DCIT, New Delhi V. M/s Oxigen Services India Pvt. Ltd., New Delhi

ITA 3766/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4408 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Depreciation; Earning of tax free income; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DLEHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 3765 AND 3766/DEL/2015 ASSESSMENT YEAR: 2008-09 AND 2010-11 DCIT, CIRCLE 19(1) VS M/S OXIGEN SERVICE S (P) LTD. NEW DELHI UNIT NO 31, TRIBHUVAN COMPLEX ISHWAR NAGAR, NEW FRIENDS COLONY, NEW DELHI PAN NO AABCI1405K (APPELLANT) (RESPONDENT) APPELLANT BY: SMT NAINASOIN KAPIL, CIT DR RESPONDENT BY: SH SATYENSETHI, ADVOCATE, DATE OF HEARING: 14.02.2019 DATE OF PRONOUNCEMENT: 15.02.2019 ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDERS DATED 9/3/2015 IN APPEAL NUM BERS 542 AND 558/14-15 ON THE FILE OF THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS)- 7, DELHI (LD. CIT(A)) REVENUE PREFERRED THESE TWO APPEALS. SINCE THE GROUNDS INVOLVED IN THESE 2 APPEALS ARE COMMON IN N ATURE, WE FIND IT JUST AND CONVENIENT TO DISPOSE OF THESE 2 APPEALS BY WAY OF A COMMON ORDER, WITH REFERENCE TO THE FACTS IN ITA 3765/DEL/2015 FO R THE ASSESSMENT YEAR 2008-09. 2 2. BRIEF FACTS OF THE CASE ARE THATM/S OXYGEN SERVI CES INDIA PRIVATE LIMITED (THE ASSESSEE) IS A DOMESTIC COMPANY ENGA GED IN THE BUSINESS OF TRADING IN ELECTRONIC RECHARGE COUPONS, COLLECTION OF PAYMENTS OF POST-PAID BILLS OF VARIOUS TELECOM OPERATOR AND TICKETING AND THEY HAVE PIONEERED THE IDEA AND EXECUTION OF ELECTRONIC VIRTUAL DISTRIBUTI ON (SUING POS/WAB/SMS) OF SERVICES LIKE PREPAID AIRTIME, DTH/BROADBAND PAYMEN TS ON BEHALF OF SERVICE PROVIDERS. FOR THE ASSESSMENT YEAR 2008-09 THE ASSE SSEE FILED THEIR RETURN OF INCOME ON 13/10/2008 DECLARING A TOTAL LOSS OF RS. 222,451,028/-. BY ORDER DATED 28/12/2011 UNDER SECTION 143(3) OF THE ACT, L D. ASSESSING OFFICER ASSESSED THE TOTAL LOSS AT RS. 179,732,770/-, BY MA KING ADDITIONS, INSOFAR AS THIS APPEAL IS CONCERNED, ON ACCOUNT OF THE DISALLO WANCE OF RS. 62,17,290/- ON ACCOUNT OF LEGAL, PROFESSIONAL AND CONSULTANCY E XPENSES, DISALLOWANCE OF RS. 52,16,124/-ON ACCOUNT OF ADVERTISEMENT AND MARK ETING EXPENSES, DISALLOWANCE OF DEPRECIATION OF RS. 84,10,239/-ON P OS TERMINALS, DISALLOWANCE OF DEPRECIATION OF RS. 74,713/- ON UPS AND DISALLOWANCE OF RS. 16,24,375/-UNDER SECTION 14 A OF THE ACT, WHICH THE LD. CIT(A) DELETED IN APPEAL. REVENUE, THEREFORE, FILED THIS APPEAL. 3. INSOFAR AS THE DISALLOWANCE ON ACCOUNT OF LEGAL, PROFESSIONAL AND CONSULTANCY EXPENSES IS CONCERNED, THE PAYMENTS OF RS. 29,50,000/-AND RS. 32,67,290/-MADE TO WIPRO LTD AND INTERGLOBE TECHNOL OGIES WEREDISALLOWED ON THE GROUND THAT THE SAME WERE CAPITAL IN NATURE, INCURRED FOR SOFTWARE DEVELOPMENT SERVICES. CONTENTION OF THE ASSESSEE HA S BEEN THAT THESE TWO ENTITIES DID NOT PROVIDE ANY SOFTWARE DEVELOPMENT S ERVICES, AND ON THE OTHER HAND THEY WERE PROVIDING ONLY SUPPORT SERVICE S. PARTICULARLY WIPRO LTD, INTERALIA, PROVIDED SERVER MANAGEMENT AND MONITORIN G SERVICES, BACKUP AND RESTORATION MANAGEMENT, NETWORK, DATABASE MANAGEMEN T, ANTIVIRUS AND 3 SECURITY MANAGEMENT AND VENDOR MANAGEMENT SERVICES ETC WHEREAS INTERGLOBE PROVIDED IT SUPPORT SERVICES BY PLACING ITS STAFF AT THE DISPOSAL OF THE ASSESSEE TO PROVIDE UPTIME FOR IT PLATFORM, ESC ALATION OF CUSTOMER COMPLAINTS AND TROUBLESHOOTING. 4. IT IS THE ARGUMENT OF THE LD. DR THAT THE PAYMEN TS MADE TO THESE TWO ENTITIES WERE THE PAYMENTS FOR SOFTWARE DEVELOPMENT SERVICES AS IS ESTABLISHED BY THE BILLS PRODUCED BEFORE THE LEARNE D ASSESSING OFFICER WHEREIN IT WAS MENTIONED AS PAYMENTS FOR SOFTWARE D EVELOPMENT SERVICES, WHICH GIVES ENDURING BENEFIT TO THE ASSESSEE AND, T HEREFORE, THE LEARNED ASSESSING OFFICER RIGHTLY HELD SUCH EXPENDITURE TO BE CAPITAL IN NATURE. SHE FURTHER SUBMITS THAT THE ISSUE OF CAPITALISING SOFT WARE EXPENSES HAS ALWAYS BEEN A DEBATABLE ISSUE AND HAS TO BE SEEN IN THE BA CKGROUND OF FACTS OF EACH CASE; THAT THERE CANNOT BE ANY SPECIFIC OR PRECISE TEST WHICH CAN BE APPLIED CONCLUSIVELY OR UNIVERSALLY FOR DISTINGUISHING BETW EEN CAPITAL AND REVENUE EXPENDITURE AND THAT DIFFERENT MINDS COME TO DIFFER ENT CONCLUSIONS WITH EQUAL PROPRIETY; THAT THE CARDINAL RULE IS THAT THE QUESTION WHETHER A CERTAIN EXPENDITURE IS CAPITAL OR REVENUE ACCOUNT SHOULD BE DECIDED FROM THE PRACTICAL AND THE BUSINESS VIEWPOINT AND IN ACCORDA NCE WITH THE SOUND ACCOUNTANCY PRINCIPLES;AND THAT IN VIEW OF THE VIEW TAKEN BY THE SPECIAL BENCH OF THE DELHI-TRIB NAIL IN THE CASE OF AMWAY I NDIA ENTERPRISES VS. DCIT (2008) 111 ITD 112 WHILE DEALING WITH THIS COMPLEX ISSUETO DECIDE THE NATURE OF THE EXPENDITURE AS TO WHETHER IT IS CAPITAL OR R EVENUE, THE TESTS OF ENDURING BENEFIT, OWNERSHIP AND FUNCTIONAL ASPECTSA RE GENERALLY APPLIED. 5. SHE FURTHER SUBMITTED THAT THE ISSUE NEEDS A DEE PER INVESTIGATION BY THE AUTHORITIES BELOW AND THE SERVICES AS CITED BY THE LD. CIT(A) DO NOT SPEAK ABOUT THE BENEFITS RENDERED TO THE ASSESSEE WERE OF ENDURING NATURE OR 4 BRIEF PERIOD AND THE LEARNED ASSESSING OFFICER WAS NOT CONFRONTED ON THIS ASPECT NOR THE LD. CIT(A) DEALT DEEPER INTO THESE A SPECTS, BUT HE SIMPLY RELIED ON THE SELF-SERVING STATEMENT OF THE ASSESSE E, AND WITHOUT A STEADYING THE OBSERVATIONS OF THE AUDITORS IN THE AUDIT REPOR T AS THEY ARE REQUIRED TO MAKE IN PARA 17 (A) OF THE AUDIT REPORT AS TO WHETH ER ANY CAPITAL EXPENDITURE WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH WA S NOT DONE BY EITHER OF THE AUTHORITIES. LASTLY, SHE CONTENDED THAT THE EXP ENSES ON ACCOUNT OF SOFTWARE HAVE BEEN CLAIMED BY THE ASSESSEE SO THE O NUS IS ON THE ASSESSEE TO SATISFY THE LEARNED ASSESSING OFFICER AS TO HIS CLAIM SO THAT IT COULD BE ALLOWED BY THE LEARNED ASSESSING OFFICER AND IN THE ABSENCE OF ANY MATERIAL WHATSOEVER PRODUCED BY THE ASSESSEE THE EXPENDITURE WAS RIGHTLY TREATED AS CAPITAL BY THE LEARNED ASSESSING OFFICER. 6. PER CONTRA, IT IS THE SUBMISSION ON BEHALF OF TH E ASSESSEE THAT SIMILAR QUESTIONS HAVE ARISEN IN THE CASE OF THE ASSESSEE F OR THE ASSESSMENT YEARS 2008-09 TO 2010-11 WHICH WERE DISPOSED OF BY THE LD . CIT(A) VIDE ORDERS DATED 9/3/2015 AND THE REVENUE PREFERRED APPEALS AG AINST THE ORDERS OF LD. CIT(A) FOR ALL THESE YEARS. LD. AR SUBMITTED THAT A PPEAL RELATING TO THE ASSESSMENT YEAR 2009-10 IN ITA NO. 3812/DEL/ 2015 H AS BEEN DISPOSED OF BY A COORDINATE BENCH OF THIS TRIBUNAL AND WHILE PLACI NG RELIANCE ON THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ACL WIRELESS LTD (2014) 361 ITR 210 AND ORIENTAL BANK O F COMMERCE VERSES ACIT (2018) 256 TAXMAN 24 THE TRIBUNAL REACHED A CONCLUS ION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACQUIRING L ICENSES TO USE THE SOFTWARE WHICH DID NOT CONFER ANY ENDURING BENEFIT ON THE ASSESSEE WAS TO BE ALLOWED AS DEDUCTION UNDER SECTION 37 (1) OF THE ACT. 5 7. WE HAVE GONE THROUGH THE ORDER DATED 7/1/2019 IN ITA NO. 3812/DEL/2015 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10. ON THE IDENTICAL SET OF FACTS, WHILE PLACING RELIANCE ON T HE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASES OF ORIENTAL BANK OF COMMERCE (SUPRA) AND ACL WIRELESS LTD (SUPRA) A COORDINATE BENCH OF THIS TRIBUNAL REACHED A CONCLUSION THAT THE EXPENDITURE INCURRED BY THE ASS ESSEE ON ACQUIRING LICENSES TO USE THE SOFTWARE WHICH DID NOT CONFER A NY ENDURING BENEFIT ON THE ASSESSEE AND HAS TO BE ALLOWED AS DEDUCTION UND ER SECTION 37 (1) OF THE ACT. IT IS NOT THE CASE OF THE REVENUE THAT THERE I S ANY CHANGE OF FACTS AND CIRCUMSTANCES INVOLVED IN THESE TWO ASSESSMENT YEAR S. FROM THE RECORD WE COULD ALSO FIND THAT WHILE GRANTING RELIEF LD. CIT( A) ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. ASAHI INDIA SAFETY GLASS LTD (2012) 346 ITR 329 (DE L). THERE IS NO REASON AS TO WHY WE SHOULD NOT FOLLOW THIS LINE OF DECISIONS WHI CH ARE APPLICABLE TO THE FACTS OF THE CASE ON HAND. WE, THEREFORE, WHILE RES PECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT AND ALSO THE VIEW TAKEN BY A COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2009-10 ON IDENTICAL SET OF FACTS, HOLD ISSUE IN FAVOUR OF THE ASSESSEE AND FIND THE GROUND OF APPEAL AS DEVOID OF MERITS. WE, ACCORDINGLY, DISMISSED GROUND NO. 1 OF THE REVENUES APPEAL. 8. NOW COMING TO THE DISALLOWANCE ON ACCOUNT OF ADV ERTISEMENT AND MARKETING EXPENSES, CASE OF THE ASSESSEE IS THAT TH E ASSESSEE IS IN THE BUSINESS OF TRADING OF ELECTRONIC RECHARGE COUPONS AND COLLECTION OF PAYMENTS OF POST-PAID OF VARIOUS TELECOM OPERATORS; THAT IT TO PROMOTE THE BUSINESS, THE ASSESSEE ENCOURAGES EXPENSES ON ADVER TISEMENT ON GLOW SIGN, SIGNBOARD, POSTERS ETC AND INCIDENTAL EXPENDITURE O N INSTALLATION OF GLOW 6 SIGN, SIGNBOARD ETC AT A RETAIL OUTLETS; AND SUCH A N EXPENDITURE IS, THEREFORE, NOT IN THE NATURE OF CAPITAL EXPENDITURE. 9. IT IS THE ARGUMENT OF THE LD. DR THAT THE LEARNE D ASSESSING OFFICER ON VERIFICATION OF PAYMENTS TO THE FIVE PARTIES OBSERV ED THAT THE EXPENSES WERE BROADLY IN THE NATURE OF INSTALLATION OF BOARD, INS TALLATION OF DATA CABLES WHICH CAN BY NO MEANS CONSIDERED AS REVENUE EXPENDI TURE SINCE THEY GAVE ENDURING BENEFIT TO THE ASSESSEE, AND, THEREFORE, T HE SAID EXPENDITURE WAS RIGHTLY TREATED AS CAPITAL EXPENDITURE BY THE LEARN ED ASSESSING OFFICER TO DISALLOW THE SAME. LD. CIT(A), HOWEVER, HELD THAT T HE ASSESSEE MADE PAYMENTS IB & W COMMUNICATION (P) LTD WHICH IS CONT RARY TO THE FACTS ON RECORD WHICH SHOWS THAT THE PAYMENTS WERE MADE TO F IVE PARTIES. LD. DR FURTHER SUBMITTED THAT THE DISCUSSION MADE IN THE I MPUGNED ORDER REVOLVES AROUND THE ADVERTISEMENT EXPENSES ONLY AND IN ONLY ONE PARAGRAPH THERE IS DISCUSSION ABOUT THE EXPENSES ON GLOW SIGN WORDS, W HICH CONTENTION THE ASSESSEE NEVER ADVANCED BEFORE THE LEARNED ASSESSIN G OFFICER. SHE SUBMITS THAT WITHOUT CALLING FOR ANY COMMENTS FROM THE LEAR NED ASSESSING OFFICER ON THIS ISSUE, LD. CIT(A), WITHOUT GIVING REASONS FOR RESOLVING THE EXPENSES TO BE REVENUE COMMITTED AN ERROR IN DELETING THE SAME. SH E FURTHER SUBMITTED THAT THIS ISSUE ALSO NEEDS A DEEPER INVESTIGATION. 10. PER CONTRA, LD. AR SUBMITS THAT GIVEN THE NATUR E OF BUSINESS OF THE ASSESSEE, THERE IS NEED TO PROMOTE THE BUSINESS BY INCURRING CERTAIN EXPENDITURE ON ADVERTISEMENTS BY WAY OF GLOW SIGNS , SIGNBOARDS, POSTERS ETC AND ALSO THE INCIDENTAL EXPENDITURE ON INSTALLA TION THEREOF. HE FURTHER SUBMITTED THAT LD. CIT(A) RIGHTLY CONSIDERED THESE ASPECTS IN THEIR PROPER PERSPECTIVE AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE LIGHT OF THE DECISIONS OF THE JURISDICTIONAL HIGH COURT IN THE C ASES OF CIT VS. 7 SALORAINTERNATIONAL LTD (2009) 308 ITR 199 (DEL) AN D CIT VS. PEPSICO INDIA HOLDINGS PRIVATE LIMITED (2012) 207 TAXMAN 5 (DEL). HE FURTHER SUBMITTED THAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10, A COORDINATE BENCH OF THIS TRIBUNAL ACCEPTED THE CONTENTION OF T HE ASSESSEE IN ITA NO. 3812/DEL/2015 AND ON THAT ASPECT PLACED RELIANCE ON THE DECISIONS OF THE HONBLE DIRECTIONAL HIGH COURT IN THE CASES OF PEPS ICO INDIA HOLDINGS (SUPRA) AND CIT VS. ORIENT CERAMICS AND INDUSTRIES LTD (201 3) 358 ITR 49. HE SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE A SSESSMENT YEAR 2008-09 ARE IDENTICAL TO THE FACTS INVOLVED IN THE ASSESSME NT YEARS 2009-10 AND 2010- 11. 11. ON A PERUSAL OF THE ORDER DATED 7/1/2019 IN ITA NO. 3812/DEL/2015 FOR ASSESSMENT YEAR 2009-10 IN ASSESSEES OWN CASE, WE FIND THAT THE A COORDINATE BENCH OF THIS TRIBUNAL CONSIDERED THE CO NTENTIONS ON EITHER SIDE IN THE LIGHT OF THE DECISIONS CITED BEFORE THEM AND REACHED A CONCLUSION THAT THE DECISIONS IN THE CASES OF PEPSICO HOLDINGS INDI A PRIVATE LTD (SUPRA) AND ORIENT CERAMICS AND INDUSTRIES LTD (SUPRA) ARE APPL ICABLE TO THE FACTS OF THE CASE. FURTHER, SINCE THE GENUINENESS OF THE EXPEND ITURE IS NOT IN DISPUTE AND THE DISPUTE IS ONLY REGARDING CAPITAL OR REVENUE EX PENDITURE IN NATURE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON GLOW SIGN BOARDS AND A NEON SIGN BOARDS IS REVENUE IN NATURE AND ALLOWABLE AS DEDUCTION UNDER SECTION 37 (1) OF THE ACT. 12. IN THE ABSENCE OF ANY COMPELLING REASONS TO TAK E A DIFFERENT VIEW IN ASSESSEES OWN CASE FOR AN EARLIER YEAR, WE FIND IT DIFFICULT TO DEVIATE FROM THE VIEW TAKEN BY A COORDINATE BENCH OF THIS TRIBUN AL IN ASSESSEES OWN CASE FOR THE SUBSEQUENT YEAR, NAMELY, 2009-10. WE, ACCOR DINGLY, RESPECTFULLY 8 FOLLOWING THE DECISIONS OF THE HONBLE JURISDICTION AL HIGH COURT AND ALSO THE VIEW TAKEN BY A COORDINATE BENCH OF THIS TRIBUNAL I N ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 HOLD THAT THE FINDINGS OF LD. CIT(A) ON THIS ASPECT DO NOT SUFFER ANY INFIRMITY AND NO INTERFERE NCE BY US IS WARRANTED. WE ACCORDINGLY DISMISS GROUND NO. 2 OF REVENUES AP PEAL. 13. THIRD GROUND IN THIS REVENUES APPEAL IS IN REL ATION TO THE DEPRECIATION ON POS TERMINALS AT 60%. ASSESSEE CLAIMED DEPRECIAT ION ON POS TERMINALS AT 60% BY TREATING THE SAME AS PART OF BLOCK OF ASSETS COMPUTERS WHEREAS THE LEARNED ASSESSING OFFICER TREATED THE SAME AS PART OF PLANT AND MACHINERY BLOCK AND ALLOWED DEPRECIATION AT 15%. LD. CIT(A) F OLLOWED THE DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF AC IT VS. M/S CONNAUGHT PLAZA RESTAURANTS (P) LTD IN ITA NO. 5466/DEL/2013 AND ALLOWED DEPRECIATION AT 60%. 14. IT IS THE ARGUMENT OF THE LD. DR THAT THE POS T ERMINALS ARE VERY CLEARLY DISTINGUISHABLE FROM COMPUTERS IN ALL SENSE OF TERM S BE IT STRUCTURALLY OR FUNCTIONALLY AND LEARNED ASSESSING OFFICER HAD DISC USSED THE DIFFERENCE BETWEEN THESE TWO ELABORATELY. SHE SUBMITS THAT A C OMPUTER IS AN ELECTRONIC DEVICE THAT TAKES INPUT OR OUTPUT SUCH AS NUMBERS, TEXT, SOUND, IMAGES, ANIMATIONS, VIDEO ETC., PROCESSES IT, AND CONVERTS IT INTO MEANINGFUL INFORMATION THAT COULD BE UNDERSTOOD, PRESENTING TH E CHANGEED INPUT I.E., PROCESSES INPUT AS OUTPUT; WHEREAS A PAYMENT TERMIN AL (POINT OF SALE TERMINAL POS TERMINAL) OR CREDIT CARD TERMINAL IS A DEVICE WHICH INTERFACES WITH THE PAYMENT RECORDS TO MAKE ELECTRONIC FUND TR ANSFERS AND IS AN ELECTRONIC DEVICE USED TO PROCESS CARD PAYMENTS AT A RETAIL LOCATIONS. SHE FURTHER SUBMITTED THAT A POS TERMINAL GENERALLY REA DS THE INFORMATION OF A CUSTOMERS CREDIT OR DEBIT CARD, CHECKS WHETHER THE FUNDS IN A CUSTOMERS 9 BANK ACCOUNT ARE SUFFICIENT, TRANSFERS THE FUNDS FR OM THE CUSTOMERS ACCOUNT TO THE SELLERS ACCOUNT,RECORDS THE TRANSACTION AND PRINTS A RECEIPT. 15. SHE FURTHER SUBMITTED THAT THE COMPUTER ACCESSO RIES AND PERIPHERALS CANNOT BE USED WITHOUT THE COMPUTER AND THAT IS THE REASON WHY THEY ARE THE PARTS OF THE COMPUTER SYSTEM AND ENTITLED TO DE PRECIATION AT THE HIGHER RATE OF 60%. WHILE REFERRING TO THE DECISIONS IN TH E CASE OF CIT VS. BSES RAJDHANI POWERS LTD, ITO VS. SAMIRAN MAJUMDAR (2006 ) 98 ITD 119 (KOLKATA- TRIB) AND EXPEDITERS INTERNATIONAL (INDIA) PRIVATE LIMITED VS. CIT SHE SUBMITTED THAT THE COMPUTER ACCESSORIES LIKE PRINTE R, CPU, MOUSE, KEYBOARD ETC FORM PART OF COMPUTERS; WHEREAS THE POS IS NEIT HER A PART OF COMPUTER NOR ITS PERIPHERY AND IT IS PATENTLY A DIFFERENT M ACHINE WHICH NEITHER HAS A CPU, HARD DISK, MOTHERBOARD, MONITOR OR MOUSE WHICH ARE THE SIN-QUA-NON FOR PLACING A DEVISE IN THE CATEGORY OF COMPUTER. A CCORDING TO HER, POS IS A SIMPLE DEVICE USED TO MAKE PAYMENTS WHICH USES A SP ECIFIC PRELOADED SINGLE SOFTWARE-PROGRAMME WHEREIN THE COMPANY RETAILER ENT ERS PRODUCTS DETAILS, PRICE, CUSTOMERS MOBILE NUMBER WHICH THE POS SENDS TO HOST AFTER VALIDATING THE RETAILER AND AN CRYPTIC RESPONSE IS RECEIVED FROM THE HOST REQUESTING FOR PAIN FOR SUCCESSFUL TRANSACTION LEAD ING TO THE PRINTING RETAILERS COPY AND CUSTOMERS COPY. BASING ON THIS HE SUBMITS THAT AT BEST A POS IS A SMART DEVICE AND CERTAINLY NOT A COMPUTER. 16. LD. DR PLACED RELIANCE ON THE DECISION OF THE H ONBLE MADRAS HIGH COURT IN THE CASE OF M/S DINAMALAR, TIRUNELVELI VS. ITO IN TCA NO. 624 OF 2016 WHERE THE ASSESSEE CLAIMED DEPRECIATION ON CAN ON LIDE, SCANNER, COMPUTERISED ACCOUNTING AND STACKING MACHINES, TRAN SPORTATION CHARGES, CTP MACHINE, SCANNER, CISCO ROUTER, MODEM, COMPUTER ISED COUNTING AND STACKING (F/C), CTP MACHINE (CLEARING CHARGES), CTP MACHINE (ERECTION) 10 TREATING IT AS COMPUTERS. LD. ASSESSING OFFICER DIS ALLOWED THE HIGHER CLAIM OF DEPRECIATION AT 60% BY HOLDING THAT THE SAID MACHIN ERIESWERE COMPUTERISED MACHINES AND WERE NOT COMPUTERS CLASSIFIED IN THE D EPRECIATION TABLE. 17. LD. CIT(A), IN THE CASE OF M/S DINAMALAR (SUPRA ), UPHELD THE DECISION OF THE LEARNED ASSESSING OFFICER BY OBSERVING THAT INC REASINGLY ORGANISATIONS ARE MOVING TOWARDS COMPUTERISED INTEGRATED MANUFACTURIN G, WHERE MORE AND MORE COMPUTERS, ROBOTS, AND MICROPROCESSORS ARE USE D IN CONJUNCTION WITH THE MACHINES; THAT SUCH MACHINES CANNOT BE CALLED A S COMPUTERS EVEN THOUGH COMPUTER IS AN INTEGRAL AND A DEDICATED PART OF THE WHOLE MACHINE; THAT COMPUTER IN THE MACHINE CANNOT BE USED FOR ANY OTHER PURPOSE; THAT FOR EXAMPLE A COMPUTERISED NUMERICALLY CONTROLLED LATHE MACHINE HAS A COMPUTER AND MICROPROCESSOR TO CONTROL THE MOVEMENT S OF THE SPINDLE BUT THAT CANNOT MAKE SUCH MACHINE A COMPUTER AND STILL DOES MACHINING, CUTTING METAL AND CREATING SHAPES IN THE METAL BUT IT IS MO RE AUTOMATED AND IT EVEN BY REPROGRAMMED INSTRUCTIONS THROUGH THE COMPUTER. 18. LD. DR FURTHER SUBMITS THAT IN THE ABOVE CASE L D. CIT(A) FURTHER OBSERVED THAT AS PER THE SCHEDULE OF DEPRECIATION, THE RATE AT 60% OF DEPRECIATION IS ALLOWABLE ONLY TO COMPUTERS AND AT BEST MAY INCLUDE ACCESSORIES LIKE SERVERS, SCANNER, CISCO ROUTER MOD EM ETC AS HELD IN THE DECISIONS CITED BEFORE LD. CIT(A) BY THE ASSESSEE, BUT CAN NEVER INCLUDE THE MISSIONS ACQUIRED BY THE ASSESSEE IN THAT CASE. LD. CIT(A), IN THAT CASE, APPLIED FUNCTIONALITY TEST AND HELD THAT ONLY THE A SSETS LIKE LAPTOPS, SERVERS, PRINTERS, SCANNERS, CISCO ROUTERS, MODEM, LAPTOP MO USE, PROJECT, PEN DRIVE, NETWORK EQUIPMENT, ROUTER PACK DESKTOP WITH MONITOR , IBM SAN SWITCHES ARE INTEGRAL PARTS OF COMPUTER BAND WHICH CANNOT BE USED WITHOUT BEING ATTACHED TO THE COMPUTERS-ALONE ARE COMPUTERS OR CO MPUTER ACCESSORIES OR 11 PERIPHERALS. TRIBUNAL UPHELD THE DECISION OF THE LD . CIT(A) IN THE CASE AND IT WAS CONFIRMED BY THE HONBLE HIGH COURT. 19. LD. DR, THEREFORE, BY IMPORTING THE CORE ARGUME NT FROM THE ABOVE DECISION, SUBMITTED THAT AT THE MOST COMPUTER PERIP HERALS CAN QUALIFY FOR CLAIMING DEPRECIATION AT 60% BUT A POS CANNOT QUALI FY AS A COMPUTER WITHIN THE MEANING OF EXPLANATION (XI) TO SECTION 36 OF TH E ACT. ON THE SAME ANALOGY, LD. DR SUBMITS THAT IN TODAYS ERA, THE WO RLD IS GOING SMART WITH ALL DAY TO DAY DEVICES BEING SMART AND ESSENTIALLY WORK OUR COMPUTER DIGITAL SOFTWARE AND A SMART PHONE IS A DEVICE EMBEDDED WIT H MACHINE TO MACHINE AND/OR COGNITIVE COMPUTING TECHNOLOGIES SUCH AS ART IFICIAL INTELLIGENCE (AI), MACHINE LEARNING OR DEEP LEARNING, ALL OF WHICH IT USES TO REASON, PROBLEM SOLVING, MAKE DECISIONS AND EVEN, ULTIMATELY, TAKE ACTION WHICH INCLUDE ROBOTS, SELF DRIVING CARS AND OTHER COGNITIVE COMPU TING SYSTEMS THAT ARE ABLE TO MAKE DECISIONS AND SOLVE PROBLEMS WITHOUT HUMAN INTERVENTION. ACCORDING TO HER, IF THE LOGIC OF THE ASSESSEE IS A CCEPTED, ALL DEVICES WHICH RUN ON COMPUTER SOFTWARE WOULD QUALIFY AS COMPUTERS WHETHER IT IS MOBILE PHONES, WASHING MACHINES, DIGITAL CAMERA, MRI MACHI NES, ROBOTS, SELF- DRIVING CARS, CHILDREN SMART TOYS ETC. BASING ON TH IS THE LD. DR SUBMITS THAT CERTAINLY THIS IS NOT THE INTENT OF LEGISLATURE AND THE EXPRESSION COMPUTERS CANNOT BE TWISTED AND CARRIED TOO FAR TO VITIATE TH E INTENT OF LEGISLATURE. SHE, HOWEVER, FURTHER SUBMITTED THAT THERE IS NEED TO VE RIFY WHETHER THE POS TERMINALS WERE BOUGHT AS COMPUTERS OR POS TERMINALS . 20. PER CONTRA IT IS THE SUBMISSION ON BEHALF OF TH E ASSESSEE THAT ALL THESE CONTENTIONS ARE CONSIDERED BY THE HIGHER FORUM IN A PLETHORA OF DECISIONS AND WHILE GRANTING RELIEF TO THE ASSESSEE FOR THE A SSESSMENT YEAR 2009-10 IN ITA 3812/DEL/ 2015 WHILE UPHOLDING THE ORDER OF LD. CIT(A), A COORDINATE 12 BENCH OF THIS TRIBUNAL FOLLOWED THE RATIO OF THE DE LHI LD. PCIT VS. CONNAUGHT PLAZA RESTAURANTS (P) LTD IN ITA NO. 542/2016 BY OR DER DATED 20/9/2016. IN VIEW OF THE BINDING PRECEDENT LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT, THERE IS NOTHING ILLEGALITY OR IRREGULARITY IN THE CONCLUSIONS REACHED BY THE LD. CIT(A) AND GRANT DEPRECIATION AT 60% ON POS TERMINALS. 21. ON A CAREFUL READING OF THE ORDER DATED 7/1/201 9 IN ITA NO. 3812/DEL/2015 IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2009-10, WE FIND THAT THE TRIBUNAL FOLLOWED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CONNAUGHT PLAZA RESTAURANTS (SUPRA) WHEREIN THE ISSUE OF HIGHER RATE OF DEPRECIATION ON POS TERMINALS WAS CO NSIDERED AND THE DECISION OF THE TRIBUNAL GRANTING 60% DEPRECIATION THEREON WAS UPHELD. IN THE SAID DECISION HONBLE JURISDICTIONAL HIGH COURT NOTICING THAT THE LD. CIT(A) IN ASSESSEES OWN CASE FOR THE ASSESSMENT YE AR 2008-09 HELD THAT THE ASSESSEE WAS ENTITLED TO THE DEPRECIATION AT 60% ON THE GROUND THAT THE EQUIPMENT WAS AKIN TO A COMPUTER AND SUCH A FINDING WAS CONCURRED BY THE ITAT. AFTER THAT THE HONBLE HIGH COURT HELD THAT A S AGAINST SUCH FINDINGS NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL ONE ARISES FOR A DETERMINATION AND, ACCORDINGLY, DISMISSED THE APPEAL OF THE REVENUE. 22. IT IS, THEREFORE, CLEAR THAT THE ISSUE IS NO LO NGER RES INTEGRA AND IS SQUARELY COVERED BY THE DECISION OF THE HONBLE HIG H COURT IN THE CASE OF CONNAUGHT PLAZA RESTAURANTS (SUPRA) WHICH THE COORD INATE BENCH OF THIS TRIBUNAL FOLLOWED IN ASSESSEES OWN CASE FOR ASSESS MENT YEAR 2009-10. SINCE THE FACTS ARE IDENTICAL AND ARE COVERED BY THE DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE FIND IT DIFFICULT TO COUNTENANCE THE ARGUMENTS ADVANCED ON BEHALF OF THE REVENUE. WHILE RESPECTFUL LY FOLLOWING THE SAME WE HOLD THAT THIS GROUND OF REVENUE IS DEVOID OF AN Y MERITS AND IS LIABLE TO 13 BE DISMISSED. WE ACCORDINGLY UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS GROUND NO. 3. 23. NEXT GROUND THAT ARISES FOR OUR CONSIDERATION I S THE DISALLOWANCE OF DEPRECIATION ON UPS. THE QUESTION IS WHETHER THEY D EPRECIATION COULD BE ALLOWED AT 60% AS CLAIMED BY THE ASSESSEE TREATING IT AS THE COMPUTER PERIPHERY OR AT 15% AS RESTRICTED BY THE LEARNED AS SESSING OFFICER BY TREATING IT AS FALLING WITHIN PLANT AND MACHINERY BLOCK. 24. LD. DR PLACED RELIANCE ON THE DECISION IN THE C ASE OF NESTL INDIA LIMITED VS. DCIT 111 TTJ 498 (DEL) WHEREIN THE TRIB UNAL HELD THAT THE DEPRECIATION ON UPS IS NOT TO BE ALLOWED AT 60%. HO WEVER SUBSEQUENTLY THERE ARE MANY DECISIONS ON THIS ASPECT AND MORE PA RTICULARLY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BSES YAMUNA POWER LTD (2013) 358 ITR 47 HELD THAT UPS FORMS PART OF THE COMPUTER PERIPHE RY AND DEPRECIATION AT A 60% IS ALLOWABLE. IN VIEW OF THIS SETTLED POSITION BY THE SAID JUDGEMENT, WE DO NOT FIND ANY MERITS IN THE CONTENTION OF THE REV ENUE AND GROUND NO. 4 IS ACCORDINGLY DISMISSED. 25. LASTLY, GROUND NO. 5 RELATES TO THE DISALLOWANC E UNDER SECTION 14 A. THERE IS NO DISPUTE THAT DURING THE YEAR UNDER CONS IDERATION NO EXEMPT INCOME IS DERIVED BY THE ASSESSEE. IN VIEW OF THE D ECISIONS OF THE JURISDICTIONAL HIGH COURT IN THE CASES OF LD. PCIT VS. MCDONALDS INDIA LTD (2019) 101 TAXMANN.COM 86, CHEMINVEST LTD VS. CIT ( 2015) 378 ITR 33 AND LD. PCIT VS.IL & FS ENERGY DEVELOPMENT COMPANY LTD (2017) 399 ITR 483 IN THE ABSENCE OF ANY EXEMPT INCOME EARNED BY THE ASSE SSEE IN THE FINANCIAL YEAR RELEVANT TO THE CONCERNED ASSESSMENT YEAR, NO DISALLOWANCE COULD BE MADE UNDER SECTION 14 A OF THE ACT. ISSUE IS NO LON GER RES INTEGRA AND WELL SETTLED BY THE AFORESAID JUDGEMENTS. WE THEREFORE D O NOT FIND ANY REASON TO 14 INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) ON TH IS ASPECT AND BY UPHOLD THE SAME WHILE DISMISSING GROUND NO. 5 OF THE APPEAL. ITA NO. 3766/DEL/2015. 26. THIS APPEAL RELATES TO THE ASSESSMENT YEAR 2010 -11. ISSUES INVOLVED IN THIS APPEAL ARE RELATING TO THE DEPRECIATION ALLOWA BLE ON POS TERMINALS AND THE ALLOWANCE OF THE EXPENDITURE ON ACCOUNT OF LEGA L, PROFESSIONAL AND CONSULTANCY EXPENSES. THESE TWO ISSUES ARE DEALT WI TH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN THE PRECEDI NG PARAGRAPHS VIDE GROUNDS NO. 3 AND 2 RESPECTIVELY AND ALSO BY THE CO ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE BY ORDER DATED 7/1/ 2019 IN ITA NO. 3812/DEL/2015. FACTS ARE IDENTICAL FOR THESE TWO YE ARS. WE, THEREFORE, WHILE FOLLOWING THE SAME REASONING REACH A CONCLUSION THA T DEPRECIATION AT 60% IS ALLOWABLE ON THE POS TERMINALS AND THAT THE EXPENDI TURE ON ACCOUNT OF ADVERTISEMENT AND MARKETING IS REVENUE IN NATURE. I N VIEW OF THIS FINDING, THIS APPEAL ALSO FAILS AND IS, THEREFORE, LIABLE TO BE DISMISSED. THIS APPEAL IS, ACCORDINGLY, DISMISSED. 27. IN THE RESULT BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 15 TH FEBRUARY, 2019 SD/- SD/- (R.K. PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH FEBRUARY, 2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR, ITAT 15 DRAFT DICTATED ON DRAFT PLACED BEFORE AUTHOR DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON DATE OF UPLOADING ORDER ON THE WEBSITE FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.