RESINS & PLATICS LTD., MUMBAI V. DCIT, RE.8(3), MUMBAI, MUMBAI

ITA 7452/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70807 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 04-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEKHAR L GAJBHIYE
• Keywords: Depreciation; Bonafide belief
• Section: 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL D DD D BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKAR RAO D. KARUNAKAR RAO D. KARUNAKAR RAO D. KARUNAKAR RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO. 7452/MUM/2011 7452/MUM/2011 7452/MUM/2011 7452/MUM/2011 ( $% $% $% $% & & & & / ASSESSMENT YEAR : 2005-06) RESINS & PLASTICS LTD. PLOT NO. A-8, MAROL INDL. ESTATE OF MIDC, CROSS ROAD B STREET NO. 5, ANDHERI (E) MUMBAI-400093 % % % % / VS. DCIT RANGE 8(3) AAYAKAR BHAVAN MUMBAI-400020 #' ! ./ ( ./ PAN/GIR NO. : AAACR1888C ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ') ') ') ') , , , , / APPELLANT BY : SHRI DALPAT SHAH *+') *+') *+') *+') - -- - , , , , /RESPONDENT BY : SHRI SHEKHAR L. GAJBHIYE % % % % - -- - .! .! .! .! / DATE OF HEARING : 6 TH AUGUST 2013 /0& /0& /0& /0& - -- -.! .! .! .! /DATE OF PRONOUNCEMENT: 14 TH AUGUST 2013 ' 1 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 2.8.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) ARI SING FROM PENALTY ORDER PASSED U/S 271(1)(C) OF INCOME TAX ACT FOR TH E ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1.1 THE LD. C.I.T (APPEALS) 18, MUMBAI, ERRED I N CONFIRMING THE PENALTY LEVIED OF ` 50,800/- U/S 271(1)(C) R.W. EXPLANATION -1 ON DISALLOWANCE OF CLAIM FOR DEPRECIATION ON COMPUT ER SOFTWARE ACQUIRED IGNORING THE FACT THAT THE CLAIM WAS MADE UNDER A BONAFIDE BELIEF AND ALL THE PARTICULARS AND DETAILS WERE FURNISHED TO THE SAID A.O. TO SUBSTANTIATE THE CLAIM MADE. ITA NO. 7452/M/2011 RESINS & PLASTICS LTD. 2 1.2 THE LD. C.I.T. (APPEALS) ERRED IN NOT APPRECIA TING THE FACT THAT THE LICENSED VERSION OF THE SOFTWARE WAS ACQUIRED A ND INSTALLED BEFORE 31 ST MARCH AND HENCE HAD CLAIMED DEPRECIATION U/S 31(1)(II) UNDER A BONAFIDE BELIEF. 1.3 THE SAID C.I.T. (APPEALS) ALSO ERRED IN NOT CO NSIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC). 3. THE ASSESSEE HAD CLAIMED DEPRECIATION AMOUNTING TO ` 1,42,100/- ON SOFTWARE OF ` 11.36.803/-. THE SOFTWARE WAS STAT ED TO BE ACQUIRED VIDE INVOICE DATED 31.3.2005. THE ASSESSING OFFICER DISA LLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE IMPLEMENTATION OF T HE SOFTWARE WAS AS PER ORDER DATED 26.5.2005 AND PAYMENT WAS MADE ON 3 .5.2005. HENCE THE AO HELD THAT THE SOFTWARE WAS NOT PUT TO USE DU RING THE RELEVANT PREVIOUS YEAR. THE DISALLOWANCE OF DEPRECIATION HAS BEEN CONFIRMED BY THE CIT(A) AND FURTHER BY THIS TRIBUNAL. IN THE MEA N TIME, THE AO INITIATED THE PROCEEDINGS U/S 271(1)(C) AND LEVY THE PENALTY OF ` 50,800/- VIDE ORDER DATED 7.5.2010. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFORE THE CIT(A) BUT COULD NOT SUCCEED. 4. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE CLAIM OF DEPRECIATION WAS DISALLOWED ON THE GROUND THAT THE SOFTWARE WAS NOT PUT TO USE DURING THE YEAR UNDER CONSIDERATION WHEREAS THE ASSESSEE HAS ACQUIRED THE SOFTWARE VIDE INVOICE DATED 31.3.2005 AND INCLUDED THE SAME IN THE BLOCK OF ASSETS. THUS, THE LD. AR HAS S UBMITTED THAT THE CLAIM OF THE ASSESSEE IS BONAFIDE BECAUSE THE SOFTWARE AG REEMENT WAS SIGNED ON 23.3.2005 AND WAS READY TO USE THOUGH IT WAS IMP LEMENTED AFTER 31.3.2005. THEREFORE, THE ASSESSEE HAS MADE A BONAF IDE CLAIM AND ITA NO. 7452/M/2011 RESINS & PLASTICS LTD. 3 DISCLOSED ALL RELEVANT PARTICULARS REGARDING THE CL AIM OF DEPRECIATION. HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COU