Turbo Energy Limited, CHENNAI V. ACIT, CHENNAI

ITA 45/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0921 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 06-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: K SRINIVASAN
• Keywords: Depreciation; Additional depreciation; Question of law; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 45/MDS/2012 ASST. YEAR : 2006-07 M/S. TURBO ENGINEERING LTD, 67, CHAMIERS ROAD, CHENNAI 600 028 PAN : AAACT2916R. (APPELLANT) V. THE ASST. COMMISSIONER OF INCOME TAX, LARGE TAX PAYER UNIT, CHENNAI. (RESPONDENT) APPELLANT BY : MR. K. SRINIVASAN, CA RESPONDENT BY : MR. ANIRUDH RAI, CIT DR DATE OF HEARING : 04 FEB 2013 DATE OF PRONOUNCEMENT : 04 FEB 2013 O R D E R PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENNAI D ATED 29.11.2011 FOR THE ASST. YEAR 2006-07. THE ASSESSE E HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL :- ITA 45/MDS/12 2 1.1 CLAIM OF ADDITIONAL DEPRECIATION B.1,57,00,147 : THE CIT(A) ERRED IN UPHOLDING THE ORDER OF DCIT DISALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION CO NTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 1.2 THE CIT(A) FAILED TO APPRECIATE THAT THE RESTRI CTION REFERRED TO IN THE SECOND PROVISO TO SEC.32(1) IS NOT APPLICABLE TO CASES OF ASSETS FOR WHICH THE RATES OF DEPRECIATION IS ALLOWABLE ON THE COST OF ACQUISIT ION, AND WHICH IS GIVEN IN THE ACT ITSELF. THE RESTRICTI ON STATED IN THE SAID PROVISO IS APPLICABLE ONLY TO CASES W HERE THE RATE AS PROVIDED IN APPENDIX I TO INCOME TAX RULE S. 1.3 THE CIT(A) FAILED TO APPRECIATE THAT ASSETS ELIGIBL E FOR ADDITIONAL DEPRECIATION CONSTITUTE A BLOCK BY THEMS ELVES AND THEREFORE ADDITIONAL DEPRECIATION AS GIVEN IN T HE SAID SECTION OUGHT TO HAVE BEEN GRANTED WITHOUT ANY RESTRICTION. 2.1 EXPENDITURE ON SOFTWARE B.16,87,761 : THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE DC IT IN TREATING SOFTWARE EXPENSES AS CAPITAL EXPENDITURE. 2.2 THE CIT(A) OUGHT TO HAVE HELD FROM THE RECORDS THAT THE ITEMS OF SOFTWARE PURCHASED HAVE VERY LIMITED LIFE TIME AND HENCE A REVENUE EXPENDITURE. 2. THE FIRST ISSUE IN THE GROUNDS OF APPEAL IS WHE THER THE ASSESSEE IS ENTITLED FOR 50% OF ADDITIONAL DEPRECIA TION IN THE SUCCEEDING ASST. YEAR WHEN AN ASSET WAS PUT TO USE FOR LESS THAN 180 DAYS IN THE PRECEDING ASST. YEAR. ITA 45/MDS/12 3 3. AT THE TIME OF HEARING THE COUNSEL FOR THE ASS ESSEE SUBMITS THAT THIS TRIBUNAL HAS ALREADY HEARD SIMILA R MATTERS IN THE CASE OF ABI SHOWATECH INDIA LTD. V. ACIT. WE HAVE GONE THROUGH THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ABI SHOWATECH INDIA LTD V. ACIT IN ITA NOS.37 TO 42 & 2 47/MDS/2011 DATED 02.1.2013 WHEREIN THIS TRIBUNAL, FOLLOWING TH E DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MM FORGINGS LTD. V. ADDL. CIT (349 ITR 673) HELD THAT THE ASSESSEE IS N OT ENTITLED FOR 50% ADDITIONAL DEPRECIATION IN THE SUCCEEDING ASST . YEAR. TRIBUNAL HELD AS UNDER :- 21. WE HAVE HEARD BOTH SIDES AND PERUSED THE ORDER S OF THE AUTHORITIES BELOW. WE FIND THAT THIS ISSUE HA S BEEN DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT RECENTLY IN T HE CASE OF MM FORGINGS LTD V. ADDL.CIT (349 ITR 673 WHEREIN THE H ON'BLE HIGH COURT HELD THAT THE ASSESSEE IS NOT ENTITLED FOR 50 % ADDITIONAL DEPRECIATION IN THE SUBSEQUENT YEAR. THE HIGH COUR T WHILE HOLDING SO, HELD AS UNDER:- 2. AS FAR AS THE FIRST QUESTION OF LAW IS CONCERN ED, THE ONLY ISSUE TO BE CONSIDERED IS AS TO WHETHER THE AS SESSEE IS ENTITLED FOR THE WHOLE OF THE DEDUCTION PERMISSI BLE AS PROVIDED UNDER SECTION 32(1)(IIA) OF THE INCOME-TAX ACT, AS IT STOOD THEN. THE ASSESSMENT YEAR IS 2005-06. T HE PROVISION AS ORIGINALLY STOOD WAS AS UNDER : 'PROVIDED ... ITA 45/MDS/12 4 (IIA) IN THE CASE OF ANY NEW. MACHINERY OR PLANT (O THER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN.ACQUIRED A ND INSTALLED AFTER THE 31ST DAY OF MARCH, 2002, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM E QUAL TO FIFTEEN PER CENT. OF THE ACTUAL COST OF SUCH MACHIN ERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE ( II) :' 3. THE ASSESSING AUTHORITY BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT, RESTRICTED THE ALLOWABILITY OF THE DEPRECIATION TO 50 PER CENT. OF THE AMOUNT PERMISSIBLE UNDER SECTION 32(1) (IIA) OF THE ACT. ACCORDING TO THE APPELLANT, WHEN IT SATISFIED ALL THE CONDITIONS STIPULATED UNDER THE PROVISOS TO SECTION 32(1)(IIA) OF THE ACT, THE ASSESSING AUTHORITY OUGH T NOT TO HAVE RESTRICTED THE DEPRECIATION PERMISSIBLE UND ER THE SAID SECTION BY RESORTING TO THE SECOND PROVISO TO SECTION- 32(1) OF THE ACT. THE LEARNED COUNSEL, HOWEVER, FAIRLY POINTED OUT BEFORE US THAT IN THE S ECOND PROVISO TO SECTION 32(1) OF THE ACT, THAT VERY CLAU SE (IIA) ITSELF WAS INSERTED BY THE FINANCE ACT, 2002, WITH EFFECT FROM APRIL I, 2003. THEREFORE, IT WAS IMPERATIVE THAT ON AND AFTER APRIL I, 2003, THE CLAIM OF THE APPELLANT MADE UNDER SECTION 32(1) (IIA) OF THE ACT, HAD TO BE NECESSARILY ASSESSED BY APPLYING THE SECOND PROVISO TO SECTION 32(1) OF THE ACT. THEREFORE, WHEN THERE WAS STATUTORY STIPULATION PROVIDING FOR RESTRICTION TO 50 PER CENT. OF THE AMOUNT ALLOWABLE UNDER SECTION 32(1) ( IIA) OF THE ACT, NO FAULT CAN BE FOUND WITH THE CONCLUSI ON OF THE ASSESSING AUTHORITY AS WELL AS THAT OF THE APPE LLATE AUTHORITY AND THE TRIBUNAL IN HAVING AFFIRMED THE A CTION OF THE ASSESSING AUTHORITY. WE, THEREFORE, DO NOT F IND ANY SCOPE TO ENTERTAIN THE SAID QUESTION OF LAW. RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR ADDIT IONAL DEPRECIATION. WE CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. ITA 45/MDS/12 5 RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE H ON'BLE JURISDICTIONAL HIGH COURT AND THIS TRIBUNAL, WE DEC IDE THIS ISSUE AGAINST THE ASSESSEE. THE GROUNDS RAISED ON THIS I SSUE ARE REJECTED. 4. IN SO FAR AS THE SECOND ISSUE IS CONCERNED, THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE GROUNDS RAISED BY THE ASSESSEE WITH REGARD TO DISALLOWANCE OF EXPENSES INCURRED ON SOFTWARE TREATING AS CAPITAL EXPENDITURE BY THE ASSESSING OFFICER, A RE NOT PRESSED AND THEREFORE, REQUESTED THAT THIS GROUND MAY BE DISPOS ED OFF AS WITHDRAWN. IN VIEW OF THE SUBMISSIONS OF THE COUN SEL FOR THE ASSESSEE, WE DISMISS THIS GROUND AS NOT PRESSED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 6. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 4 TH DAY OF FEBRUARY 2013, AT CHENNAI. SD/- SD/- ( DR. O.K. NARAYANAN) (CHALLA NAGENDR A PRASAD) VICE PRESIDENT JUDICIAL MEMBE R CHENNAI, DATED : 04 FEBRUARY 2013 JLS. ITA 45/MDS/12 6 COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT-(A), (4) C.I.T., (5) D.R. (6) GUARD FILE