The ITO, Ward-5(2), Ahmedabad V. Prerak Trading Pvt.Ltd., Ahmedabad

ITA 537/AHD/2011

• Counselvise Citation: 53720514 RSA 2011
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 22-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation; Revenue expenditure
• Section: 143(3); 148; 154

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND A.K. GARODIA, A.M . ITO, WARD 5(2), AHMEDABAD. M/S PRERAK TRADING (P) LTD., C-1, CELLAR, VINAYAK APARTMENT, OPP. SWATI COMPANY, NAVRANGPURA, AHMEDABAD. APPELLANT VS. RESPONDENT APPELLANT BY :- SHRI MAHESH KUMAR, DR RESPONDENT BY:- SHRI P. M. MEHTA, AR O R D E R DATE OF HEARING 19/8/2011. DATE OF PRONOUNCEMENT -26.8.2011 PER D.K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 20.12.2010 RAISING FOLLOWING GROUND :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.8,45,294/- MADE ON ACCOUNT OF DISALL OWANCE OF EXCESS DEPRECIATION. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LTD. COMPANY. IT FILED ITS RETURN OF INCOME SHOWING LOSS AT RS.40,646/-. THE RETURN WAS PROCESSED U/S 143(1) ON 24.2.2003 ACCEPT ING THE RETURNED LOSS. ITA NO.537/AHD/2011 ASST. YEAR 2002-03 ITA NO.537/AHD/2011 ASST. YEAR 2002-03 2 THEREAFTER THE ORDER U/S 154 OF THE ACT WAS PASSED ON 21.02.2006 REVISING THE TOTAL INCOME OF THE ASSESSEE AT RS.31,80,040/-. THE CASE WAS TAKEN UP FOR RE-ASSESSMENT AND NOTICE U/S 148 OF THE ACT WAS ISSUED ON 23.09.2008 AND SERVED UPON THE ASSESSEE ON 26.09.2008. IN RESP ONSE TO SAID NOTICE THE ASSESSEE FILED ITS SUBMISSION DATED 11.12.2009. FINALLY THE IMPUGNED ASSESSMENT ORDER DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.39,53,330/- VIDE ORDER 14/12/2009 U/S 143(3) R.W .S. 147 OF THE ACT. 3. IN APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE MAD E THE FOLLOWING SUBMISSIONS : THE APPELLANT SUBMITS THAT AO HAS DISALLOWED CLAIM OF DEPRECIATION OF APPELLANT COMPANY ON THE BASIS OF D ISALLOWANCE MADE BY AO IN ASST. YEAR 2001-02 BY MAKING DISALLOW ANCE OF COMPUTER HARDWARE AMOUNTING TO RS.94,35,800/-. THE SAID DISALLOWANCE WAS ALSO CONFIRMED BY HONBLE CIT(A). THEREFORE, AO HAS ISSUED NOTICE FOR RE-ASSESSMENT AND DISALLOW ED CLAIM OF THE APPELLANT OF DEPRECIATION ON OPENING WDV OF COMPUTE R HARDWARE. THE HONBLE ITAT HAS VIDE ITS ORDER DATED 03-07-200 9 ALLOWED CLAIM OF DEPRECIATION ON COMPUTER HARDWARE OF APPEL LANT COMPANY IN ASST. YEAR 2001-02. THEREFORE, THE ACTION OF THE AO IN ASST. YEAR 2002-03 FOR MAKING DISALLOWANCE OF CLAIM OF DEPRECI ATION OF APPELLANT COMPANY IS BAD IN LAW AND KINDLY BE DELET ED. 4. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, T HE LD. CIT(A) OBSERVED AS UNDER :- 2.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER. THE ISSUE OF ALLOWABILITY OR OTHE RWISE OF DEPRECIATION ON COMPUTER HARDWARE AROSE IN THE IMME DIATELY PRECEDING ASST. YEAR 2001-02. FOR THE YEAR UNDER CO NSIDERATION ALLOWING DEPRECIATION ON THE CORRECT OPENING WDV IS CONSEQUENTIAL. AO IS DIRECTED TO ALLOW DEPRECIATION ON THE CLOSING WDV OF ASST. YEAR 2001-02 AS PER THE INCOME-TAX REC ORDS. THIS GROUND OF APPEAL IS TREATED AS ALLOWED FOR STATISTI CAL PURPOSES. ITA NO.537/AHD/2011 ASST. YEAR 2002-03 3 AGAINST THIS ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. DR RELIED ON THE ORDER OF AO WHEREAS THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ISSUE IS NOW COVER ED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CAS E OF ITO VS. PRERAK TRADING (P) LTD. IN ITA NO.1086/AHD/2005 WITH C.O. NO.158/AHD/2005 FOR ASST. YEAR 2001-02. (COPY OF TRIBUNALS ORDER I S PLACED ON RECORD). ACCORDINGLY HE SUBMITTED THAT THE ISSUE MAY BE DECI DED ACCORDINGLY. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOIN G THROUGH THE MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL FOR ASST. YEAR 2001-02 IN ASSESSEES OWN CASE AND T HE SAME HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY THE TRIBUNAL. THE OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER :- 10 WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER, THE ORDER OF CIT(A) AS WELL AS TH E ASSESSEES PAPER BOOK CONSISTING OF PAGES 1 TO 85. WE FIND THAT THE ASSESSEE HAS PUR CHASED COMPUTED HARDWARE AND SOFTWARE DURING THE YEAR UNDER CONSIDERATION AMOUNT ING TO RS.94,35,800/-. THE DETAILS ARE NARRATED IN THE ABOVE PAGE NO.3 OF THIS ORDER. THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION ON THESE ASSETS AND THE ASSESSING OFFI CER DISALLOWED BY RELYING ON THE STATEMENT OF ONE SHRI BHARATBHAI PATEL, WHO WAS DIR ECTOR OF THE COMPANY. THE DIRECTOR, SHRI BHARATBHAI PATEL WAS EXAMINED ON OAT H AND HE STATED THAT THE COMPANY IS HAVING STAFF OF FIVE PERSONS AND THEY MAINLY DO OUTDOOR DUTIES. IT WAS A FACT THAT THE PREMISE OF THE ASSESSEE COMPANY IS TOO SMALL TO ACC OMMODATE THE COMPUTER AND THE ELECTRICAL CONSUMPTION BILL OF THE PREMISES IS NOT SO SUBSTANTIAL. THE REGISTERED OFFICE OF THE ASSESSEE COMPANY WAS AT 59/706 AMBIKA APARTM ENTS, ANKUR ROAD, AHMEDABAD. WE FIND THAT THE ASSESSEE HAS EARNED MAR KETING COMMISSION OF RS.31,00,000/- DURING THE RELEVANT YEAR AS IS FOUND FROM THE PROFIT & LOSS ACCOUNT. THIS COMMISSION WAS RECEIVED BY THE ASSESSEE FROM M /S. MODERN PRECISION INDUSTRIES FOR COORDINATING WITH VARIOUS PARTIES REGARDING MAR KETING OF THEIR PRODUCTS. THE ASSESSEE ALSO EARNED COMMISSION INCOME FROM M/S. VI MPSON AGENCIES FOR MARKETING OF THEIR SOFTWARE. WE FIND THAT THE ASSESSEE HAD MA DE PURCHASES OF CELRON 500 MHZ WITH KEYBOARD, MOUSE ETC. VIDE BILL NO. 369 DATED 2 0-6-2000. SIMILARLY, THE ASSESSEE ALSO PURCHASED SERVER PILL 600, C440GX + INTEL, SER VER BOARD, 512 MB RAM, DAT DRIVE, 1.44 MB, CDD, ULTRA 2 SCSI HARD DISK, CREATI VE CD ROOM 52 X, TVSE GOLD KEY BOARD, LOGITECH 3 BOLTON MOUSE, ATX CABINE T WITH SMPS,, MULTI MEDIA KIT, 17 SVGA MONITOR (SAMTRON) VIDE BILL NO.12/19/ 96A DATED 19-12-2000. THE ITA NO.537/AHD/2011 ASST. YEAR 2002-03 4 ASSESSEE ALSO PURCHASED ADDITIONAL MODULES FOR ORDE R PROCESSING AND VALUE CHAIN MANAGEMENT SYSTEM VIDE BILL NO.ASL/ERP/10/11 DATED 30-1-2000 AND ALSO PAID CHARGES FOR BACK BONE NETWORK AND INTERNET CONNECTI VITY USING FIBER OPTIC CABLE VIDE BILL NO.ARL/10/01 DATED 10-10-2000. THESE FACTS HAV E NEVER BEEN DENIED BY THE LOWER AUTHORITIES. WE FURTHER FIND THAT IN THE STAT EMENT OF SHRI BHARATBHAI PATEL RECORDED ON 7-11-2003 IT WAS CONFIRMED THAT HE WAS LOOKING AFTER ACCOUNTS/BANKS AND DAY TO DAY ADMINISTRATION. HE WAS OPERATING ONE COM PUTER FOR ACCOUNTS AND BILLING. HE HAD MADE PURCHASE AND PAYMENT FOR COMPUTER HARDW ARE AND SOFTWARE FROM APPLITECH SOLUTIONS AND APPLITECH RESEARCH AND SILV ER TOUCH COMPUTER. HE ALSO CONFIRMED RECEIPT IF COMPUTER AND INSTALLATION OF S OFTWARE. WE FIND THAT THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE RELYING ON TH E TRIBUNALS DECISION IN THE CASE OF ACIT VS PARKLIGHT SECURITIES LTD. IN ITA 2328/AHD/2 004, WHEREIN, THE TRIBUNAL RELYING ON THE DECISION OF THE DELHI BENCH OF ITAT IN THE CASE OF AMWAY INDIA ENTERPRISES VS. DCIT (2008) 301 ITR (AT) 1 (DELHI) HAS HELD THAT THE ECONOMIC LIFE OF THE COMPUTER SOFTWARE FOR WHICH THE ASSESSEE HAS INCURRED THE EXPENSES, IS TWO YEARS MORE. THEREFORE FOLLOWING DELHI TRIBUNAL, HEL D THAT EVEN THE COMPUTER SOFTWARE EXPENSES INCURRED BY THE ASSESSEE CAN BE REGARDED T O BE THE REVENUE EXPENDITURE. WE FIND THAT CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF T HE ASSESSEE FOR THE ENTIRE AMOUNT OF PURCHASE OF SOFTWARE AS REVENUE EXPENDITURE AND WE CONFIRM THE SAME. 11. AS REGARDS TO THE PURCHASE OF HARDWARE, THE MER E CONFIRMATION OF DISALLOWANCE OF DEPRECIATION ON THE AMOUNT OF PURCHASE OF HARDWA RE AT RS.41,35,8000/-, IS JUST BASED ON THE STATEMENT OF SHRI BHARATBHAI PATEL. AS THE CIRCUMSTANCES DISCUSSED IN THE ABOVE PARA AND THE FACT THAT THESE ASSETS WERE ACTU ALLY ACQUIRED BY THE ASSESSEE AND THIS FACT HAS NOT BEEN DOUBTED BY THE REVENUE, WE A RE OF THE VIEW THAT, AS REGARDS TO THE PURCHASE OF HARDWARE THE FINDINGS OF THE LOWER AUTHORITIES ARE PERVERSE AND NEEDS TO BE REVERSED. ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE ON THIS ISSUE. FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE ARE O F THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF ASSESSEE. W E UPHOLD THE SAME AND REJECT THE GROUND RAISED BY THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 26/8/2011. SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 26/8/2011. MAHATA/- ITA NO.537/AHD/2011 ASST. YEAR 2002-03 5 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 23/8/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER /8/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..