DCIT (OSD) RG 10(1), MUMBAI V. SARASWAT INOTECH LTD, NAVI MUMBAI

ITA 6722/MUM/2012

• Counselvise Citation: 672219914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: M C NANIWADEKAR
• Keywords: Depreciation

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI . . , !' #'' ' , $ % BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 6722 / / 2012 A.Y. 2009-10 ITA NO. : 6722/MUM/2012 (ASSESSMENT YEAR: 2009-10) DY. COMMISSIONER OF INCOME TAX 10(3), ROOM NO. 451, 4 TH FLOOR, AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI -400 020 VS M/S SARASWAT INFOTECH LTD., PLOT NO. 85, MADHUSHREE, SECTOR -7, VASHI, NAVI MUMBAI -400 703 PAN: AADCS 4082 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M L PERUMAL RESPONDENT BY : SHRI M C NANIWADEKAR /DATE OF HEARING : 08-01-2014 / DATE OF PRONOUNCEMENT : __ -01-2014 ( O R D E R #'' ' , : PER VIVEK VARMA, JM: THE INSTANT APPEAL IS FILED BY THE DEPARTMENT AGAINST TH E ORDER OF CIT(A) 21, MUMBAI, DATED 17.07.2012, WHEREIN, THE FOLLOWING GROUNDS HAVE BEEN TAKEN: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD. CIT(A) WAS RIGHT IN HOLDING THAT DEPRECIATION ON UPS IS ALLOWABLE @ 60% IGNORING THE FACT THAT UPS IS AN ELECTRICAL APPLIANCE FOR TEMPORARY SUPPLY OF ELECTR ICITY THEREFORE IS IN NATURE OF PLANT AND MACHINERY AND THEREFORE DEPRECIATI ON SHOULD BE PROVIDED @ 15%? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A) WAS RIGHT IN HOLDING THAT DEPRECIATION ON ATM IS ALLOWABLE @ 60% IGNORING THE FACT THAT ATM IS A CASH DISPENSING MACHINE WITH A PROJECTOR AND THE REFORE IS IN NATURE OF PLANT AND MACHINERY AND THEREFORE DEPRECIATION SHOULD BE PROV IDED @ 15%. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, LD. CIT(A) WAS RIGHT IN HOLDING THAT DEPRECIATION ON PURCHASE OF SOFTWARE IS TO BE ALLOWED IGNORING THE FACT THAT ASSESSEE HAS FAILED TO PROVE THAT THE ATM S WAS PUT TO USE IN THE CURRENT YEAR. M/S SARASWAT IN FOTECH LTD. ITA NO. 6722/MUM/2012 2 2. AT THE TIME OF HEARING AR SUBMITTED THAT THE THREE G ROUNDS IMPUGNED IN THE APPEAL ARE COVERED BY THE DECISION OF THE COORDINATE BENCH AT MUMBAI, IN THE CASE OF THE ASSESSEE IN ITA NO. 3606/MUM/2011 IN ASSESSMENT YEAR 2008-09. 3. THE AR, FURTHER SUBMITTED THAT THE THREE GROUNDS WE RE AGITATED BY THE DEPARTMENT IN APPEAL TO THE HONBLE BOMBAY HIGH COURT U/S 260A, WHEREIN, HONBLE BOMBAY HIGH COURT DISMISSED THE APP EAL FILED BY THE DEPARTMENT. THE AR PLACED BOTH THESE ORDERS BEFORE US. 4. ON GOING THROUGH THE ORDERS AS SUBMITTED BY THE AR , WE THINK IT APPROPRIATE TO REPRODUCE THE ORDER OF THE HONBLE BOMB AY HIGH COURT, TO PUT THE OBJECTIONS OF THE DEPARTMENT TO REST. THE O RDER OF THE HONBLE BOMBAY HIGH COURT IN ITA(L) NO. 1243 OF 2012 REA DS AS UNDER: IN THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 20 08-09, FOLLOWING QUESTIONS OF LAW HAVE BEEN RAISED FOR CONSIDERATION OF THIS COURT. A) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE ITAT WAS RIGHT IN HOLDING THAT DEPRECIATION ON UPS IS ALLOWABLE @ 60% IGNORING THE FACT THAT UPS IS AN ELECTRICAL APPLIANCE FOR TEMPORARY SUPPLY OF ELECTR ICITY THEREFORE IS IN NATURE OF PLANT AND MACHINERY AND THEREFORE, DEPRECIAT ION SHOULD BE PROVIDED @ 15%? B) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE ITAT WAS RIGHT IN HOLDING THAT DEPRECIATION ON ATM IS ALLOWABLE @ 60% IGNORING THE FACT THAT ATM IS A CASH DISPENSING MACHINE WITH A PROJECTOR AND THERE FORE IS IN NATURE OF PLANT AND MACHINERY AND THEREFORE DEPRECIATION SHOULD BE PROV IDED @ 15%? C) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE ITAT WAS RIGHT IN HOLDING THAT DEPRECIATION ON PURCHASE OF SOFTWARE IS TO BE ALLOWED IGNORING THE FACT THAT ASSESSEE HAS FAILED TO PROVE THAT ASSESSEE HAS PHYSICALLY RECEIVED THE LICENCE BY 31/3/2008? 