Arcserve India Software Solution Pvt. Ltd., Delhi V. ACIT circle -3(1), New Delhi

ITA 5244/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2833 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 06-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’ NEW DLEHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI N.K. CHOUDHRY, JUDICIAL MEMBER ITA No. 5244/Del/2019 Assessment Year: 2015-16 Arcserve India Software Solutions Pvt. Ltd., 1568, 2 nd Floor, Kashmere Gate, Delhi-110006 PAN:AAMCA8054F Versus ACIT, Circle-3(1), New Delhi (Appellant) (Respondent) Appellant by : None Respondent by : ShriZahid Parvez, Ld. Sr. DR Date of hearing : 09.06.2022 Date of order : 27.06.2022 ORDER PER N.K. CHOUDHRY, J.M. This appeal has been preferred by the Assessee/Appellant herein, against the order dated 08.04.2019, impugned herein, passed by the ld. Commissioner of Income Tax (Appeals)-32 (in short ‘Ld. Commissioner’), New Delhi, u/s 250(6) of the Income Tax Act, 1961 (in short ‘the Act’). 2. Though notice of hearing of the instant appeal on dated 09- 06-2022 was sent and served upon the Appellant, as it clearly appears from track consignment (consignment no. ED947 674217IN) downloaded on 10-06-2022, however the Appellant neither appeared not made any application for adjournment, hence we are constrained to decide this appeal as ex-parte. [2] 3. Brief facts relevant for adjudication of the instant appeal are that theAppellantby declaring an income of Rs.68,36,090/- had filed its Return of Incomefor A.Y 2015-16 on dated 28.11 2015, which was selected for scrutiny through CASS for the reason ‘Depreciation claimed at higher rates/higher addition depreciation claimed , for which the Appellant during the course of assessment proceedings, was asked to provide the details and evidence of procurement of assets during the year, on which depreciation has been claimed. 2.1 Though the Assessee furnished the details of addition made to fixed assets during the year under consideration, however on perusal of the bills, it was observed by the AO that certain bills were in the name of Associated Enterprise of USA and certain bills were dated after 31.03.2015. The AO further observed that the Assessee was in the phase of setting up of its business and had not claimed any expense for employees cost and hence the assets could not have been put to use. The AO also observed that some of the fixed assets bills were not in the name of appellant and some of the bills pertains to next assessment year. The AO ultimately disallowed the claim of depreciationaggregating to Rs.88,58,662/- {Rs. 83,97,818, Rs. 2,59,133/- and Rs. 2,01,711/- respectively qua Plant and Machinery i.e. computers, furniture & fittings and building}. The AO also disallowed the depreciation of Rs.9.86.208/- claimed for arriving book profit for the purpose of MAT on the ground that since the assets were not put to use, the claim of [3] depreciation for arriving at book profit under the Company Law also not allowable. 3. The Appellant being aggrieved with the Assessment Order, preferred first appeal before the Ld. Commissioner, who vide impugned order dismissed the appeal of the Appellantand affirmed the assessment order. 4. Being aggrieved with the impugned order, the Appellant is in appeal before us. 5. Heard the Ld. DR who supported the orders passed by the authorities below. We have given thoughtful consideration to the peculiar facts and circumstances of the case and the orders passed by the authorities below and find that the Ld. Commissioner thoroughly considered the factual position to the effects that the appellant is a 100% subsidiary of ‘Arcserve UK Holding Pvt. Ltd.’ incorporated on 01.08.2014 and during the year under consideration was involved in setting of its business. All the procurements of the Appellantwere handled by Arcserve USA being a recipient of ‘Software Analysis and Testing Modules' services from the Appellant. During the A.Y 2015-16, the Appellant signed a business transfer agreement for purchase of running business of 'CA India Technologies Pvt. Ltd.’ on slump sale basis. As per agreement dated 26.02.2015 the employees along with assets were to be transferred to Appellant on 01,03.2015, but due to technical reason the record date of acquisition was extended to 31.05.2015. Therefore, it is apparent that Appellant had no employee during the F Y. 2014-15 as all the employees were acquired from M/s CA India Technologies Pvt. Ltd. On 31.05.2015. [4] 5.1 The Ld. Commissioner further observed that ownership of computers in the name of Arcserve USA has been transferred through inter office memo to the Appellant and Appellant claims that depreciation is allowable to it as it has been put to use in Indian office prior to closer of financial year, however, it is clear that user and ownership is not established in the case of appellant. There is no evidence that these computers were used by appellant in its business, as its business was in the process of being set up and the employees were acquired on 31.05.2015 i.e. after the end of the financial year. AO has observed that revenue has been booked on the basis of markup of 15% over and above the expenditure/cost incurred by Appellant which shows that in actuality, no revenue was earned by appellant during the year. 5.2 The Ld. Commissioner further observed that it is also to be noted that the expenses prior to set up of business will be pre-operative expenses, which have to be added to the cost of asset and depreciation has to be claimed once the business is set up and operational and which Appellant could have claimed in subsequent years. In totality of circumstances, I am in agreement with AO that assets have not been put to use during the year as there were no employees on the payroll of appellant till the end of financial year and ownership was not established. Therefore, there is no basis in the claim of appellant. 5.3 Considering the observations made and conclusions drawn by the Ld. Commissioner in the impugned order, we do not find any reason or justification or material to controvert the findings of the Ld. Commissionerand therefore in our considered view, the order under challenge does not suffer from any perversity, impropriety and/or illegality and thus no interference is warranted. [5] 6. In the result, Appealfiled by the Assessee stands dismissed. Order pronounced in the open court on 27/06/2022. Sd/- Sd/- (ANIL CHATURVEDI) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER *aks/-