HCL Comnet Systems and Services Ltd., New Delhi V. CIT, New Delhi

ITA 5906/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3915 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Keywords: Revision of order; Depreciation; Assessment record
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: C NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO: 5906/DEL/2010 ASSESSMENT YEAR : 2006-07 HCL COMNET SYSTEMS AND SERVICES LTD. VS. CIT, DEL HI IV 806, SIDDHARTH, 96, NEHRU PLACE NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY VOHRA, ADV. SHRI NEERAJ JAIN, ADV . MRS. PINKY KAPO OR, ADV. RESPONDENT BY : SHRI R.I.S.GILL, CIT, D.R. O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER U/S 263 OF THE I.T.ACT OF LD.CIT, DELHI IV DATED 30.9.2010 AND PERTAINS TO A.Y. 2006-07. 2. IN THIS CASE LD.CIT NOTED THAT ON EXAMINATION OF INCOME TAX ASSESSMENT RECORDS OF THE ASSESSEE FOR A.Y. 2006-07 IT TRANSPIRED THAT ASSESSEE CLASSIFIED SOFTWARE UNDER COMPUTERS AND C LAIMED DEPRECIATION ITA 5906/DEL/2010 PAGE 2 OF 4 M/S HCL COMNET SYSTEMS & SERVICES LTD. A.Y. 2006-07 @ 60%. LD.CIT OBSERVED THAT THESE ASSETS WERE LIC ENSES CLASSIFIABLE AS INTANGIBLE ASSET, SUBJECT TO DEPRECIATION @ 25%. T HUS IN HIS OPINION MISTAKE RESULTED IN INCORRECT ALLOWANCE OF DEPRECIA TION AND CONSEQUENT UNDER-ASSESSMENT OF INCOME. LD.CIT FURTHER OBSERVE D THAT AO WAS ABSOLUTELY SILENT AS TO WHY HE ALLOWED ASSESSEES C LAIM IN THIS REGARD. LD.CIT CONCLUDED THAT TWIN CONDITIONS HAVE BEEN SA TISFIED THAT THE ORDER OF AO IS BOTH ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. THEREFORE HE SET ASIDE THE ORDER OF THE A.O. FOR RE CONSIDERATION OF THE MATTER. 3. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BE FORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF MATERIALS PRODUCED AND PRECEDENTS RELIED UPON. LD.COUNSEL OF THE ASSESSEE CONTENDED THAT LD.CIT HAS ERRED IN SETTING ASIDE AOS ORDER WITHOUT ESTABLISHING AS TO HOW ALLOWING DEPRECIATION ON CO MPUTER SOFTWARE @ 60% WHICH IS IN ACCORDANCE WITH THE CLEAR PROVISI ONS OF LAW MAKES THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT HAS FURTHER BEEN CONTENDED THAT THE LD.CIT HAS ALSO NOT APPRECIATED THE FACT THAT THE PROFITS OF THE UNDERTAKINGS OF THE ASSESSE E WERE ELIGIBLE FOR DEDUCTION U/S 10A OF THE INCOME TAX ACT. WHATEVER DISALLOWANCE IF ANY IS MADE ON ACCOUNT OF DEPRECIATION THE SAME WOULD B E EXEMPT U/S 10A AND HENCE THERE WILL BE NO PREJUDICE TO THE INTERES TS OF THE REVENUE. LD.D.R. ON THE OTHER HAND RELIED UPON THE ORDERS OF LD.CIT. ITA 5906/DEL/2010 PAGE 3 OF 4 M/S HCL COMNET SYSTEMS & SERVICES LTD. A.Y. 2006-07 5. WE HAVE CAREFULLY CONSIDERED THE ISSUE. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS DEPRECIATION OF COMPUTER S OFTWARE, AND EFFECTIVE FROM A.Y. 2003-04. COMPUTER SOFTWARE HAS TO BE TRE ATED AS PART OF COMPUTER ONLY AND DEPRECIATION IS ALLOWABLE ON THE SAME @ 60%. DEPRECIATION CLAIM OF ASSESSEE IS APPEARING IN PAG E 37 OF THE PAPER BOOK. 60% DEPRECIATION HAS BEEN CLAIMED ON COMPUT ERS. BY WAY OF A NOTE IT HAS BEEN MENTIONED THAT COMPUTER INCLUDES INPUT/OUTPUT DEVICES, UPS AND SYSTEMS SOFTWARE. IN PAGE 41 OF T HE PAPER BOOK THE DETAILS OF ASSETS CAPITALIZED ON SOFTWARE ITEMS HAS BEEN DISCLOSED AS ORA401CA.OFO.V9.264 BIT SOFTWARE. WE FIND OURSELV ES IN AGREEMENT WITH THE CONTENTION OF THE ASSESSEE THAT 60% RATE O F DEPRECIATION HAS BEEN PRESCRIBED IN THE ACT ITSELF ON COMPUTER SOFTW ARE, HENCE ALLOWING SUCH A DEPRECIATION WHICH IS IN ACCORDANCE WITH THE LAW CAN NOT MAKE THE AOS ORDER ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF REVENUE. 6. WE FURTHER FIND S.263 DEALS WITH AOS ORDER WH ICH IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF R EVENUE. IN THE PRESENT CASE IT IS NOTED THAT THE ASSESSEE UNDERTAKING IS ELIGIB LE FOR DEDUCTION U/S 10A OF THE I.T.ACT, HENCE EVEN FOR ARGUMENTS SAKE IT IS FOUND THAT DEPRECIATION HAS BEEN PROVIDED IN EXCESS THERE WOUL D NOT BE ANY TAX ACCRUING ON THE SAME AS THE PROFITS RELATING TO IT ARE EXEMPT U/S 10A OF THE I.T.ACT. ITA 5906/DEL/2010 PAGE 4 OF 4 M/S HCL COMNET SYSTEMS & SERVICES LTD. A.Y. 2006-07 7. IN THIS VIEW OF THE MATTER WE ARE OF THE OPINION THAT AOS ORDER CAN NOT BE SAID TO E ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE. HENCE WE SET ASIDE THE ORDER OF LD.CIT AND DECIDE T HE ISSUE IN FAVOUR OF ASSESSEE. 8. IN THE RESULT THE ASSESSEES APPEAL STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JUNE, 2011. SD/- SD/- (I.P. BANSAL ) (SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 RD JUNE, 2011 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3. CIT; 4. CIT(A); 5. DR; 6. GUARD FILE BY ORDER DY. REGISTRAR // C O P Y //