CHEMBUR NAGARIK SAHAKARI BANK LIMITED, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX-1(3)(2), MUMBAI

ITA 4673/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2183 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 30-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Question of law; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.4673/M/2017 ASSESSMENT YEAR: 2014-15 M/S. CHEMBUR NAGARIK SAHAKARI BANK LTD., 101-103, RUDRESH COMMERCIAL COMPLEX, 19 TH ROAD, NEAR DR. AMBEDKAR GARDEN, CHEMBUR, MUMBAI 400 071 PAN: AAAAT3491M VS. DCIT 1(3)(2), AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, CHURCHGATE, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RAVINDRA POOJARY, A.R. REVENUE BY : SHRI ARVIND KUMAR, D.R. DATE OF HEARING : 17.06.2019 DATE OF PRONOUNCEMENT : 25.06.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 28.04.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2014-15. 2. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE O RDER OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.6,90,651/-BY U PHOLDING THE ORDER OF AO RESTRICTING THE DEPRECIATION @ 15% AS AGAINST THE 60% CLAIMED BY THE ASSESSEE ON ATM MACHINES ON THE GROUND THAT THEY ARE NOT PART OF COMPUTER SYSTEM WHEREAS T HE ISSUE IN ITA NO.4673/M/2017 M/S. CHEMBUR NAGARIK SAHAKARI BANK LTD. 2 GROUND NO.2 IS AGAINST THE ORDER OF LD. CIT(A) UPHO LDING THE ORDER OF AO WHEREIN A DEPRECIATION ON UPS BATTERIES WERE ALLOWED @ 10% INSTEAD OF 60% CLAIMED BY THE ASSESSE E. 3. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE S UBMITTED BEFORE THE BENCH THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. SARASWAT INFOTECH LTD. IN ITA NO.12 43 OF 2012 ORDER DATED 15.01.2013 WHEREIN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. A.R. TH EREFORE PRAYED BEFORE THE BENCH THAT THE SAME MAY KINDLY BE DECIDE D BY ALLOWING THE GROUND RAISED BY THE ASSESSEE. 4. THE LD. D.R., ON THE OTHER HAND, FAIRLY AGREED T O THE CONTENTIONS OF THE LD. A.R. THAT THERE IS A DECISIO N OF THE HONBLE BOMBAY HIGH COURT ON THE ISSUE WHICH COVER THE DISP UTE SQUARELY. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AND ALSO THE ORDER OF THE HONBLE BOMBAY HIG H COURT AS REFERRED TO ABOVE, WE OBSERVE THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE WHEREIN IT HAS BE EN UPHELD THAT DEPRECIATION ON ATM MACHINES ARE TO BE ALLOWED @ 60%. THE QUESTION OF LAW RAISED IN THE CASE OF CIT VS. S ARASWAT INFOTECH LTD. (SUPRA) IS REPRODUCED AS UNDER: B) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ITAT WAS RIGHT IN HOLDING THAT DEPRECIATION ON ATM IS ALLOWABLE @ 60% IGNORING THE FACT THAT ATM IS A CASH DISPENSING MACHINE WITH A PROJECTOR AND THER EFORE IS IN NATURE OF PLANT AND MACHINERY AND THEREFORE DEPRECIATION SHOULD BE PROV IDED @ 15%. WHILE DECIDING THE ABOVE SUBSTANTIAL QUESTION OF LA W THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE REVENUE HAS FAI LED TO ITA NO.4673/M/2017 M/S. CHEMBUR NAGARIK SAHAKARI BANK LTD. 3 SHOW THAT THE FINDING OF THE TRIBUNAL ARE PERVERSE AND THUS UPHELD THE ORDER OF TRIBUNAL WHEREIN THE CO-ORDINAT E BENCH OF THE TRIBUNAL HAS HELD THAT UPS AND ATM ARE TO BE AL LOWED @ 60%. THE RELEVANT FINDING OF THE SAID DECISION IS AS UNDER: 2) THE RESPONDENT ASSESSEE IS A SUBSIDIARY OF SARA SWATCO. OP. BANK LIMITED AND PROVIDES SOFTWARE DEVELOPMENT, INFORMATION TECHNOLO GY AND ENABLED SERVICES TO ITS HOLDING COMPANY I.E. SARASWAT BANK. DURING THE COUR SE OF THE YEAR, THE RESPONDENT ASSESSEE HAD PURCHASED CERTAIN CAPITAL ASSETS SUCH AS UPS, ATM MACHINES AND SOFTWARE LICENCE TO INTER ALIA PROVIDE TECHNOLOGY S ERVICES TO ITS HOLDING COMPANY. THE RESPONDENT ASSESSEE CLAIMED DEPRECIATION ON UPS AND ATM MACHINES UNDER THE BLOCK OF COMPUTERS .@ 60% WHILE DEPRECIATION WA S CLAIMED ON SOFTWARE @ 30% (50% OR 60%) IN VIEW OF USE ONLY FOR A PAR.T OF THE YEAR. 3) THE ASSESSING OFFICER WAS OF THE VIEW THAT THE U PS AND ATMS WOULD NOT FALL UNDER THE CATEGORY OF COMPUTERS AND BEING PART OF P LANT AND MACHINERY/OFFICE EQUIPMENT WOULD BE ELIGIBLE FOR DEPRECIATION ONLY A T 15%. SIMILARLY, HE DISALLOWED THE CLAIM FOR DEPRECIATION ON SOFTWARE LICENCE ON T ILE GROUND THAT THE SAME WAS NOT PUT TO USE IN THE PREVIOUS YEAR TO THE ASSESSME NT YEAR 2008-09. CONSEQUENTLY THE EXCESS CLAIM OF DEPRECIATION MADE BY THE RESPON DENT ASSESSEE WAS DISALLOWED. 4) IN APPEAL THE CIT (APPEALS) UPHELD THE FINDINGS OF THE ASSESSING OFFICER. 5) IN SECOND APPEAL, THE TRIBUNAL BY ITS ORDER DAT ED 14/3/2012 HELD THAT UPS IS AN INTEGRAL PART OF THE COMPUTER SYSTEM AND REGULATE T HE FLOW OF THE POWER TO AVOID ANY KIND OF DAMAGE TO THE COMPUTER NETWORK DUE TO F LUCTUATION IN POWER SUPPLY WHICH COULD LEAD TO LOSS OF VALUABLE DATA. THE TRIB UNAL RELIED UPON THE DECISION OF THE DELHI HIGH COURT DATED 20/1/2011 IN THE MATTER OF CIT V. ORIENT CERAMICS AND INDUSTRIES LTD, IN WHICH UPS WAS HELD TO BE THE PAR T OF THE COMPUTER SYSTEM AND DEPRECIATION AT 60% WAS ALLOWED. SIMILARLY, SO FAR AS ATMS ARE CONCERNED, THE TRIBUNAL ON FINDING OF FACT CONCLUDED THAT ATM CANN OT FUNCTION WITHOUT THE HELP OF COMPUTER AND WOULD BE A PART OF THE COMPUTER USED I N THE BANKING INDUSTRY. RELIANCE WAS PLACED BY THE TRIBUNAL UPON THE DECISI ON OF THE DELHI BENCH OF TRIBUNAL IN THE MATTER OF DCIT V. GLOBAL TRUST BANK (ITA NO.474/0/09) WHEREIN IT HAS BEEN HELD THAT ATM WAS A COMPUTER EQUIPMENT AND DEP RECIATION @ 60% WAS ALLOWED. SO FAR AS THE USE OF SOFTWARE IS CONCERNED , THE TRIBUNAL RECORDS A FACT THAT THE EVIDENCE OF THE USE OF THE SOFTWARE ON 31/3/200 8 . WAS PRODUCED BEFORE THE TRIBUNAL. THUS, THE TRIBUNAL HELD THAT DEPRECIATION @ 30% ON SOFTWARE WAS RIGHTLY CLAIMED. 6) WE NOTE THAT THE TRIBUNAL HAS ARRIVED AT A FINDI NG OF FACT ON ALL THE THREE QUESTIONS. THE REVENUE HAS NOT BEEN ABLE TO SHOW TH AT THE ABOVE FINDING OF FACT IS PERVERSE. THUS, WE DO NOT SEE ANY REASON TO ENTERTA IN QUESTION (I), (II) AND (ILL) ABOVE. 6. WE, THEREFORE RESPECTFULLY FOLLOWING THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT, SET ASIDE THE ORDER OF L D. CIT(A) ITA NO.4673/M/2017 M/S. CHEMBUR NAGARIK SAHAKARI BANK LTD. 4 AND DIRECT THE AO TO ALLOW DEPRECIATION ON ATM MACH INE AND UPS BATTERIES @ 60%. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.06.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 25.06.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.