DCIT (OSD) 8(1), MUMBAI V. FUTURE SUPPLY CHAIN SOLUTIONS LTD, MUMBAI

ITA 4468/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4411 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2014
• Court: TRIBUNAL
• Keywords: Depreciation; Tax effect
• Section: 143(3)

Judgement Text

, , F, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.4468/MUM/2014 ASSESSMENT YEAR: 2008-09 DC IT (OSD) 8 ( 1 ), R. NO.204, 2 ND FLOOR, AAYAKAR BHAVAN M.K. RD. MUMBAI 400020 / VS. FUTURE SUPPLY CHAIN SOLUTION LTD. KNOWLEDGE HOUSE, SHYAM NAGAR, OFF JOGESHWARI VIKHROLI LINK ROAD, SHYAM NAGAR, JOGESHWARI (E), MUMBAI- 400060 (REVENUE) (RESPONDENT) P.A. NO. AAACF9650N REVENUE BY SHRI SANJEEV KASHYAP (DR) RESPONDENT BY M S. MEDHA NAIK ( OFFICER - TAXATION OF ASSESSEE COMPANY) / DATE OF HEARING : 04/01/2016 / DATE OF ORDER: 8/01/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1 6, FUTURE SUPPLY CHAIN SOLUTION 2 MUMBAI {(IN SHORT CIT(A)}, DATED 28.03.2014 FOR THE ASSESSMENT YEAR 2008-09, PASSED AGAINST THE ASSESSM ENT ORDER OF THE ASSESSING OFFICER (IN SHORT AO) U/S 143(3) OF THE ACT, ON THE FOLLOWING GROUNDS: '1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATI ON ON SAP SOFTWARE ACQUIRED BY THE ASSESSEE FROM PRIL WITHOUT APPRECIATING THE FACT THAT THE ASSESSE E HAD PURCHASED/ACQUIRED THE SAID SOFTWARE VIDE INVOICE DATED 31.03.2008 AND ASSESSEE HAD NOT FURNISHED ANY EVIDENCE TO SHOW THAT IT WAS PUT TO USE IN THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON SAP SOFTWARE ON THE BASIS OF SCREEN-SHOTS FILED BY THE ASSESSEE WHICH IN NO WAY ESTABLISH THAT THE SAP WAS INDEED IMPLEMENTED AND PUT TO USE BY THE ASSESSEE COMPANY IN FEBRUARY, 2008' 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y MS. MEDHA NAIK, OFFICER- TAXATION OF THE ASSESSEE C OMPANY ON BEHALF OF THE ASSESSEE AND BY SHRI SANJEEV KASHYAP, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE R EVENUE. 3. IT HAS BEEN ARGUED BY THE LD. DR THAT THERE WAS NO EVIDENCE TO ESTABLISH THAT SOFTWARE WAS USED DURING THE YEAR, AND THEREFORE, AO HAD RIGHTLY DISALLOWED DEPRECIATI ON ON THE SOFTWARE IN THE YEAR UNDER CONCERN. FUTURE SUPPLY CHAIN SOLUTION 3 3.1. ON THE OTHER HAND, IT HAS BEEN ARGUED ON BEHALF OF THE ASSESSEE THAT LD. CIT(A) HAS RECORDED DETAILED FIND INGS OF FACTS BEFORE ARRIVING AT THE CONCLUSION THAT SOFTWARE HAS BEEN USED BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONCE RN. IT WAS FURTHER ARGUED THAT NOTHING HAS BEEN BROUGHT ON RECORD TO NEGATE OR CONTROVERT THE FACTUAL FINDINGS OF LD. CIT(A). IT WAS ALSO SUBMITTED THAT THE GENUINENESS OF THE CLAIM HA S NOT BEEN DOUBTED, THE ONLY GRIEVANCE OF LD. AO WAS ABOUT USE R IN THE CURRENT YEAR THAT TOO ON FLIMSY GROUNDS THAT BILL O F SOFTWARE WAS DATED 31.03.2008 I.E., LAST DATE OF THE PREVIOU S YEAR. IT WAS SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT( A) IS IN ACCORDANCE WITH LAW AND FACTS AND SHOULD BE UPHELD. 3.2. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES. THE BRIEF F ACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD CLAIMED DEPRECIATION @ 30% IN RESPECT OF SAP SOFTWARE ACQUIRED AND PUT TO USE DURING THE YEAR. IT WAS NOTED BY THE AO THAT INVOICE OF THE SOFTWARE WA S DATED 31.03.2008, AND ACCORDINGLY, IT WAS PUT TO THE ASSE SSEE TO ESTABLISH THE USERS OF THE SOFTWARE DURING THE YEAR UNDER CONCERN. THE ASSESSEE MADE DETAILED SUBMISSIONS AND FURNISHED EVIDENCES TO SHOW THAT SOFTWARE WAS ACQUI RED MUCH EARLIER AND WAS PUT TO USE BY THE ASSESSEE, BUT SOM EHOW THE BILL WAS DATED 31.03.2008. BUT THE LD. AO WAS NOT S ATISFIED WITH THE RESPONSE AND THEREFORE, HE DISALLOWED THE CLAIM OF DEPRECIATION ON THE GROUND THAT PURCHASE BILL OF TH E SOFTWARE FUTURE SUPPLY CHAIN SOLUTION 4 DATE 31.03.2008 AND ASSESSEE WAS NOT ABLE TO ESTABL ISH ITS USER DURING THE YEAR UNDER CONCERN. 3.3. DETAILED SUBMISSION WERE MADE BEFORE THE LD. CIT(A ) AND FURTHER EVIDENCES WERE SUBMITTED TO SHOW USER OF TH E SOFTWARE DURING THE YEAR. LD. CIT(A) SENT THE MATTER TO THE AO FOR EXAMINATION OF SUBMISSIONS OF THE ASSESSEE AND ADDI TIONAL EVIDENCES FILED BY THE ASSESSEE AND FURNISHING A RE MAND REPORT. THEREAFTER, THE AO SENT REMAND REPORT TO TH E LD. CIT(A) WHEREIN ALLEGATIONS MADE IN THE ASSESSMENT ORDER WE RE REITERATED. THE LD. CIT(A) CONSIDERED ENTIRE MATERI AL AVAILABLE BEFORE HIM, AND THEREAFTER HELD THAT SOFTWARE WAS A CQUIRED BY THE ASSESSEE DURING THE YEAR UNDER CONCERN AND WAS VERY MUCH PUT TO USE BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. THE RELEVANT PARA OF HIS ORDER IS REPRODU CED BELOW: AS REGARDS ALLOWBILITY OF DEPRECIATION ON THIS CAP ITAL EXPENDITURE FOR THIS AY, THE SCREEN SHOTS FILED SHO W BOTH THE DOCUMENT DATE AND THE POSTING DATE, THE LAT TER IS EXPLAINED TO BE THE DATE OF ENTERING THE TRANSACTIO N AND CANNOT BE ALTERED ONCE IT IS ENTERED INTO THE SYSTE M. COPY OF THE SCREEN SHOTS FILED SHOW THE POSTING DATES AS FOLLOWS: 11/02/2008 (ENTRIES RELATING TO PANTALOON, HDFC), 16/02/2008 (ENTRIES RELATING TO KAVERI WAREHOUSING, HDFC) 11/03/2008 (ENTRIES RELATING TO KAVERI WAREHOUSING TDS PYB-CONTRACTORS, PUR-F GOODS MANUAL), ETC. 14/02/2008 (ENTRIES RELATING TO PETTY CASH WITH CJ, CONVEYANCE-STAFF) FUTURE SUPPLY CHAIN SOLUTION 5 LOOKING TO THE ABOVE, IT CAN BE SAID THAT SAP SOFTW ARE HAD BEEN PUT TO USE IN FEBRUARY, 2008, HENCE DEPRECIATI ON CANNOT BE DENIED. GROUND NO.2 IS ACCORDINGLY ALLOWE D. 3.4. THUS, FROM THE ABOVE IT IS EVIDENT THAT AFTER EXAM INING ALL THE EVIDENCES, LD. CIT(A) RECORDED A CLEAR FINDINGS THAT SOFTWARE WAS ACQUIRED BY THE ASSESSEE MUCH BEFORE 3 1 ST MARCH 2008. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE BEFORE US TO CONTROVERT THE FACTUAL FINDINGS RECORD ED BY THE LD. CIT(A). 3.5. IT IS FURTHER NOTED BY US THAT IN THIS CASE THE AS SESSEE FILED ITS RETURN AT LOSS OF RS.(-)9,63,36,075/- AND EVEN AFTER MAKING IMPUGNED ADDITION ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION FOR RS.79,18,500/-, THE ASSESSED INCOM E REMAINED AT LOSS OF RS.(-) 8,84,17,575/-. THUS, APP ARENTLY, THERE WAS NO MOTIVE WITH THE ASSESSEE TO MAKE A WRO NG CLAIM ON ACCOUNT OF DEPRECIATION. IT IS FURTHER NOTED BY US THAT IN THIS CASE, THE GENUINENESS OF THE CLAIM IS NOT DOUB TED. THE LD. AO HAS HIMSELF ALLOWED DEPRECIATION ON FULL VALUE O F THE SOFTWARE IN THE NEXT YEAR. TAX RATES ARE SAME IN BO TH THE YEARS. IN EFFECT, THERE IS NO LOSS TO THE REVENUE. EVEN, IF DEPRECIATION IS DISALLOWED IN THIS YEAR, THE ASSESS EE SHALL BE ELIGIBLE FOR DEPRECIATION IN THE NEXT YEAR ON HIGHE R AMOUNT OF OPENING AMOUNT OF WDV. FUTURE SUPPLY CHAIN SOLUTION 6 3.6. WE FIND THAT THIS KIND OF APPROACH ADOPTED BY THE REVENUE HAS CAUSED UNDUE HARDSHIP TO TAXPAYERS. IN THIS REGARD WE SHALL LIKE TO QUOTE HERE GUIDANCE GIVEN T O THE REVENUE IN ITS RECENT JUDGMENT BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. 358 ITR 2 95, THE RELEVANT PARA FROM THIS JUDGMENT IS REPRODUCED BELO W: 32. THIRDLY, THE REAL QUESTION CONCERNING US IS TH E YEAR IN WHICH THE ASSESSEE IS REQUIRED TO PAY TAX. THERE IS NO DISPUTE THAT IN THE SUBSEQUENT ACCOUNTING YEAR, THE ASSESSEE DID MAKE IMPORTS AND DID DERIVE BENEFITS UNDER THE ADVANCE LICENCE AND THE DUTY ENTITLEMENT PASS BOOK AND PAID TAX THEREON. THEREFORE, IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. WE ARE TOLD THAT THE RATE OF TAX REMAINED THE SAME IN THE PRESENT ASSESSMENT YEAR AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE DISPUTE RAISED BY THE REVENUE IS ENTIRELY ACADEMIC OR AT BEST MAY HAVE A MINOR TAX EFFECT. THERE WAS, THEREFORE, NO NEED FOR THE REVEN UE TO CONTINUE WITH THIS LITIGATION WHEN IT WAS QUITE CLEAR THAT NOT ONLY WAS IT FRUITLESS (ON MERITS) BU T ALSO THAT IT MAY NOT HAVE ADDED ANYTHING MUCH TO THE PUBLIC COFFERS. 33. FOR THE AFORESAID REASONS, WE DISMISS THE CIVIL APPEALS WITH NO ORDER AS TO COSTS, BUT WITH THE HOP E THAT THE REVENUE IMPLEMENTS ITS LITIGATION POLICY A LITTLE MORE PRACTICALLY AND A LITTLE MORE SERIOUSLY . 3.6. WE NOTE FROM THE FACTS OF THE CASE BEFORE US THAT REVENUE HAS FILED FRIVOLOUS APPEAL AND THAT TOO IN A CASUAL MANNER WITHOUT EXAMINING ANY FACTS AND FIGURES AND GIVING RISE TO THE LITIGATION. IT HAS BEEN OBSERVED BY THE SUPERIOR CO URTS TIME AND AGAIN THAT FRIVOLOUS LITIGATION CONSUMES PRODUCTIVE TIME AND ENERGY OF ENTIRE MACHINERY OF THE GOVERNMENT AS WEL L AS ALL THE FUTURE SUPPLY CHAIN SOLUTION 7 LITIGATING PARTIES. WE HOPE THAT REVENUE WOULD BE M ORE CAREFUL IN FUTURE WHILE FILING THE APPEAL. ONCE APPEAL IS F ILED, IT SHOULD BE CONTESTED SINCERELY AND AFTER BRINGING COMPLETE FACTS AND REQUISITE DOCUMENTARY EVIDENCES ON RECORD TO NEGATE THE FACTUAL FINDINGS OF THE FIRST APPELLATE AUTHORITY. THUS, WITH THESE OBSERVATIONS, WE DISMISS GROUNDS R AISED IN THE APPEAL FILED BY THE REVENUE. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JANUARY, 2016. SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; ' DATED : 8/01/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. $ %& / THE APPELLANT 2. '(%& / THE RESPONDENT. 3. * ( $ ) / THE CIT, MUMBAI. 4. * / CIT(A)- , MUMBAI 5. -. ' /0 , $ /01 , / DR, ITAT, MUMBAI 6. 2 3 / GUARD FILE. / BY ORDER, ( -$ ' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI