Appeal details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 63642 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 4 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-09-2012
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
26-07-2012
Assessment Year
2005-2006
Appeal Filed On
05-05-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE RESIDENT AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.521/BAN G/2011 (ASST. YEAR - 2005-06) M/S HEWLETT PACKARD INDIA SOFTWARE OPERATION PVT. LTD., SURVEY NO.192, WHITEFIELD, MAHADEVAPURA, BANGALORE-560 048. . APPELLANT PAN NO.AAACH7164B. VS. THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-II, BANGALORE. . RESPONDENT APPELLANT BY : SHRI MANOJ KUMAR, C.A RESPONDENT BY : SHRI S.K AMBASTHA, CIT DATE OF HEARING : 03-09-2012 DATE OF PRONOUNCEMENT : 14-09-2012 O R D E R PER N BARATHVAJA SANKAR, VICE RESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2005-06. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE ITA NO.521/B/11 2 COMMISSIONER OF INCOME-TAX - (APPEALS) LTU AT BAN GALORE DATED 28.02.2011. THE APPEAL ARISES OUT OF THE ASSESSMEN T COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN TREATING THE EXPENDITURE OF SOFTWARE PURC HASES AS CAPITAL EXPENDITURE AND DISALLOWING DEPRECIATION ON CERTAIN ASSETS, WHICH WERE PUT TO USE W.E.F 30.09.2004/31/03/2005. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WHICH IS ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, FILED ITS RETURN OF INCOME ON 31/10/2005 FOR THE ASSESSMENT YEAR 2005-0 6 DECLARING AN INCOME OF RS.59,12,97,005/-. SUBSEQUENTLY, THE ASS ESSEE FILED REVISED RETURN OF INCOME ON 28.7.2006 DECLARING AN INCOME O F RS.57,01,50,443/- STATING THAT THE ASSESSEE HAD ERR ONEOUSLY ADDED INTEREST INCOME OF RS.1,05,73,281/- TO BUSINESS PRO FITS INSTEAD OF REDUCING THE SAME AND CONSIDERING IT SEPARATELY. 4. THE RETURN OF INCOME OF THE ASSESSEE WAS TAKEN U P FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT U/S 143(3) VARI OUS ENQUIRIES WERE MADE. THE ASSESSING OFFICER OBSERVED THAT THE ASSE SSEE HAD CLAIMED ITA NO.521/B/11 3 THE EXPENDITURE ON SOFTWARE AS REVENUE EXPENDITURE BY DEBITING IT DIRECTLY TO PROFIT AND LOSS ACCOUNT. THE AO TREATE D THE SAME AS CAPITAL IN NATURE AND ALLOWED THE DEPRECIATION @60%. 5. `AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) WHO CONFIRMED THE SAME AND THE ASSESSEE IS IN SECON D APPEAL BEFORE US. 6. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SOFTWARE PURCHASED BY THE ASSESS EE WAS OPERATING SOFTWARE AND, THEREFORE, IT CANNOT BE CONSIDERED AS CAPITAL EXPENDITURE. HE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECI SION OF THE SPECIAL BENCH OF THE TRIBUNAL AT DELHI IN THE CASE OF M/S A MWAY INDIA ENTERPRISES REPORTED IN 301 ITR 81, WHEREIN THE SP ECIAL BENCH HAS LAID DOWN CERTAIN GUIDELINES FOR DETERMINATION OF T HE NATURE OF THE EXPENDITURE ON SOFTWARE. HE SUBMITTED THAT B BEN CH OF THE TRIBUNAL IN THE CASE OF M/S KODIAK NETWORKS (INDIA) VS. ACI T IN ITA NO.970/BANG/2011 HAS ALSO FOLLOWED THE SAME AND RE MITTED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIF ICATION AS TO WHETHER THE EXPENDITURE CLAIMED BY THE ASSESSEE SATISFIED A NY OF THE CONDITIONS ITA NO.521/B/11 4 LAID DOWN IN M/S AMWAY INDIA ENTERPRISES (CITED SUP RA). COPIES OF THE SAID ORDERS ARE PLACED BEFORE US. 7. HAVING GONE THROUGH THE MATERIAL ON RECORD, WE F IND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S AM WAY INDIA ENTERPRISES (CITED SUPRA) HAS LAID DOWN CRITERIA T O BE CONSIDERED FOR DETERMINING THE NATURE OF THE EXPENDITURE ON SOFTWA RE AND THE HONBLE DELHI HIGH COURT HAS CONFIRMED THE SAID DECISION VI DE ORDERS DATED 4 TH NOV, 2011. RESPECTFULLY FOLLOWING THE SAME, THIS I SSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RECONSIDER THE ISSUE IN THE LIGHT OF THE DECISION OF THE SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF M/S AMWAY INDIA ENTERPRISES (CITED S UPRA). 8. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. 9. COMING TO THE SECOND ISSUE REGARDING DISALLOWIN G DEPRECIATION ON CERTAIN ASSETS - 10. THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E ASSESSMENT PROCEEDINGS U/S 143(3), THE ASSESSEE WAS ASKED TO F URNISH THE DETAILS OF ASSETS ACQUIRED IN THE LAST WEEK OF SEPTEMBER AN D MARCH & THE AO ITA NO.521/B/11 5 NOTICED FROM THE SAID DETAILS THAT NUMBER OF ASSETS THE TOTAL COST VALUE OF WHICH CAME TO RS.1,53,38,362/- WAS CLAIMED TO HA VE BEEN PURCHASED ON 30.09.2004 AND CAPITALIZED. IT WAS AL SO NOTICED THAT THE DEPRECIATION WAS CLAIMED ACCORDINGLY. HE ALSO OBSE RVED THAT ASSETS COSTING IN ALL RS.2,72,11,145/- ARE CLAIMED TO HAVE BEEN PURCHASED ON 31.3.2005 AND CAPITALIZED ON THE SAME DAY BY COMMIS SIONING AND PUT TO USE AND OBSERVING THAT MANY OF THE ITEMS INVOLVE D INSTALLATION, COMMISSIONING AND NETWORKING ETC. AND COULD NOT HAV E BEEN PURCHASED, DELIVERED AT THE FACTORY SITE AND INSTAL LED IN WORKPLACE, COMMISSIONED AND OPERATIONALIZED ALL ON THE SAME DA Y, THE AO DISALLOWED THE CLAIM OF DEPRECIATION ON THESE ASSET S CLAIMED TO HAVE BEEN OPERATIONAL ON 30.9,2004 AND RESTRICTED IT TO ONLY 50% OF THE NORMAL RATE OF DEPRECIATION. ON SIMILAR ANALOGY, D EPRECIATION CLAIMED ON THE ASSETS CLAIMED TO HAVE BEEN PURCHASED, INST ALLED AND PUT TO USE ON 31.3.2005 WAS DISALLOWED. 11. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT(A) ALONG WITH THE FRESH EVIDENCE TO PROVE THAT THE ASS ETS WERE ACQUIRED BEFORE 30.09.2004. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE AO IN HIS REMAND REPORT STATED THAT THE PUR CHASE DATES FOR 19 ITEMS OUT OF 71 ASSETS INDICATED THAT THOSE ITEMS A RE PURCHASED BEFORE ITA NO.521/B/11 6 30.09.2004, 31.3.2005 AND AO ACCORDINGLY CONSIDERED THAT THE ASSESSEES CLAIM OF DEPRECIATION ON 19 ITEMS COULD BE CONSIDERED. THE CIT(A) ACCORDINGLY GAVE RELIEF. HOWEVER, WITH REGA RD TO THE BALANCE ITEMS, THE ASSESSEE COULD NOT FURNISH THE DETAILS A ND THE CIT(A) CONFIRMED THE DISALLOWANCE OF DEPRECIATION MADE BY THE AO ON THESE ITEMS. 12. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS THE ISSUE OF NATURE OF SOFTWARE EXPENSES HAS BEEN REMITTED TO THE FILE OF THE AO, THIS ISSUE MAY ALSO BE SENT BACK TO THE AO FOR GIVI NG THE ASSESSEE A FAIR OPPORTUNITY OF HEARING AND TO SUBMIT THE EVIDE NCE RELATING TO THE ASSETS AND THEIR BEING PUT TO USE BEFORE 30.09.2004 AND 31.3.2005. 14. THE LEARNED DR HOWEVER, RELIED ON THE ORDERS O F THE CIT(A). 15. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THEIR RIVAL CONTENTIONS, WE DEEM IT FIT AND PROPER TO REMIT THI S ISSUE ALSO TO THE FILE OF THE AO WITH A DIRECTION TO THE AO TO GIVE T HE ASSESSEE A FAIR OPPORTUNITY OF FILING THE EVIDENCE, IF ANY, AVAILAB LE WITH IT TO PROVE ITA NO.521/B/11 7 THAT THE ASSETS WERE ACQUIRED AND PUT TO USE PRIOR TO 30.09.2004 AND 31.3.2005 RESPECTIVELY AND CONSIDER THE SAME IN ACC ORDANCE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSE SHALL BE GIVEN FAIR OPPORTUNITY OF HEARING. 16. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE EE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH SEPT, 2012. SD/- SD/- (P MADHAVI DEVI) (N BARATHV AJA SANKAR) JUDICIAL MEMBER VICE PRESIDENT VMS. BANGALORE DATED : 14 /09/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETA RY, ITAT, BANGALORE.
