Bharti Hexacom Ltd, V. DCIT Circle 2 (1),

ITA 5003/DEL/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1024 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 26-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Retrospective amendment; Bad and doubtful debts; Set aside
• Section: 115JB; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : D NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.5003/DEL./2007 (ASSESSMENT YEAR : 2004-05) M/S BHARTI HEXACOM LIMITED, VS. DCIT, CIRCLE 2(1) , H-5/12,QUTAB AMBIENCE, NEW DELHI. MEHRAULI, NEW DELHI. PAN/GIR NO.AAACH1766P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL BHALLA, REVENUE BY : SMT. KAVITA BHATNAGAR,CIT(DR) ORDER PER C.L. SETHI, JM THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, NEW DELHI DATED 27.9.2007 F OR ASSESSMENT YEAR 2004-05. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS E RRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICE R IN ALLOWING DEPRECATION ON COMPUTER ACCESSORIES AND PERIPHERALS @ 25% THE RATE APPLICABLE TO PLANT & MACHINERY BLOCK OF ASSETS INS TEAD OF THE RATE OF 60% APPLICABLE TO COMPUTER BLOCK OF ASSETS ALLOWABLE O N TERMS OF SECTION 32 .R.W.RULE 5 READ WITH APPENDIX 1 OF THE I.T. RULES, 1962. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED BOTH ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICE R IN WRONGLY DETERMINING THE BOOK PROFIT AT RS.38,05,69,000 U/S 115JB OF T HE ACT INSTEAD OF RS.36,98,87,000 DECLARED BY THE APPELLANT COMPANY B Y ADDING BACK PROVISION FOR DOUBTFUL DEBTS AMOUNTING TO RS.1,06,82,000/- TO THE RETURNED BOOK PROFIT U/S 115JB OF THE ACT. 2. BRIEF FACTS REGARDING GROUND NO.1 ARE THAT IT IS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE FRESH ADDITIONS TO THE FIXED ASSETS OF RS.2480090/- IN COMPUTER AND COMPUTER ACCESSORIES AND HAS CLAIMED DEPRECIATION @ 60% ON THE SAME. IT IS OBSERVED I.T.A. NO.5003/DEL./2007 (A.Y. : 2004-05) 2 BY THE ASSESSING OFFICER THAT AS PER THE APPENDIX 1 (RULE 5 OF I.T. RULES), ONLY COMPUTERS AND COMPUTER SOFTWARES ARE ENTITLED FOR D EPRECATION @ 60%. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEPRECATION CLAIMED @ 60% SHOULD NOT BE DISALLOWED ON COMPUTER PERIPHERALS TREATING THIS PLANT AND MACHINERY. IN REPLY, THE ASSESSEE HAS FILED ITS REPLY ALONG WITH A CHART FURNISHING THE DETAILS OF ADDITIONS TO FIXED ASSETS AND COMPUTER ACCESSORIES AND PERIPHERA LS WHICH WERE PUT TO USE FOR MORE THAN 180 DAYS AND LESS THAN 180 ON WHICH DEPRECIATI ON @ 60% AND 30% HAS BEEN CLAIMED RESPECTIVELY. THE ASSESSING OFFICER WAS NO T SATISFIED. IT WAS HELD BY HIM THAT DEPRECATION @ 60% IS ALLOWABLE ONLY ON COMPUTERS AN D COMPUTER SOFTWARES AND SINCE PRINTERS, UPS ETC. ARE NOT INTEGRAL PART OF COMPUTE R SYSTEM, DEPRECATION ON THE SAME IS ALLOWABLE ONLY @ 25%. ACCORDINGLY, HE MADE DISALLO WANCE OF DEPRECIATION TO THE EXTENT OF RS.302991/-. BEING AGGRIEVED, THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) , BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. IT WAS SUBMITTED BY THE LD.AR OF THE ASSESSEE TH AT THE ASSESSING OFFICER HAS OVERLOOKED AN IMPORTANT FACT THAT THE COMPUTER ACCE SSORIES AND PERIPHERALS ARE PART AND PARCEL OF THE COMPUTER AND HAVE NOT BEEN PURCHASED OR USED INDEPENDENTLY AND THERE IS NO SEPARATE RATE OF DEPRECATION NOTIFIED SO AS TO J USTIFY THE IMPOSITION OF RATE OF 25% APPLICABLE TO PLANT AND MACHINERY BLOCK OF ASSETS. RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDERED IN TH E CASE OF CIT VS. DELHI AIRPORT SERVICES AS REPORTED IN 255 ITR 91. 4. THE LD.DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT CITED BY THE LD.AR OF THE ASSESSEE. WE FIND THAT THE ASSESSING OFFICER HAS A LLOWED DEPRECATION @ 60% WITH REGARD TO COMPUTERS AND COMPUTER SOFTWARES, BUT ON COMPUTE R PRINTERS, UPS SERVER BATTERIES ETC., THE ASSESSING OFFICER HAS ALLOWED DEPRECATION @ 25% AS AGAINST 60% CLAIMED BY THE ASSESSEE. THESE ITEMS BEING COMPUTER PRINTERS, UPS AND SERVER BATTERIES ETC. HAVE BEEN PURCHASED ALONG WITH THE COMPUTERS AND ARE USED IN CONJUNCTION WITH THE COMPUTER. I.T.A. NO.5003/DEL./2007 (A.Y. : 2004-05) 3 5. IN THE LIGHT OF THESE FACTS, NOW, WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE O F CIT VS. DELHI AIRPORT SERVICES (SUPRA). IN THAT CASE, THE DISPUTE WAS REGARDING R ATE OF DEPRECIATION ALLOWABLE ON AIR- CONDITIONER FIXED IN A BUS. THE DISPUTE WAS WHETHER DEPRECIATION ON SUCH AIR-CONDITIONER IS ALLOWABLE AS PER THE RATE APPLICABLE TO THE BUS OR AS PER THE RATE APPLICABLE TO AIR- CONDITIONER WHEN SEPARATE RATE OF DEPRECATION HAVE BEEN PROVIDED FOR MOTOR VEHICLES AND AIR-CONDITIONING PLANT. IN THAT CASE, THE ASSESSING OFFICER ALLOWED DEPRECIATION ON AID- CONDITIONER @ 15% AND NOT @ 30% CLAIMED BY THE ASSE SSEE WHILE FOR THE REMAINING VALUE OF THE VEHICLE, DEPRECATION WAS ALLOWED @ 30% . THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). IN THAT CASE, HE ACCEPTED THE ASSESSEES CONTENTION AND DIRECTED FOR THE ALLOWANC E OF DEPRECIATION AT 30% ON THE AGGREGATE VALUE OF BUS AND AIR-CONDITIONING MACHINE RY. SUCH ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS CONFIRMED BY THE TRIBUN AL RELYING ON ITS EARLIER DECISION RENDERED IN THE CASE OF SMT. URMILA GOEL, AS REPORT ED IN 52 CTR 276 (DEL.). THE REVENUE BROUGHT THE MATTER BEFORE THE HONBLE HIGH COURT AND IT WAS HELD BY THE HONBLE HIGH COURT THAT NO INTERFERENCE IS CALLED F OR IN THE ORDER OF THE TRIBUNAL. SINCE IN THE PRESENT CASE ALSO, THE COMPUTER PERIPHERALS ARE USED IN CONJUNCTION WITH COMPUTER, WE ARE OF THE CONSIDERED OPINION THAT DEPRECATION H AS TO BE ALLOWED ON COMPUTER PERIPHERALS ALSO AT THE RATE APPLICABLE TO COMPUTER S I.E. 60% IN THE PRESENT CASE. WE HOLD SO BY ADOPTING THE SAME ANALOGY AS WAS ADOPT3ED IN THE CASE OF SMT. URMILA GLOEL (SUPRA) BY HONBLE DELHI HIGH COURT. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY. GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 6. THE FACTS REGARDING GROUND NO.2 OF THE APPEAL AR E THAT WHILE COMPUTING BOOK PROFIT OF THE ASSESSEE U/S 115JB OF THE I.T.ACT, TH E ASSESSING OFFICER HAS MADE AN ADDITION BY ADDING BACK PROVISION FOR DOUBTFUL DEBT S AMOUNTING TO RS.106.82 LAKHS. THIS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY RETROS PECTIVE AMENDMENT IN SECTION 115JB. THIS RETROSPECTIVE AMENDMENT HAS BEEN MADE BY FINAN CE (NO.2) ACT, 2009 WITH EFFECT FROM 1.4.2001. AS PER THIS AMENDMENT A NEW CLAUSE (I) WAS INSERTED IN EXPLANATION 1 TO SECTION 115JB(1) OF THE ACT AS PER WHICH WHILE COMP UTING BOOK PROFIT, THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN TH E VALUE OF ANY ASSET HAS TO BE ADDED I.T.A. NO.5003/DEL./2007 (A.Y. : 2004-05) 4 BACK IF THE SAME HAS BEEN DEBITED TO THE P&L A/C. SINCE, THE PROVISION FOR BAD AND DOUBTFUL DEBTS DEBITED BY THE ASSESSEE TO THE P&L A /C TO THE EXTENT OF RS.106.82 LAKH IS COVERED BY THIS CLAUSE (I) OF EXPLANATION 1 TO SECT ION 115JB(1), WE HOLD THAT THE ASSESSING OFFICER WAS RIGHT IN ADDING BACK THIS AMO UNT WHILE COMPUTING BOOK PROFIT. HENCE, GROUND NNO.2 OF THE ASSESSEE IS REJECTED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 8. ORDER PRONOUNCED IN OPEN COURT AT THE CONCLUSION OF THE HEARING ON 11.11.2009. SD/- SD/- (A.K. GARODIA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: NOV. 11, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-V, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT