DCIT 8(2), MUMBAI V. LOTWIN ONLINE LOTTERY P.LTD, MUMBAI

ITA 6966/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9093 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURUDR
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6966/MUM/2013 ASSESSMENT YEAR: 2010-11 DCIT 8(2) VS. M/S. LOTWIN ONLINE LOTTERY PVT. LT D. ROOM NO. 209, 2 ND FLOOR, SHOP NO 1, ZAVER ARCADE, ZAVER RD M.K. ROAD, MULUND (W), MUMBAI 400020 MUMBAI - 400080 PAN : AAACL7943C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M.V. RAJGURU,DR ASSESSEE BY: NONE DATE OF HEARING : 03/0 1/2017 DATE OF PRONOUNCEMENT: 03/01/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR 2010-11. THE APPEAL IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER (APPEALS) 17, MUMBAI AND ARISES OUT OF THE ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (T HE ACT). 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS AP PEAL IS THAT THE LD. CIT(A) ERRED IN UPHOLDING THE CLAIM OF THE ASSE SSEE OF DEPRECIATION @60% ON INVERTER BATTERIES IGNORING TH E FACT THAT INVERTER BATTERIES ARE NOT SEPARABLE PART OF THE CO MPUTER AND CAN BE UTILISED FOR OTHER FUNCTIONS AS BACK UP BATTERIES A ND HENCE NOT ELIGIBLE FOR DEPRECIATION @60%. 3. IN A NUTSHELL, THE FACTS ARE THAT DURING THE COU RSE OF SURVEY, IT WAS GATHERED THAT M/S. JALARAM ONLINE LOTTERY AGENC Y HAD ALREADY CLOSED ITS LOTTERY BUSINESS 4-5 YEARS AGO. THE BUSI NESS WAS ITA NO. 6966/MUM/2013 2 SUBSEQUENTLY TAKEN OVER BY THE PRESENT ASSESSEE. TH IS BUSINESS WAS AGAIN TAKEN OVER FROM THEM BY M/S. B.S. ENTERPRISE (A UNIT OF GOLDWIN HEALTHCARE PVT. LTD.). IT WAS INFORMED THAT JALARAM GROUP HAD USED THOUSAND OF COMPUTER TERMINALS FOR EFFECTING THE SA LE OF ONLINE LOTTERIES ALL OVER MAHARASHTRA. THEY HAD INSTALLED BATTERIES FOR POWER BACK UP ATTACHED WITH THE COMPUTERS. THEY WERE CHAR GING DEPRECIATION AGAINST THE BATTERIES @60% AS APPLICAB LE TO THE COMPUTERS. IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE FILED A WRITTEN SUBMISSION WHICH HAS BEEN EXTRACTED AT PA GE 3 OF THE ASSESSMENT ORDER. THE AO WAS NOT CONVINCED WITH THE SAME AND CAME TO A FINDING THAT THE BATTERIES HAVE INDEPENDENT EX ISTENCE AND THEREFORE RESTRICTED THE DEPRECIATION TO 10% AS IN THE CASE OF FURNITURE AND FITTINGS INCLUDING ELECTRICAL FITTI NGS AND THEREBY DISALLOWED THE CLAIM OF EXCESS DEPRECIATION OF RS. 1,02,52,464/-. 4. THE ASSESSEE PREFERRED AN APPEAL AGAINST THE ORD ER OF THE AO BEFORE THE LEARNED CIT(A). RELYING ON THE JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD. (2013) 40 TAXMANN.COM 108 (DEL) AND CIT VS. ORIENT CERAMICS & INDUSTRIES LTD . (2011) TAXMANN.COM 417 (DEL), THE LD. CIT(A) HELD THAT DEPRECIATION @60% WAS ALLOWABLE AND THUS ALLOW ED THE APPEAL FILED BY THE ASSESSEE. 5. THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE AO. 6. WE HAVE PERUSED THE RELEVANT MATERIAL ON RECORD. THE SHORT QUESTION FOR ADJUDICATION IN THE INSTANT CASE IS WH ETHER THE BATTERIES WHICH ARE USED ALONG WITH UPS AND WHICH FORM SYSTEM FOR POWER BACK UP IN CASE OF POWER FAILURE QUALIFY FOR DEPREC IATION @60% OR NOT. WE FIND THAT A SIMILAR ISSUE AROSE BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF BSES YAMUNA POWERS LTD.(SUPRA) . THE ISSUE WAS WHETHER THE TRIBUNAL ERRED IN LAW IN ALLOWING DEPRE CIATION TO THE ASSESSEE @60% ON COMPUTERS ACCESSORIES AND PERIPHER ALS INSTEAD OF NORMAL RATE OF 25%. THE HON'BLE HIGH COURT HELD AS UNDER: 5. HOWEVER, UPON A PERUSAL OF THE FILE, WE FIND TH AT THE HIGHER RATE OF DEPRECIATION WAS ALLOWED BOTH BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ('THE CIT(A)') AND THE TRIBUNAL. IN FACT, THE TRIBUN AL IN ITS IMPUGNED ORDER HAS OBSERVED AS UNDER : 'THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF CO- ORDINATE BENCH OF THE TRIBUNAL AS DISCUSSED BELOW : IN THE CASE OF ITO V. SAMIRAN MAJUMDAR [2006] 98 ITD 119 (KOL.) , INCOME-TAX APPELLATE TRIBUNAL KOLKATA BENCH 'B', HA S TAKEN A VIEW THAT ITA NO. 6966/MUM/2013 3 THE PRINTER AND SCANNER ARE INTEGRAL PART OF THE COM PUTER SYSTEM AND ARE TO BE TREATED AS COMPUTER FOR THE PURPOSE OF ALL OWING HIGHER RATE OF DEPRECIATION, I.E., 60 PER CENT. 3.2 THE INCOME-TAX APPELLATE TRIBUNAL, DELHI 'F' BE NCH IN THE CASE OF EXPEDITORS INTERNATIONAL (INDIA) (P.) LTD. V. CIT [2008] 118 TTJ 652 (DELHI) HAS HELD THAT PERIPHERALS SUCH AS PRINTER, SCANNERS , NT SERVER, ETC., FORM INTEGRAL PART OF THE COMPUTER AND THE SAM E, THEREFORE, ARE ELIGIBLE FOR DEPRECIATION AT THE RATE OF 60 PER CENT . AS APPLICABLE TO A COMPUTER. 4. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF THE CO-ORDINATE BENCH, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONE R OF INCOME-TAX (APPEALS) IN ALLOWING THE DEPRECIATION AT 60 PER CEN T. ON COMPUTER PERIPHERALS AND ACCESSORIES, AND, THUS, THE GROUND RAI SED BY THE REVENUE IS REJECTED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED.' 6. WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNA L THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS, PRINTERS, SCANN ERS AND SERVER, ETC., FORM AN INTEGRAL PART OF THE COMPUTER SYSTEM. IN FA CT, THE COMPUTER ACCESSORIES AND PERIPHERALS CANNOT BE USED WITHOUT TH E COMPUTER. CONSEQUENTLY, AS THEY ARE THE PART OF THE COMPUTER SYSTEM, THEY ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60 PE R CENT. 6.1 ALSO SIMILAR ISSUE HAS BEEN DEALT IN ORIENT CERAMICS & INDUSTRIES LTD. (SUPRA) . THE ISSUE WAS CLAIM OF DEPRECIATION ON UPS BY THE ASSESSEE @60% WHEREAS THE AO HAD ALLOWED IT @25%. T HE HON'BLE HIGH COURT FOLLOWED THE JUDGEMENT IN BSES YAMUNA POWERS LTD. (SUPRA) AND ALLOWED DEPRECIATION @60% ON SUCH ITEMS. 7. RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HON' BLE DELHI HIGH COURT IN THE CASES MENTIONED AT PARA 6 & 6.1 HERE-I N-ABOVE, WE SUSTAIN THE ORDER PASSED BY THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/01/2017 SD/- SD/- (MAHAVIR SINGH) (N. K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 03/01/2017 BISWAJIT, SR. P.S. ITA NO. 6966/MUM/2013 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI