DCIT, New Delhi V. M/s BTA Cellcom Ltd., New Delhi

ITA 3658/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52880 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 28-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.3658/DEL/2011 ASSESSMENT YEAR : 2005-06 DCIT, CIRCLE 3 (1), CR BUILDING, NEW DELHI. VS. BTA CELLCOM LTD., 1005-06, KAILASH BUILDING, KASTURBA GANDHI MARG, NEW DELHI. PAN : AAACR5498Q (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MRS. ANUSHA KHURANA, SR.DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT (A) DATED 26 TH MAY, 2011 FOR ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL READ AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.2,16,614/- ON ACCOUNT OF DISALLOWANCE OF EXTRA DEP RECIATION ON COMPUTER PERIPHERALS/ACCESSORIES IGNORING THAT AS P ER THE IT RULES 60% DEPRECIATION IS ALLOWABLE ONLY ON COMPUTER AND COMPUTER SOFTWARE AND NOT ON COMPUTER PERIPHERALS AND ACCESSORIES. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.816858/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATIO N ON ASSETS WITH THE HOLDING COMPANY IGNORING THAT ONCE THE INDIVIDUAL ASSET IS NOT PUT TO USE, WHICH IS PRE-REQUIS ITE CONDITION FOR AVAILING DEPRECIATION U/S 32 OF THE INCOME TAX AC T, 1961, THE ITA NO.3658/DEL/2011 2 SAME BECOMES INELIGIBLE/DISQUALIFIED FOR BLOCK OF A SSETS ON WHICH DEPRECIATION IS ALLOWED AS PER RULE 5 AND APPE NDIX IA OF THE INCOME TAX RULES, 1962, BUT SHALL CONTINUE TO REMAI N THE PART OF THE BLOCK OF ASSETS FOR ALL OTHER PURPOSE EXCEP T FOR THE PURPOSE OF CLAIMING DEPRECIATION UNLESS PUT TO USE. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. APROPOS GROUND NO.1, LEARNED CIT (A) HAS ADMITTED THE CLAIM OF THE ASSESSEE ON COMPUTER ACCESSORIES LIKE NETWORK, RAM, S URF CONTROLLER, S.T. COUPLERS, CALL CLASSIFIERS, DIGITAL CA RD AND ANALOG CARD, ETC. TO BE INTEGRAL PART OF THE COMPUTER AND, THERE FORE, THEY HAVE TO BE CONSIDERED AS PART OF BLOCK OF COMPUTERS AND, THUS, A RE ENTITLED FOR HIGHER DEPRECIATION @ 60%. 3. NOTICE OF HEARING WAS SENT TO THE ASSESSEE, HOWEVER, N ONE WAS PRESENT. THE LEARNED DR RELIED UPON THE ASSESSMENT ORDER IN WHICH THE ASSESSING OFFICER HAS TREATED THE AFOREMENTIONED ACCESSORI ES DIFFERENT FROM COMPUTER AND HAS ALLOWED THE NORMAL DEPRECIATIO N INSTEAD OF 60%. 4. AFTER HEARING THE LEARNED DR AND AFTER CONSIDERIN G THE FINDINGS RECORDED BY THE ASSESSING OFFICER AND CIT (A), WE ARE O F THE OPINION THAT LEARNED CIT (A) HAS RIGHTLY GRANTED THE RELIEF TO THE ASSESSEE AND THE SAID RELIEF IS IN ACCORDANCE WITH THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD. D ATED 31 ST AUGUST, 2010 REPORTED AS 2010-TIOL-636-H.C.-DEL-IT IN WHICH THEIR LORDSHIPS HAVE HELD AS UNDER:- 4. WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL TH AT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS, PRINTER S, SCANNERS AND SERVER, ETC. FORM AN INTEGRAL PART OF THE COMPUTER SYSTEM. IN FACT, THE COMPUTER ACCESSORIES AND PERIPHER ALS CANNOT BE USED WITHOUT THE COMPUTER. CONSEQUENTLY, AS THE Y ITA NO.3658/DEL/2011 3 ARE THE PART OF THE COMPUTER SYSTEM, THEY ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60%. 5. THEREFORE, FINDING NO MERIT IN GROUND NO.1, WE D ISMISS THE SAME. 6. SO AS IT RELATES TO GROUND NO.2, IT WAS NOTICED BY THE ASSESSING OFFICER THAT SCHEDULE 3A INDICATED THAT THE FIXED A SSETS AMOUNTING TO RS.7.54 MILLION WERE LYING WITH THE ULTIMATE HOLDING COMPANY. THE ASSESSEE CLAIMED TO BE THE OWNER OF THOSE ASSETS. THE ASSESSIN G OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPRE CIATION ON THE SAID ASSET SHOULD NOT BE DISALLOWED AS THEY ARE NOT USED BY THE ASSESSEE FOR THE PURPOSES OF ITS BUSINESS. THE ASSESSEE WAS REQUI RED TO EXPLAIN AS TO WHETHER THOSE ASSETS WERE USED BY THE ASSE SSEE FOR THE PURPOSE OF ASSESSEES BUSINESS. IT WAS SUBMITTED THAT DEP RECIATION ON ASSETS LEASED OUT TO HOLDING COMPANY WAS CLAIMED AT ` 8,16,858/-. THE ASSESSING OFFICER AGAIN ASKED THE ASSESSEE TO SHOW CAUSE A S TO WHY THE DEPRECIATION BE NOT DISALLOWED AS THE ASSETS WER E NOT USED FOR THE ASSESSEES BUSINESS AND NO INCOME HAS BEEN RECEIVED BY T HE ASSESSEE COMPANY FROM THE ULTIMATE HOLDING COMPANY AS R EGARDS THE USER OF THOSE ASSETS. VIDE REPLY DATED 19 TH MAY, 2007, IT WAS SUBMITTED THAT DUE TO AN ARRANGEMENT BETWEEN THE HOL DING COMPANY AND THE ASSESSEE COMPANY, CERTAIN EXPENSES ARE INCURRED B Y THE HOLDING COMPANY FOR ROUTINE BUSINESS PURPOSES AND THE SAM E ARE BEING ACCOUNTED WITHOUT ANY MARK-UP OR INTEREST. SI NCE THOSE ASSETS HAVE BEEN OPERATED FROM THE LOW CAPACITY WITH THE A SSESSEE, THE SAME WAS TRANSFERRED AND INSTALLED IN THE PREMISES OF ULTIMAT E HOLDING COMPANY SINCE 1 ST JUNE, 2002. IT WAS ALSO SUBMITTED THAT SUBSEQUENTLY THOSE ASSETS WERE SOLD TO HOLDING COMPANY ITSELF. UNDER THESE FACTS THE ASSESSING OFFICER HELD THAT THE ASSETS HAVE NOT BEEN U SED FOR THE ASSESSEES BUSINESS FOR ANY GAINFUL ACTIVITY AND, THEREFORE , HE DISALLOWED THE CLAIM OF THE ASSESSEE REGARDING DEPRECIAT ION OF ` 8,16,858/- ON THOSE ASSETS. LEARNED CIT (A) HAS ALLOWED SUCH CLAIM OF ITA NO.3658/DEL/2011 4 THE ASSESSEE ON THE GROUND THAT THE SAID ASSET HAD BECOME PART OF THE BLOCK OF PLANT AND MACHINERY ON 1 ST JUNE, 2002 AND DEPRECIATION CLAIMED WAS ALLOWED BY THE ASSESSING OFFICER IN THE EARL IER YEARS ALSO. THE CONCEPT OF BLOCK OF ASSET HAS BEEN INTRODUCED IN T HE INCOME-TAX ACT, 1961 FROM 01.04.88 AND ONCE THE ASSET MERGES INTO BLOCK OF ASSET, THE INDIVIDUAL ASSET LOST ITS IDENTITY. THUS, THE USER O F INDIVIDUAL ASSET IS NOT REQUIRED AND RELEVANT FACTOR WOULD BE THE USE OF BLOCK ASSET AND HE MADE REFERENCE TO THE DECISION OF HONBLE DELHI H IGH COURT IN THE CASE OF BHARAT ALUMINIUM CO. LTD. VS. CIT IN WHICH IT WAS HELD THAT ONCE THE ASSET HAD FALLEN UNDER A PARTICULAR BLOCK OF ASSET, EVEN IF THE SAME WAS NOT USED DURING THE RELEVANT YEAR, THE DEPREC IATION CANNOT BE DISALLOWED. 7. THE LEARNED DR RELYING UPON THE FINDINGS RECORDED BY LD. ASSESSING OFFICER PLEADED THAT THE ASSESSEE SHOULD NOT BE HE LD ENTITLED FOR DEPRECIATION ON THOSE ASSETS AND, THEREFORE, THE CL AIM OF THE ASSESSEE HAS WRONGLY BEEN ALLOWED BY ALLOWED BY THE LEAR NED CIT (A). 8. WE HAVE HEARD THE LEARNED DR AND WE HAVE CAREFUL LY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY THE CIT (A). WE FIND THAT THE ISSUE RAISED BY THE REVENUE IN THIS GROUND IS SQUARELY COVERED BY THE DECISION OF HONBLE DELHI HIG H COURT IN THE CASE OF CIT VS. YAMAHA MOTORS INDIA PVT. LTD. 328 ITR 297 (DEL) WHEREIN THEIR LORDSHIPS HAVE HELD THAT THE WORDS USED FOR THE PURPOSE OF BUSINESS IN THE CASE OF USER OF ASSETS IN EARLIER YEARS AND AFTER CONSIDERING THE CONCEPT OF BLOCK OF ASSETS, IT WAS HELD THAT EVEN IF THE BUSINESS IS CLOSED, THE DEPRECIATION CANNOT BE DISALLOWED FOR NON-USER. THEREFORE, THERE IS NO INFIRMITY IN THE ORDER PASSED B Y THE CIT (A) ALLOWING THE CLAIM OF THE ASSESSEE DISPUTED IN THE PRESEN T GROUND OF APPEAL. GROUND NO.2 OF THE REVENUE IS ALSO DISMISSED. ITA NO.3658/DEL/2011 5 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.09.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 30.09.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES