTIONS ENTIRELY THROUGH THE FUNCTIONS OF A COMPUTER. THE AR THUS I NVITED OUR ATTENTION TO THE WRITTEN SUBMISSION, WHEREIN, THE AR PLEADED BEFORE THE REVE NUE AUTHORITIES THAT ATM CANNOT FUNCTION WITHOUT THE HELP OF A COMPUTER AND IS CERT AINLY AN IMPORTANT COMPUTER PERIPHERAL FOR BANKING INDUSTRY. THE AR THUS TOOK US THROUGH THE DECISION OF DELHI ITAT IN THE CASE OF DCIT VS. GLOBAL TRUST BANK (ITA NO.4 74/D/09), WHEREIN, THE COORDINATE BENCH HAS HELD THE ATM WAS A COMPUTER EQUIPMENT AND THUS ALLOWED DEPRECIATION AT 60%. 7. ON BOTH THESE ISSUES, THE BENCH, RESPECTFULLY FO LLOW THE DECISION OF HONBLE DELHI HIGH COURT SO FAR AS UPS IS CONCERNED AS WILL ALSO FOLLOW THE DECISION OF COORDINATE BENCH OF ITAT DELHI SO FAR AS ATM IS CONCERNED. IT IS IMPORTANT TO NOTE THAT EVEN ITAT, MUMBAI(SB) IN THE CASE OF DCIT VS. DATACRAFT INDIA LTD., 6 TAXMAN.COM.85 HAS TAKEN THE VIEW THAT ROUTERS & SWITCHES ARE TO BE INCLUDED IN THE BLOCK OF COMPUTERS AS THEY CANNOT BE USED WITHOUT THE COMPUTERS. 8. COMING TO THE DEPRECIATION ON PURCHASE OF SOFTWA RE LICENSE, THE REVENUE AUTHORITIES HELD THAT THE ASSESSEE COMPANY COULD NO T PROVE THAT THE SOFTWARE WAS ACQUIRED AND INSTALLED AND PUT TO USE BY 31.3.2008 AND HENCE THEY DISALLOWED THE DEPRECIATION. BEFORE THE BENCH, THE AR SUBMITTED T HAT THE SOFTWARE WAS PUT TO USE ON 31.3.2008 AND TOOK US THROUGH THE PURCHASE ORDER WH ICH WAS DATED 29.3.2008. BEFORE ITA NO.3606 /MUM/2011 ASSESSMENT YEAR: 2008-09 4 US, THE AR INVITED OUR ATTENTION TO THE FACT THAT O MNI SOFTWARE WAS ALREADY IN USE BY THE BANK SINCE LONG. AS THE LICENCE WAS TO BE ACQU IRED AND TO BE PUT TO USE FOR THE NEWLY ACQUIRED CO-OPERATIVE BANKS, ENHANCED LICENSE S WERE TO BE ACQUIRED. IT WAS SUBMITTED BY THE AR THAT THE ASSESSEE COMPANY ACQUI RED THE LICENCES FOR ENHANCED USE, AND WEE PUT TO USE ON 31.3.2008, THE AR INVITED OUR ATTENTION TO A COPY OF DAILY TRIAL BALANCE FOR ANKALI MIRAJ BRANCH ON 31.3.2008. 9. ON GOING THROUGH THE FACTS ON THIS ISSUE ALSO, W E FEEL THAT THE ASSESSEE COMPANY HAS GONE ON TO PROVE THAT THE SOFTWARE WHICH WAS AC TUALLY ACQUIRED AND PUT TO USE ON 31.3.2008 AND HENCE, THE ASSESSEE COMPANY HAS RIGHT LY CLAIMED DEPRECIATION AT 30% (BEING 50% OF 60%). WE, ACCORDINGLY, ALLOW THE GRI EVANCE OF THE ASSESSEE ON THIS COUNT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 14 TH MARCH, 2012 SD/- SD/- (B.RAMAKOTAIAH) (VI VEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 14 TH MARCH, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),22, MUMBAI 4. COMMISSIONER OF INCOME TAX, 10 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI