ACIT, Bangalore V. Sanyo India Pvt. Ltd., Bangalore

ITA 4307/DEL/2012

• Counselvise Citation: 430720114 RSA 2012
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: KAPIL NAYYAR; SHIVANGI MINHAS
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO. 4307/DEL/2012 ASSESSMENT YEAR: 2006-07 ACIT, CIRCLE 12(3), 14/3, 4 TH FLOOR, RASTROTHANA BHAVAN, (OPP. RBI), NRUPATHUNGA ROAD, BANGALORE. VS. SANYO INDIA PVT. LTD., 45, 2 ND FLOOR, JUBILEE BUILDING, MUSEUM ROAD, BANGALORE. PAN NO. AAJCS0730M (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SATPAL SINGH, SR. DR RESPONDENT BY: SH. KAPIL NAYYAR, AR & MS. SHIVANGI MINHAS, AR O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) DATED 26/03/2012 FOR A.Y. 2006-07. 2. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MARKETING AND TRADING OF CONSUMER ELECTRONIC AND ELECTRICAL PRODU CTS OF SANYO BRAND. THE PRODUCT RANGE INCLUDED THE AIR CONDITIONERS, WASHIN G MACHINES, REFRIGERATORS, MICROWAVE OVENS, DIGITAL CAMERAS, LCD PROJECTORS, F REEZERS ETC. IT HAD FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 8,06,96, 446/- WHICH WAS SUBSEQUENTLY REVISED AT A LOSS OF RS. 7,99,60,758/- . ITA NO. 4307/D/2012 2 3. THE ASSESSING OFFICER NOTICED THAT ITEMS ON WHIC H THE ASSESSEE HAD CLAIMED DEPRECIATION @ 60% UNDER THE HEAD COMPUTER S WERE ACTUALLY MERE ACCESSORIES OF THE COMPUTER RATHER THAN COMPUTERS . HE NOTED THAT ASSESSEE HAD CLAIMED ITEMS LIKE PRINTER, ADAPTER, S ERVER, VOIP, NETWORKING, UPS, ROUTER ETC. AS COMPUTERS THOUGH THEY WERE AC TUALLY EQUIPMENTS COMPRISED UNDER THE HEAD PLANT & MACHINERY. AFTER CONSIDERING THE DECISION IN THE CASE OF SCIENTIFIC ENGINEERING HOUS E (P) LTD., 157 ITR 86 AND CIT VS. TAJ MAHAL HOTEL [1971] 82 ITR 44 HELD THAT EQUIPMENTS IN QUESTION COULD NOT BE CONSIDERED ANYTHING BUT PLANT. HE, THEREFORE, ALLOWED DEPRECIATION AT THE RATE APPLICABLE TO PLANT AND MA CHINERY. 4. LD. CIT(A) DELETED THE DISALLOWANCE FOLLOWING TH E DECISION IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD., ITA NO. 1267/20 10 DATED AUGUST 31, 2010. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A) , THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE LD. CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE CIT(A) ERRED IN TREATING ROUTERS, SWITCHES, NETWORK CABLES, PRINTERS AND SERVERS AS COMPUTERS AND ALLOWING DEPRECIATION AT THE RATE APPLICABLE TO THE COMPUTERS WITHOUT APPRECIATING THAT ALTHOUGH TH E ABOVE EQUIPMENTS ARE FUNCTIONALLY INTEGRATED WITH ITA NO. 4307/D/2012 3 COMPUTERS, THEY THEMSELVES CANNOT BE TREATED AS COMPUTERS. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. 6. WE FIND THAT ON FACTUAL MATRIX LD. CIT(A) HAS OB SERVED AS UNDER: - 3.5 I HAVE DULY CONSIDERED THE ABOVE SUBMISSIONS OF THE LD. AR. DURING THE COURSE OF APPELLATE PROCEED INGS, I HAVE CALLED FOR THE BREAK-UP OF VARIOUS ITEMS FORMI NG PART OF THE DISALLOWANCE. I ALSO CALLED FOR SAMPLE BILLS OF VARIOUS ITEMS ON WHICH DEPRECIATION WAS CLAIMED @ 30%. IN RESPONSE TO THE SAME, IT HAS BEEN SUBMITTE D THAT, THIS BEING THE FIRST YEAR OF OPERATION, THE APPELLA NT HAD TO SET UP ITS SYSTEMS NETWORK FOR ITS NATION-WIDE OPER ATORS. THEREFORE, IN ADDITION TO BUYING COMPUTERS, IT INCU RRED FOLLOWING ADDITIONAL EXPENSES ON VARIOUS COMPUTER ACCESSORIES/PERIPHERALS AS UNDER: - S.NO. ITEMS AMOUNT 1. ROUTERS, SWITCHES AND NETWORK CABLES 79,84,156 2. PRINTERS 54,81,937 3. SERVER 58,70,035 ITA NO. 4307/D/2012 4 3.6 FOR ALL THESE ITEMS, THE APPELLANT HAD CLAIMED DEDUCTION @ 30% AT RS. 58,05,605/-, SINCE ALL THESE ITEMS HAD BEEN PUT TO USE FOR LESS THAN 180 DAYS. ON GOI NG THROUGH THE SAMPLE INVOICES/ BILLS SUBMITTED BY THE APPELLANT AND THE COPY OF LEDGER ACCOUNT, I FIND TH AT THE APPELLANTS HEAD OFFICE WAS LOCATED IN BANGALORE. T HEY HAVE SET UP BRANCHES/ SALES OFFICES IN SEVERAL CITI ES. THESE BRANCHES/ SALES OFFICES ARE CONNECTED EACH OT HER THROUGH A SERVER. THE SYSTEM NETWORK HAS BEEN PUT IN PLACE FOR CONNECTING THE BRANCH OFFICES WITH THE HE AD OFFICE BECAUSE OF WHICH ROUTERS, SWITCHES, NETWORKI NG CABLE, SERVERS ETC. HAVE BEEN INSTALLED. 7. LD. CIT(A) FURTHER OBSERVED THAT SERVERS, ROUTER S, SWITCHES, NETWORKING CABLE, AND PRINTERS CANNOT BE INDEPENDENTLY PUT TO USE. THEY BECOME FUNCTIONAL ONLY WHEN THEY ARE INTEGRATED INTO A WHO LE. THEREFORE, SERVERS, ROUTER, SWITCHES, NETWORK CABLES AND PRINTERS WERE HELD BY HIM AS PART OF COMPUTERS. 8. IN THE BACKDROP OF AFOREMENTIONED UN-CONTROVERTE D FACTUAL MATRIX, WE FIND THAT THE ISSUE IS NOW NO MORE RESINTEGRA IN VI EW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. M/S BONANZA PORTFOLIO LTD. (2011-TIOL-555-HC-DEL-IT) DATED AUGUST 10, 2011. I N THIS CASE HONBLE DELHI HIGH COURT CONSIDERED THE ASSESSEES CLAIM OF DEPRECIATION @ 60% ON COMPUTER PERIPHERALS LIKE PRINTERS, SCANNERS ETC. A ND HELD AS UNDER: - ITA NO. 4307/D/2012 5 SIMILARLY, WITH REGARD TO DEPRECIATION @ 60% ON COMPUTER PERIPHERALS, WE RELY UPON THE JUDGMENT OF THIS COURT IN COMMISSIONER OF INCOME TAX VS. CITICORP MARUTI FINANCE LTD. (ITA NO. 1712/2010 AND ITA 1714/2010 DECIDED ON 9 TH NOVEMBER, 2010) AND HELD THAT THE COMPUTER PERIPHERALS ARE ENTITLED TO DEPRECIATI ON @ 60%. 9. FURTHER IN THE CASE OF CIT VS. GALILEO INDIA PVT . LTD. 2011-TIOL-860- HC-DEL-IT DATED DECEMBER 19, 2011, THE ASESSEES CL AIM OF DEPRECIATION ON COMPUTER SOFTWARE PRINTERS, HUB, TICKET PRINTERS , ROUTERS AND SCANNERS ETC. @ 60% WAS CONSIDERED BY HONBLE DELHI HIGH COURT AN D THE SAME WAS UPHELD. WE, THEREFORE, DO NOT FIND ANY REASON IN T HE ORDER OF LD. CIT(A). 10. IN THE RESULT, THE DEPARTMENTS APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/12/2012 SD/- SD/- (R.K. GUPTA) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 07/12/2012 *KAVITA ITA NO. 4307/D/2012 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR