The Dy. CIT, Circle-4(1)(2), Ahmedabad V. M/s. Trio Elevators Company (India) Ltd., Ahmedabad

ITA 795/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7283 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 30-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NOS. 793 & 795/AHD/2017 ( / ASSESSMENT YEAR: 2013-14) TRIO ELEVATORS COMPANY (INDIA) LTD. 404, SHIVAM COMPLEX, BHUYANGDEV CROSS ROAD, SOLA ROAD, GHATLODIYA, AHMEDABAD. / VS. DCIT CIRCLE 4(1)(2), AHMEDABAD. ./ ./ PAN/GIR NO. : AAC CT4 923 E ( / APPELLANT ) .. ( / RESPONDENT ) DCIT CIRCLE 4(1)(2), AHMEDABAD. / VS. TRIO ELEVATORS COMPANY (INDIA) LTD. 404, SHIVAM COMPLEX, BHUYANGDEV CROSS ROAD, SOLA ROAD, GHATLODIYA, AHMEDABAD. ./ ./ PAN/GIR NO. : AAC CT4 923 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BANDISH SOPARKAR, A.R. / RESPONDENT BY : SHRI VINOD TANWANI, SR. DR / DATE OF HEARING 10/07/2019 !'# / DATE OF PRONOUNCEMENT 29/07/2019 $%/ O R D E R ITA NOS.793 & 795/AHD/2017 [TRIO ELEVATORS COMPANY (INDIA) LTD. VS. DCIT] A.Y. 2013-14 - 2 - PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE CIT(A)-8, AHME DABAD (CIT(A) IN SHORT), DATED 19.01.2017 ARISING IN TH E ASSESSMENT ORDER DATED 20.01.2016 PASSED BY THE ASSESSING OFF ICER UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCER NING A.Y. 2013-14. 2. THE SUBSTANTIVE GROUNDS OF APPEAL OF THE ASSESS EE READS AS UNDER:- 1. THE LD. COMMISSIONER (APPEAL) ERRED IN FACT AND IN LAW IN CONFIRMING THE DISALLOWANCE OF EMPLOYEES CONTRIBUT ION OF PF AND ESI OF RS. 2,93,473/- U/S. 2(24)(X) R.W.S. 36(1)(VA ) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE PAYMENT OF THE SAI D CONTRIBUTION WAS MADE AFTER DUE DATE AS PROVIDED IN RESPECTIVE S TATUTE. 2. THE LD. COMMISSIONER (APPEAL) ERRED IN FACT IN L AW BY CONFIRMING THE DISALLOWANCE OF PROVISION FOR MAINTE NANCE AND FREE SERVICE/WARRANTY OF RS. 8,59,094/- IN COMPUTATION O F BOOK PROFIT U/S. 115JB. 793/AHD/2017(A.Y. 2013-14)(ASSESSEES APPEAL):- 3. GROUND NO. 1 CONCERNS DISALLOWANCE OF RS. 2,93,4 73/- UNDER S. 2(24)(X) R.W.S. 36(1)(VA) TOWARDS DEFAULT IN PAY MENT OF EMPLOYEES CONTRIBUTION OF PF AND ESI WITHIN DUE DA TE SPECIFIED UNDER RESPECTIVE LAWS. IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. GUJARAT STATE ROAD TR ANSPORT CORPORATION (2014) 366 ITR 170 GUJARAT, WE DO NOT F IND ANY MERIT IN THE GRIEVANCE OF THE ASSESSEE ON THIS SCORE. GR OUND NO. 1 (SUPRA) FOR THE ASSESSEES APPEAL IS DISMISSED. ITA NOS.793 & 795/AHD/2017 [TRIO ELEVATORS COMPANY (INDIA) LTD. VS. DCIT] A.Y. 2013-14 - 3 - 4. GROUND NO. 2 CONCERNS ADJUSTMENT TOWARDS PROVISI ON FOR MAINTENANCE AND FREE SERVICES/WARRANTY OF RS. 8,59, 094/- WHILE DETERMINING BOOK PROFIT UNDER S. 115JB. 5. IT IS CONTENDED ON BEHALF OF THE ASSESSEE THAT S UCH PROVISION TOWARDS MAINTENANCE/WARRANTY ETC. CANNOT BE STATED TO BE AN UNASCERTAINED LIABILITY SO AS TO ADD IT BACK IN TER MS OF CLAUSE (C) TO EXPLANATION 1 TO SECTION 115JB. WE FIND OURSELVES IN AGREEMENT WITH THE AFORESAID CONTENTION OF THE ASSESSEE THAT SUCH LIABILITIES CANNOT BE REGARDED AS CONTINGENT LIABILITY. WHAT I S CERTAIN IS THE INCURRING OF LIABILITY NOTWITHSTANDING ESTIMATION T HEREOF WITH REASONABLE CERTAINTY. ALTHOUGH ACTUAL QUANTIFICATI ON MAY NOT BE ALWAYS BE POSSIBLE, THE LIABILITY IS IN PRAESENTI THOUGH IT IS LIKELY TO BE DISCHARGED AT A FUTURE DATE. SIMILAR ISSUE HAS COME UP BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. INOX LEISURE LTD. (2013) 351 ITR 314 (GUJ.) WHERE IT WAS HELD TH AT ASCERTAINED LIABILITIES CANNOT BE SUBJECTED TO THE ADJUSTMENT U NDER CLAUSE (C) TO EXPLANATION 1 TO SECTION 115JB. THUS, WE FIND MERI T IN THE GRIEVANCE OF THE ASSESSEE ON THIS SCORE. GROUND NO . 2 OF THE ASSESSEES APPEAL AS NOTED ABOVE IS ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. 795/AHD/2017 (A.Y. 2013-14)(REVENUES APPEAL):- 7. WE SHALL NOW TURN TO REVENUES APPEAL IN 795/AHD /2017. THE SUBSTANTIVE GROUNDS IN REVENUES APPEAL READS AS UN DER:- 1) WHETHER THE LD. CIT(A) IS RIGHT IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION CLAIMED ON TRADEMA RK OF RS. 65,88,665/-. 2) WHETHER THE LD. CIT(A) IS RIGHT IN LAW AND ON F ACTS IN ALLOWING THE DEPRECIATION AT THE RATE OF 60% ON SOF TWARE BEING ITA NOS.793 & 795/AHD/2017 [TRIO ELEVATORS COMPANY (INDIA) LTD. VS. DCIT] A.Y. 2013-14 - 4 - CUSTOMIZED LICENSE PRODUCT UNDER CONSIDERATION INST EAD AT THE RATE OF 25%. 8. GROUND NO. 1 CONCERNS DISALLOWANCE ON ACCOUNT OF DEPRECIATION TOWARDS GOODWILL. 9. ON PERUSAL OF THE ASSESSMENT ORDER AND FIRST APP ELLATE ORDER IT APPEARS THAT ASSESSEE HAS CLAIMED DEPRECIATION AMOU NTING TO RS. 65,88,665/- AT THE RATE OF 25% ON OPENING VALUE OF GOODWILL AT RS. 2,63,54,659/-. IT IS CONTENDED BY THE ASSESSEE THA T THE CLAIM TOWARDS DEPRECIATION ON GOODWILL IS CONSEQUENTIAL T O THE EARLIER ASSESSMENT YEARS WHERE SUCH DEPRECIATION HAS BEEN D ULY ACCEPTED. IT WAS FURTHER POINTED OUT THAT THE GOODWILL AROSE ON ACCOUNT OF PURCHASE OF BUSINESS OPERATIONS OF AN ENTITY NAMELY ALPS TECHNOLOGIES LTD. ON SLUMP SALE BASIS. THE VALUATI ON AND DETERMINATION OF GOODWILL APPEARS AT PARA 4.3 OF TH E ASSESSMENT ORDER. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND THE ORDER OF THE AUTHORITIES BELOW ON THIS ISSUE. THE ESSENTIAL CONTROVERSY INVOLVES MAINTAINABILITY OF CLAIM OF DE PRECIATION ON COST OF GOODWILL BY THE ASSESSEE. THE ASSESSEE HAS CLAIMED CERTAIN COSTS TOWARDS GOODWILL BEING EXTRA CONSIDERATION PA ID TOWARDS ACQUISITION OF NET VALUE OF ASSETS OF ALPS TECHNOLO GIES LTD. ON SLUMP SALE BASIS WITH A VIEW TO ACQUIRE ITS BUSINES S OPERATIONS. THERE CAN BE NO QUARREL THAT EXTRA CONSIDERATION PA ID FOR ACQUISITION OF ASSETS AND THE BUSINESS OF A CONCERN REPRESENTS COST OF GOODWILL. THIS BEING SO, THE ASSESSEE WOULD BE ENTITLED IN LA W FOR CLAIM OF DEPRECIATION THEREON IN VIEW OF THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. TGB BANQUETS & H OTELS LTD. TAX APPEAL NO. 470 OF 2012 DATED 21.06.2016 (GUJ.) AND ALSO THE ITA NOS.793 & 795/AHD/2017 [TRIO ELEVATORS COMPANY (INDIA) LTD. VS. DCIT] A.Y. 2013-14 - 5 - DECISION OF HONBLE SUPREME COURT IN THE CASE OF SM IFFS SECURITIES LTD. SUPRA. THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE CIT(A) IN FAVOUR OF THE ASSESSEE. HENCE, WE DECLINE TO INTERFERE. 11. THE SECOND ISSUE CONCERNS CLAIM OF DEPRECIATION AT THE RATE OF 60% ON SOFTWARE BEING CUSTOMIZED LICENSE PRODUCT. THE CIT(A) HAS DEALT WITH THE ISSUE AS UNDER:- 7. GROUND NO.4 IS AGAINST THE ALLOWANCE OF DEPRECIA TION @ 25% ON COMPUTER SOFTWARE INSTEAD OF PRESCRIBED RATE OF 60% IN APPENDIX TO INCOME TAX RULES 1962. I HAVE CONSIDERED THE FACTS OF THE CASE AS STATED BY THE APPELLANT AS WELL AS THE AO IN HIS ASSESSMENT ORDER . I HAVE ALSO CONSIDERED THE SUBMISSION OF THE APPELLANT AND THE CASE LAWS REFERRED BY THE AO AS WELL AS THE APPELLANT. THE MA IN GROUND OF APPEAL IS AGAINST APPLICATION OF DEPRECIATION @ 25% INSTEAD OF 60% CLAIMED BY THE APPELLANT ON THE COMPUTER AND COMPUT ER SOFTWARE. THE AO APPLIED THE RATE OF 25% BY STALING THAT IN T HE INSTANT CASE IT IS :THE LICENSE WHICH HAS GOT MORE VALUE AND IMPORT ANCE THAN THE SOFTWARE AND CONCLUDED THAT THE APPLICATION SOFTWAR E BEING LICENSE ARE INTANGIBLE ASSETS AND THEY ARE ELIGIBLE FOR DEP RECIATION U/S.32 OF THE ACT @25%. DURING THE APPELLATE PROCEEDINGS THE AR FILED A DE TAILED WRITTEN SUBMISSION IN WHICH STATED THAT THE DEPRECI ATION RATE OF 60% HAS BEEN PROVIDED FOR 'COMPUTER INCLUDING COMPUTER SOFTWARE' IN ENTRY NO 5 OF PART A III OF APPENDIX TO INCOME TAX RULES 1962. HE ALSO REFERRED TO THE DECISION OF ITAT DELHI IN THE CASE OF AMWAY INDIA ENTERPRISES (ITAT SPECIAL BENCH DELHI)(2008) 111 ITD 0112. THE ISSUE IN DISPUTE AND SUBMISSION OF THE APPELLA NT IS CONSIDERED. IT IS NOTICED THAT THE HON'BLE ITAT, AH MEDABAD ALSO IN THE CASE OF ACIT V. VOLTAMP TRANSFORMER LTD (ITANO. 1676/AHD/2012) CONFIRMED THE DECISION TAKEN BY THE CIT(A) ALLOWING THE DEPRECIATION @ 60%. IN THIS CASE CIT(A) DECIDED AS UNDER: 'AFTER CONSIDERING THE EXPLANATION OF THE APPELLANT , I AM INCLINED TO ACCEPT THE VIEW PROPOUNDED BY THE APPEL LANT. THE INCOME TAX ACT DOES NOT MAKE ANY DIFFERENCE BETWEEN THE SYSTEM SOFTWARE AND THE APPLICATION SOFTWARE. THE S CHEDULE ONLY PROVIDES THE DEPRECIATION @60% ON THE COMPUTER SOFTWARE AND THE TERM 'COMPUTER SOFTWARE' HAS A/SO BEEN DENIED IN THE APPENDIX-I, THE CLASSIFICATION MADE B Y THE ACCOUNTING STANDARDS CANNOT OVERWRITE THE DEFINITIO N GIVEN IN ITA NOS.793 & 795/AHD/2017 [TRIO ELEVATORS COMPANY (INDIA) LTD. VS. DCIT] A.Y. 2013-14 - 6 - THE INCOME TAX ACT. ACCORDINGLY, THE APPELLANT IS E NTITLED TO DEPRECIATION @60%. THE GROUNDS OF APPEAL ARE ACCORD INGLY ALLOWED. ' MOREOVER, HONBLE MUMBAI SPECIAL BENCH IN ITS ORDER OF DATA CRAFT INDIA LTD. (SUPRA) HIGHLIGHTED THE FAD THAT T ERM 'COMPUTER' HAS NOT BEEN DEFINED UNDER THE IT ACT NO R IN THE GENERAL CLAUSES ACT, 1987, THE MEANING OF THE TERM COMPUTER HAS TO BE UNDERSTOOD BY APPLYING THE PRINCIPLES OF STATUTORY INTERPRETATION I.E. ONE HAS TO GIVE THE MEANING TO THE EXPRESSION 'COMPUTER' NOT MERELY BY GOING TO THE DI CTIONARY MEANING BUT BY APPLYING COMMON PARLANCE OR COMMERCI AL PARLANCE TESTS AS WELL AS BY ANALYSING THE INTENDME NT OF LEGISLATURE IN PROVIDING HIGHER RATE OF DEPRECIATIO N..... THE HONBLE SPECIAL BENCH FURTHER WENT ON TO HOLD T HAT 'THOUGH FUNCTIONS OF THE COMPUTER AS ONE COMPOSITE UNIT IS FOR PERFORMING LOGICAL, ARITHMETICAL OR MEMORY FUNCTION S ETC., BUT IT IS NOT THE ONLY EQUIPMENT WHICH PERFORMS SUCH JU NCTIONS THAT CAN BE CALLED AS 'COMPUTER'. ALL THE INPUT AND OUTP UT DEVICES WHICH IN FACT SUPPORT IN THE RECEIPT OF INPUT AND O UTFLOW OF THE OUTPUT ARE ALSO PART OF THE 'COMPUTER'. THEREFORE T HE RATIO WHICH CAN BE CULLED OUT FOR THE AFORESAID DECISION FOR HONBLE SPECIAL BENCH (SPECIFICALLY PARA 31.4 OF THE ORDER) , IT IS TO BE SEEN THAT THE HONBLE SPECIAL BENCH HAS CLEARLY HEL D THAT WHEN A PARTICULAR HARDWARE OR SOFTWARE IS USED ALONG WIT H THE COMPUTERS AND WHEN THEIR FUNCTIONS ARE INTEGRATED W ITH A COMPUTER OR IN OTHER WORDS WHEN A DEVICE IS USE AS PART OF A COMPUTER OR IN OTHER WORDS WHEN THE DEVICE IS USE A S PART OF THE COMPUTER IN ITS FUNCTIONS, EVEN THOUGH IT MAY B E HAVE IN USER ON STANDALONE BASIS, BUT STILL THAN SUCH HARDW ARE OR SOFTWARE WOULD BE TERMED AS A 'COMPUTER'. IN VIEW OF THE DETAILED FINDING GIVEN BY THE HON'B LE ITAT AHMEDABAD IN CASE OF VOLTAMP TRANSFORMER LTD (SUPRA ) AND MUMBAI SPECIAL BENCH IN ITS ORDER OF DATA CRAFT INDIA LTD. AND THE CASE LAW REFERRED BY THE APPELLANT, THE CLAIM OF DEPRECIATIO N @ 60% BY THE APPELLANT IS ALLOWABLE. I DO NOT FIND ANY REASON TO DIFFER WITH FINDINGS OF HON'BLE 1TAT, AHMEDABAD AND MUMBAI IN A BOVE MENTIONED CASES. NEITHER (HE INCOME TAX ACT NOR THE JUDICIAL PRONOUNCEMENT DIFFERENTIATE BETWEEN THE COMPUTER AN D COMPUTER SOFTWARE AND LICENSE TO USE THE SAME. THE LIST OF T ANGIBLE ASSETS IN THE TABLE OF RATE OF DEPRECIATION AT SERIAL NO.5 NA ME OF THE ASSET IS 'COMPUTERS INCLUDING COMPUTER SOFTWARE'. THE MEANIN G OF COMPUTER SOFTWARE IS ALSO GIVEN IN NOTE NO.7 GIVEN BELOW THE TABLE OF RATE OF DEPRECIATION. ACCORDING TO THIS NOTE THE 'COMPUTER SOFTWARE' MEANS ANY COMPUTER PROGRAMME RECORDED ON ANY DISK, TAP, P ERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE. HENCE, B Y ANY INTERPRETATION THE COMPUTER SOFTWARE CANNOT BE TREA TED OUTSIDE THE PURVIEW OF THE ASSET ELIGIBLE FOR DEPRECIATION THE RATE OF 60%. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW THE DEPREC IATION @ 60% AS ITA NOS.793 & 795/AHD/2017 [TRIO ELEVATORS COMPANY (INDIA) LTD. VS. DCIT] A.Y. 2013-14 - 7 - PRESCRIBED IN THE INCOME TAX ACT. THE APPEAL ON THI S GROUND IS ALLOWED. 12. WE FIND THAT THE CIT(A) HAS CONCLUDED THE ISSUE IN FAVOUR OF THE ASSESSEE HAVING REGARD TO THE PROVISIONS OF THE ACT AND THE DECISION OF THE COORDINATE BENCH RENDERED IN SIMILA R CIRCUMSTANCES. THE COMPUTER AND COMPUTER SOFTWARE AND LICENSES ARE NOT DIFFERENTIATED IN THE TABLE OF DEPRECIATION AS PR OVIDED UNDER THE INCOME TAX ACT. THUS, CIT(A) IN OUR VIEW HAS RIGHT LY RECORDED THE FINDINGS IN FAVOUR OF THE ASSESSEE. WE DECLINE TO INTERFERE THEREWITH. GROUND NO. 2 OF REVENUES APPEAL IS DIS MISSED. 13. IN THE RESULT, REVENUES APPEAL IS DISMISSED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 29/07/2019 TANMAY TRUE COPY !' #' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. ) *+ , / CONCERNED CIT 4. ,- / CIT (A) 5. 012 33*+, *+#, 56$)$ / DR, ITAT, AHMEDABAD 6. 289 : / GUARD FILE. BY ORDER / $% , ;/5 *+#, 56$)$ < THIS ORDER PRONOUNCED IN OPEN COURT ON 29 /07/2019