2) THE RESPONDENT ASSESSEE IS A SUBSIDIARY OF SARASW AT CO. OP. BANK LIMITED AND PROVIDES SOFTWARE DEVELOPMENT, INFORMATION TECHNOLOGY A ND ENABLE SERVICES TO ITS HOLDING COMPANY I.E. SARASWAT BANK. DURING THE COURS E OF THE YEAR, THE RESPONDENT ASSESSEE HAD PURCHASED CERTAIN CAPITAL ASS ETS SUCH AS UPS, ATM MACHINES AND LICENCE TO INTER ALIA PROVIDE TECHNOLOGY S ERVICES TO ITS HOLDING COMPANY. THE RESPONDENT ASSESSEE CLAIMED DEPRECIATION ON UPS AND ATM MACHINES UNDER THE BLOCK OF COMPUTERS @ 60% WHILE DEPR ECIATION WAS CLAIMED ON SOFTWARE @ 30% (50% OR 60%) IN VIEW OF USE ONLY FO R A PART OF THE YEAR. 3) THE ASSESSING OFFICER WAS OF THE VIEW THAT THE UP S AND ATMS WOULD NOT FALL UNDER THE CATEGORY OF COMPUTERS AND BEING PART OF PLA NT AND MACHINERY/OFFICE EQUIPMENT WOULD BE ELIGIBLE FOR DEPRECIATION ONLY AT 15%. SIMILARLY, HE DISALLOWED THE CLAIM FOR DEPRECIATION ON SOFTWARE LICENCE ON THE GROUND THAT THE SAME WAS NOT PUT TO USE IN THE PREVIOUS YEAR TO THE A SSESSMENT YEAR 2008-09. CONSEQUENTLY THE EXCESS CLAIM OF DEPRECIATION MADE BY T HE RESPONDENT ASSESSEE WAS DISALLOWED. 4) IN APPEAL THE CIT (APPEALS) UPHELD THE FINDINGS OF T HE ASSESSING OFFICER. 5) IN SECOND APPEAL, THE TRIBUNAL BY ITS ORDER DATED 14/3/2012 HELD THAT UPS IS AN INTEGRAL PART OF THE COMPUTER SYSTEM AND REGULATE THE FLOW OF THE POWER TO M/S SARASWAT IN FOTECH LTD. ITA NO. 6722/MUM/2012 3 AVOID ANY KIND OF DAMAGE TO THE COMPUTER NETWORK DUE TO FLUCTUATION IN POWER SUPPLY WHICH COULD LEAD TO LOSS OF VALUABLE DATA. THE TRIB UNAL RELIED UPON THE DECISION OF THE DELHI HIGH COURT DATED 20/1/2011 IN THE MATTER OF CIT VS ORIENT CERAMICS AND INDUSTRIES LTD. IN WHICH UPS WAS HELD TO BE THE PART OF THE COMPUTER SYSTEM AND DEPRECIATION AT 60% WAS ALLOWED. S IMILARLY, SO FAR AS ATMS ARE CONCERNED, THE TRIBUNAL ON FINDING OF FACT C ONCLUDED THAT ATM CANNOT FUNCTION WITHOUT THE HELP OF COMPUTER AND WOULD BE A PART OF THE COMPUTER USED IN THE BANKING INDUSTRY. RELIANCE WAS PLACED BY THE TRIB UNAL UPON THE DECISION OF THE DELHI BENCH OF TRIBUNAL IN THE MATTER OF DCIT V. GLOBAL TRUST BANK (ITA NO.4741D/09) WHEREIN T HAS BEEN HELD THAT ATM WAS A C OMPUTER EQUIPMENT AND DEPRECIATION 60% WAS ALLOWED. SO FAR AS THE USE OF SOFTWARE IS CONCERNED, THE TRIBUNAL RECORDS A FACT THAT THE EVIDEN CE OF THE USE OF THE SOFTWARE ON 31/3/2008 WAS PRODUCED BEFORE THE TRIBUN AL. THUS, THE TRIBUNAL HELD THAT DEPRECIATION @ 30% ON SOFTWARE WAS RIGHTLY C LAIMED. 6) WE NOTE THAT THE TRIBUNAL HAS ARRIVED AT A FINDING OF FACT ON ALL THE THREE QUESTIONS. THE REVENUE HAS NOT BEEN ABLE TO SHOW THAT THE ABOVE FINDING OF FACT IS PERVERSE. THUS, WE DO NOT SEE ANY REASON TO ENTER TAIN QUESTION (I), (II) AND (III) ABOVE. 7) ACCORDINGLY, THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 5. SINCE THE QUESTIONS REFERRED TO IN THE APPEAL BEFORE T HE HONBLE BOMBAY HIGH COURT AND IN THE IMPUGNED APPEAL ARE VERBATIM AND IDENTICAL, AND SINCE THE CIT(A) HAS FOLLOWED THE ORDER OF THE ITAT (WHERE ONE OF US WAS PARTY), IT IS NOT NECESSARY TO GO IN TO FURTHER DETAILS AND/ OR LEGAL ISSUES. 6. THE GROUNDS AS IN THE APPEAL FILED BY THE DEPARTMENT DESERVE TO BE REJECTED. 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2014. SD/- SD/- ( . . ) ( #'' ' ) (R. C. SHARMA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 15 TH JANUARY, 2014 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A)-21, MUMBAI. 4) THE CIT-10, MUMBAI, M/S SARASWAT IN FOTECH LTD. ITA NO. 6722/MUM/2012 4 5) !'# $ , % $ , &'( / THE D.R. E BENCH, MUMBAI. 6) #) * COPY TO GUARD FILE. %+,- / BY ORDER / / TRUE COPY / / . / / '0 % $ , &'( DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *23/ . . * CHAVAN, SR. PS