RT IN CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158. THE L D. COUNSEL HAS FURTHER SUBMITTED THAT THE PRELIMINARY REQUIREMENT PRIOR TO THE IMPLEMENTATION OF THE SOFTWARE WERE COMPLETED DURING THE YEAR UNDER C ONSIDERATION. HE HAS FURTHER POINTED OUT THAT THE SOFTWARE IN QUESTION W AS A CUSTOMISE VERSION AND A LOT OF PRELIMINARY GROUND WORK WAS TO BE COMP LETED BEFORE IT IS FINALLY INSTALLED AND STARTED. THE WORK HAS ALREADY STARTED IN ORDER TO MAKE THE IMPLEMENTATION W.E.F. 1.4.2005, THE PAYMEN T AND SO-CALLED PURCHASE ORDER WAS NONE BUT CONFIRMATION TOWARDS PA YMENT OF SECOND INSTALMENT AGAINST THE BILL DATED 31.3.2005. HE HAS ALSO RELIED UPON THE FOLLOWING DECISIONS: BALAJI VEGETABLES PRODUCTS P. LTD. VS CIT 290 ITR 1 72(KAR) CIT VS CHAMUNDESWARI SUGAR LTD. 309 ITR 326(KAR) NARANG INTERNATIONAL HOTELS (P) LTD. 137 ITD 53 (MU M)(TM) ITO VS PARIKH INVESTMENT & DEVELOPMENT (P) LTD. 43 SOT 537(MUM) 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE DISALLOWANCE OF DEPRECIATION HAS BEEN CONFIRMED BY THIS TRIBUNAL ON THE GROUND THAT THE SOFTWARE IN QUESTION WAS NOT PUT TO USE. THEREF ORE, THE ASSESSEE MADE AN INCORRECT CLAIM BY FURNISHING INACCURATE PARTICU LARS OF INCOME. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ASSET IN QUESTION WAS FINALLY ACQUIRED AND PUT TO USE ONLY AFTER THE YEAR UNDER CONSIDERATION THEN MAKING THE CLAIM OF D EPRECIATION OF SUCH ASSET IS AMOUNT TO FURNISHING INACCURATE PARTICULAR S OF INCOME. ITA NO. 7452/M/2011 RESINS & PLASTICS LTD. 4 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS CAREFUL PERUSAL OF THE RELEVANT RECORD WE FIND THAT THE DISALLOWANCE O F DEPRECIATION HAS BEEN CONFIRMED BY THIS TRIBUNAL IN THE QUANTUM APPEAL ON THE GROUND THAT THE IMPLEMENTATION OF THE SOFTWARE WAS ON 26.5.2005 WHI CH WAS AFTER 31.3.2005 THEREFORE JUST BECAUSE THE LICENSE AGREEM ENT WAS SIGNED ON 23.3.2005 IT COULD NOT BE SAID THAT USE OF SOFTWARE WAS PROVED. THUS, IT IS CLEAR FROM THE ORDER OF THIS TRIBUNAL IN QUANTUM AP PEAL THAT THE DISALLOWANCE OF DEPRECIATION WAS CONFIRMED ON THE G ROUND THAT UNDISPUTEDLY THE IMPLEMENTATION SCHEDULE WAS AFTER THE END OF THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE R EVENUE THAT THE CLAIM OF THE ASSESSEE IS BOGUS OR ABSOLUTELY WRONG. THE ASSE SSEE CLAIMED DEPRECIATION BASED ON THE FACT THAT THE SOFTWARE IN QUESTION WAS ACQUIRED VIDE INVOICE DATED 31.3.2005 AND WAS UNDER THE PROC ESS OF IMPLEMENTATION. THE ASSESSEE HAS FURNISHED ALL THE RELEVANT RECORD INCLUDING BILLS, AGREEMENT AND FACT REGARDING THE I MPLEMENTATION AS WELL AS THE INCLUSION OF THE SOFTWARE IN THE BLOCK OF AS SETS. THEREFORE, IN OUR VIEW THE CLAIM OF THE ASSESSEE FALLS UNDER THE CATE GORY OF BONAFIDE CLAIM THOUGH NOT ALLOWABLE UNDER THE PROVISIONS OF SECTIO N 32 OF THE INCOME TAX ACT BECAUSE THE ASSET WAS NOT PUT TO USE BUT STILL THERE WAS SCOPE OF BONAFIDE BELIEF WHEN THE ASSESSEE CLAIMED THE DEPRE CIATION ON THE GROUND THAT THE ASSET IN QUESTION WAS READY TO USE AND IN THE PROCESS OF IMPLEMENTATION. IN THE FACTS AND CIRCUMSTANCES OF T HE CASE WE ARE OF THE VIEW THAT THE CLAIM OF THE ASSESSEE DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME. ITA NO. 7452/M/2011 RESINS & PLASTICS LTD. 5 HENCE, IN VIEW OF THE DECISION OF HONBLE SUPREME C OURT IN CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) THE PENALT Y LEVIED U/S 271(1)(C) IS NOT JUSTIFIED AND SAME IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF AUGUST 2013 ' 1 - /0& ! 2 3'%4 14 TH 5#. 0 - 5 SD/- SD/- ( . ) ! '# (D. KARUNAKAR RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 14 TH AUGUST 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI