DCIT, Ernakulam V. M/s Cochin International Airport Ltd., Cochin

ITA 807/COCH/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61436 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 08-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-07-2008
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: R RAJASEKHARAN
• Keywords: Business income; Depreciation; Initiation of penalty proceedings; Commercial expediency; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NOS. 807/COCH/2008, 375/COCH/2009 & 392/CO CH/2010 ASSESSMENT YEARS : 2005-06, 2006-07 & 2 007-08 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), ERNAKULAM. VS. M/S. COCHIN INTERNATIONAL AIRPORT LTD., 4 TH FLOOR, GCDA COMPLEX, MARINE DRIVE,KOCHI-682 031. [PAN: AAACC 9658B] (REVENUE-APPELLANT) (ASSESSEE- RESPONDENT) I.T.A NO. 373/COCH/2010 ASSESSMENT YEAR : 2007-08 M/S. COCHIN INTERNATIONAL AIRPORT LTD., 4 TH FLOOR, GCDA COMPLEX, MARINE DRIVE, KOCHI-682 031. [PAN: AAACC 9658B] VS. THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-1, ERNAKULAM. . (ASSESSEE - APPELLANT) (REVENUE-RES PONDENT) REVENUE BY SHRI T.J.VINCENT, SR. DR ASSESSEE BY SHRI R.RAJASEKHARAN, CA DATE OF HEARING 08/03/2012 DATE OF PRONOUNCEMENT 04/05/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEALS FILED AT THE INSTANCE OF THE REVENUE ARE RELATED TO THE ASSESSMENT YEARS 2005-06, 2006-07 & 2007-08. THE APPEAL OF TH E ASSESSEE RELATES TO THE ASSESSMENT YEAR 2007-08. ALL THE APPEALS ARE DIREC TED AGAINST THE ORDERS PASSED BY LD CIT(A)-II, KOCHI. SINCE SOME OF THE ISSUES URGED I N THESE APPEALS ARE IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS COMMON ORDER. I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 2 2. WE SHALL FIRST TAKE UP THE APPEALS FILED BY THE DEPARTMENT. FOLLOWING ISSUES ARE URGED BY THE DEPARTMENT IN ALL THE THREE YEARS:- (A) THE INCOME DERIVED BY THE ASSESSEE BY WAY OF ROYALTY, RENT & SERVICES, MISC. INCOME ETC. IS ASSESSABLE UNDER THE HEAD INC OME FROM BUSINESS OR INCOME FROM OTHER SOURCES. (B) ELIGIBILITY OF DEDUCTION U/S 80IA (C) WHETHER THE RUNWAY, ISOLATION PARKING BAY, R OAD, CULVERTS AND DRAIN CONSTITUTE PLANT OR BUILDING FOR THE PURPOSE OF ALL OWING DEPRECIATION. IN ASSESSMENT YEAR 2005-06, THE REVENUE IS ALSO CON TESTING THE ISSUE VIZ., WHETHER THE BROUGHT FORWARD UNABSORBED DEPRECIATION CAN BE SET OFF AGAINST THE INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. THE FIRST COMMON ISSUE RELATES TO THE HEAD OF I NCOME UNDER WHICH THE INCOMES DERIVED BY WAY OF ROYALTY, RENTS & SERVICES, MISC. INCOME ETC. ARE ASSESSABLE. THE TRIBUNAL HAS CONSIDERED AN IDENTICAL ISSUE IN THE A SSESSEES OWN CASE RELATING TO THE ASSESSMENT YEAR 2004-05 IN ITA NO.541/COCH/2007 AND HAS HELD AS UNDER:- 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CA REFULLY PERUSED THE RECORD. IT IS WELL SETTLED PROPOSITION OF LAW NOW THAT THE INC OME DERIVED ON EXPLOITATION OF COMMERCIAL ASSETS WOULD BE BUSINESS INCOME. THE QU ESTION WHETHER A PARTICULAR TYPE OF INCOME IS TO BE TREATED AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES HAS TO BE DECIDED ON THE BASIS OF FACTS AND CIRCUMS TANCES PREVAILING IN A PARTICULAR CASE. WE NOTICE THAT THERE IS A DIRECT DECISION ON THE ISSUE UNDER CONSIDERATION IN A VERY OLD CASE, VIZ., IN THE CASE OF CROFT (INSPECTOR OF TAXES) VS. SYWELL AERODROME LTD REPORTED IN (1942)(10 ITR 96 ( SUPP.)(EC)(CA), WHEREIN IT WAS HELD THAT THE INCOME DERIVED BY THE OWNER OF AN AERODROME, A COMMERCIAL ASSET, FROM VARIOUS SOURCES FROM THE USE BY OTHERS OF LICENSING THE SAID PROPERTY IS ASSESSABLE AS BUSINESS INCOME. IN THE INSTANT CASE, THE INTENTION OF THE ASSESSEE WAS ONLY EXPLOITATION OF COMMERCIAL ASSET AND THE SAID INTENTION WAS NOT PROVED TO BE WRONG. THE INCOME DERIVED BY WAY OF ROYALTY; I.E. SHARE OF INCOME FROM VARIOUS SERVICES AS WELL AS THE INCOME DERIVED BY WAY OF RENT AND SERVICES HAVE BEEN DERIVED BY THE ASSESSEE ONLY ON COMMERCIAL EXPLOITATION OF THE AIRPORT. THERE CANNOT BE ANY DOUBT THAT THE V ARIOUS FACILITIES PROVIDED BY THE ASSESSEE FORM INTEGRAL PART OF SETTING UP OF AN AIRPORT AND IT WOULD NOT BE POSSIBLE TO OPERATE AN AIRPORT WITHOUT SUCH FACILIT IES. THE AO, ON THE OTHER I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 3 HAND, HAS FAILED TO SHOW THAT THE OBJECT OF THE ASS ESSEE WAS TO DERIVE RENTAL INCOME ONLY, I.E. RENT SIMPLICITER AND THERE WAS NO INTENTION OF THE COMMERCIAL EXPLOITATION OF THE AIR PORT SET UP BY IT. ON THE CONTRARY, THE ASSESSEE HAS PLACED BEFORE US VARIOUS AGREEMENTS, LICENCES ISSUE D BY THE GOVERNMENT TO SHOW THAT ITS OBJECT WAS ONLY COMMERCIAL EXPLOITATI ON OF THE AIRPORT. IN VIEW OF THE FOREGOING DISCUSSIONS, WE AGREE WITH THE VIEW T AKEN BY THE LD CIT(A) THAT THE INCOME DERIVED BY THE ASSESSEE BY WAY OF ROYAL TY AND RENT AND SERVICES ARE ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS . 8. THE BREAK UP DETAILS OF MISCELLANEOUS INCOME AMOUNTING TO RS.75,84,609/- WAS NOT FURNISHED BEFORE US BY BOTH THE PARTIES. H OWEVER FROM THE GROUND RAISED BY THE REVENUE, WE NOTICE THAT THE SAID INCO ME CONSISTED OF INCOME RECEIVED ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION S, FILM/VIDEO SHOOTING, INTEREST ON INCOME TAX REFUND, TENDER FORM FEE ETC. IN OUR VIEW, THE INCOME DERIVED FROM FOREIGN EXCHANGE FLUCTUATIONS, TENDER FORM FEE ARE HAVING CONNECTION WITH THE BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE AND HENCE THEY SHOULD BE TREATED AS BUSINESS INCOME ONLY. HOWEVER, THE INCOME DERIVED BY ALLOWING FILM/VIDEO SHOOTING AND INTEREST ON INC OME TAX REFUND DO NOT HAVE ANY CONNECTION WITH THE CORE BUSINESS ACTIVITIES CA RRIED ON BY THE ASSESSEE. ACCORDINGLY, IN OUR VIEW, THEY SHOULD BE ASSESSED U NDER THE HEAD INCOME FROM OTHER SOURCES. THE NATURE OF OTHER RECEIPTS THAT ARE INCLUDED UNDER THE HEAD MISCELLANEOUS INCOME IS NOT AVAILABLE. ACCORDING LY, IN OUR VIEW, THE ASSESSABILITY OF VARIOUS ITEMS INCLUDED UNDER THE H EAD MISCELLANEOUS INCOME WOULD DEPEND UPON THE NATURE OF VARIOUS ITEMS OF IN COME INCLUDED THEREIN, WHICH REQUIRE EXAMINATION ITEM WISE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) WITH REGARD TO THE MISCELLANEOUS INCOME AN D RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE NA TURE OF INCOME INCLUDED UNDER THE SAID HEAD AND TAKE THE DECISION IN THE LIGHT OF FOREGOING DISCUSSIONS AND ALSO IN ACCORDANCE WITH THE LAW. 9. THE LD A.R FAIRLY CONCEDED THAT THE INTEREST INCOME DERIVED FROM BANK DEPOSITS IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE AO. THE VIEWS EXPRESSED BY US IN ASSESSMENT YEAR 2004-0 5 ARE EQUALLY APPLICABLE TO THE YEARS UNDER CONSIDERATION ALSO, AS THERE IS NO CHANGE IN THE FACTS SURROUNDING THE ISSUES. ACCORDINGLY, WE DISPOSE OF THIS GROUND IN ACCORDANCE WITH THE DECISION RENDERED IN THE APPEAL RELATING TO THE ASSESSMENT Y EAR 2004-05 WITH SIMILAR DIRECTIONS. 4. THE NEXT ISSUE RELATES TO THE ELIGIBILITY OF T HE ASSESSEE TO CLAIM DEDUCTION U/S 80IA. THE AO HAS STATED THAT THE FOLLOWING CONDITIONS PRE SCRIBED U/S 80IA(4) HAVE TO BE I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 4 CUMULATIVELY FULFILLED BY THE ASSESSEE IN RESPECT O F THE INFRASTRUCTURE FACILITY IN ORDER TO BECOME ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. (A) IT IS OWNED BY THE COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF COMPANIES OR BY AN AUTHORITY OR A BOARD OR A CORPOR ATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STA TE ACT. (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENT RAL GOVERNMENT OR STATE GOVERNMENT OR LOCAL AUTHORITY OR ANY OTHER STATUTOR Y BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY; (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1 ST DAY OF APRIL, 1995. THE AO HAS AGREED THAT THE FIRST CONDITION HAS BEEN FULFILLED APPARENTLY SINCE THE AIRPORT FACILITY IS AN INFRASTRUCTURE FACILITY AND IT IS OW NED BY A COMPANY REGISTERED IN INDIA. WITH REGARD TO THE SECOND CONDITION, THE ASSESSEE H AS PRODUCED FOLLOWING AGREEMENTS BEFORE THE AO:- (A) AERODROME LICENSE PUBLIC USE ISSUED BY THE DIRE CTOR GENERAL OF CIVIL AVIATION ON 05-12-2007. (B) MEMORANDUM OF UNDERSTANDING (MOU) ON PROVISION OF CNS/ATM FACILITIES/SERVICES BY AIRPORTS AUTHORITY OF INDIA. THE AO HELD THAT THESE TWO AGREEMENTS ARE NOT THE A GREEMENT CONTEMPLATED IN CONDITION (B) SUPRA. ACCORDINGLY HE HELD THAT THE ASSESSEE DID NOT MEET THE MANDATORY CONDITION SPECIFIED IN CLAUSE (B) SUPRA. WITH REGA RD TO THE THIRD CONDITION, THE AO NOTICED THAT THE ITAT, COCHIN BENCH HAD HELD IN THE ASSESSEES OWN CASE, WHILE CONSIDERING THE APPEAL RELATING TO THE ASSESSMENT Y EAR 1995-96, THAT THE ASSESSEE HAD COMMENCED BUSINESS IN THE YEAR RELEVANT TO THE ASSE SSMENT YEAR 1995-96 ITSELF, I.E., BEFORE 1.4.1995. BY PLACING RELIANCE ON THE ABOVE SAID DECISION OF ITAT, THE AO HELD THAT THE ASSESSEE DID NOT FULFIL THE THIRD CONDITIO N ALSO. ACCORDINGLY HE REJECTED THE CLAIM OF DEDUCTION U/S 80IA OF THE ACT. 5. HOWEVER, THE LD CIT(A) HELD THAT THE MOU ENT ERED WITH THE AIRPORTS AUTHORITY OF INDIA FOR PROVISION OF VARIOUS FACILITIES CAN BE TA KEN AS THE AGREEMENT CONTEMPLATED IN I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 5 THE CONDITION (B) SUPRA. WITH REGARD TO CONDITION (C), THE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT THERE IS A DIFFERE NCE BETWEEN THE COMMENCEMENT OF BUSINESS AND STARTING OPERATION AND MAINTENANCE O F INFRASTRUCTURE FACILITY. HE FURTHER ACCEPTED THE CONTENTION THAT THE TRIBUNAL H AS ONLY CONSIDERED THE ISSUE RELATING TO THE COMMENCEMENT OF BUSINESS AND IT DID NOT CO NSIDER THE ISSUE RELATING TO THE OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILI TY. ACCORDINGLY THE LD CIT(A) HELD THAT THE FINDING OF THE AO IS NOT BASED ON FACTS OR LAW AND ACCORDINGLY DIRECTED THE AO TO ALLOW THE DEDUCTION U/S 80IA OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. THE AGREEMENT CONTEMPLATED IN CLAUSE (B) OF SEC. 80IA(4) IS THE AGREEMENT ENTERED WITH GOVERNMENT/GOVERNMENT BODIES FOR (I) DEVELOPING OR (II) OPERATING AND MAI NTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY. BEF ORE THE AO, THE ASSESSEE HAS FILED AERODROME LICENCE-PUBLIC USE AND THE MOU ON PROVI SION OF FACILITIES IN THE AIRPORT. THE QUESTION IS WHETHER THESE TWO DOCUMENTS CONSTIT UTE AGREEMENT FOR DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY. IN OUR VIEW, BOTH THE AGR EEMENTS DO NOT CONSTITUTE THE AGREEMENTS SPECIFIED IN CLAUSE (B), BECAUSE THE FIR ST ONE IS JUST A LICENSE AND THE SECOND ONE RELATES TO THE PROVISION OF FACILITIES I NSIDE THE AIRPORT. WHAT IS CONTEMPLATED IN CLAUSE (B) IS THE AGREEMENT FOR DEVELOPING AND/O R OPERATION OF THE INFRASTRUCTURE FACILITY ENTERED WITH THE GOVERNMENT/GOVERNMENT BOD Y. BEFORE US ALSO, THE ASSESSEE HAS FURNISHED FOLLOWING AGREEMENTS:- (A) AGREEMENT WITH AIR INDIA FOR GROUND HANDLING . (B) MOU WITH BPCL FOR FUELING OPERATIONS AND LAND USE. (C) AGREEMENT WITH THOMAS COOK, ARTS JEWELLERY, MU LTI MEDIA, BHARTI AIRTEL, EIH LTD. THESE AGREEMENTS ARE THE AGREEMENTS ENTERED WITH TH E SERVICE PROVIDERS AND NOT THE AGREEMENTS CONTEMPLATED UNDER CLAUSE (B) OF THE ACT . IT MAY BE ARGUED LOGICALLY ONE CAN COME TO THE CONCLUSION THAT THERE EXISTED THE A GREEMENT WITH THE GOVERNMENT, SINCE THE SERVICE PROVIDERS WOULD NOT ENTER INTO AG REEMENT WITH THE ASSESSEE UNLESS SUCH AN AGREEMENT IS AVAILABLE. IN OUR VIEW, THIS A CASE WHERE THE ASSESSEE IS REQUIRED I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 6 TO FULFIL THE CONDITION IN A STRAIGHT MANNER AND HE NCE THE ASSESSEE IS DIRECTED TO FURNISH THE RELEVANT AGREEMENT TO THE AO. 7. WITH REGARD TO THE THIRD CONDITION OF STARTI NG OF OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY, WE NOTICE THAT THE LD CIT( A) HAS COME TO THE CONCLUSION IN FAVOUR OF THE ASSESSEE ON THE BASIS OF SUBMISSIONS MADE BY THE ASSESSEE. THE DIFFERENCE BETWEEN THE COMMENCEMENT OF BUSINESS AND STARTIN G UP OF FACILITY WAS NOT APPRECIATED BY THE AO. ONCE THIS DIFFERENCE IS APP RECIATED, THE NEXT REQUIREMENT IS ASCERTAINMENT OF THE FACTUAL ASPECTS LIKE VARIOUS D ATES IN WHICH THE VARIOUS OPERATIONS WERE STARTED BY THE ASSESSEE. EVIDENTLY, THE BASIC PARTICULARS ARE NOT BORNE OUT OF ASSESSMENT ORDER NOR THERE WAS ANY OCCASION FOR THE AO TO VERIFY THOSE VITAL DETAILS. HENCE, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES RE-EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AN D RESTORE THE SAME TO THE FILE OF THE AO FOR FRESH EXAMINATION OF THE ISSUE IN ACCORDANCE WITH THE LAW. 8. THE NEXT COMMON ISSUE RELATES TO THE ALLOWAN CE OF DEPRECIATION ON CERTAIN ASSETS, VIZ., RUNWAY, ISOLATION PARKING BAY AND ROADS, CULV ERTS & DRAINS. ACCORDING TO THE ASSESSEE, THESE ASSETS ARE TO BE TREATED AS PLANT FOR THE PURPOSE OF DEPRECIATION AND HENCE THEY SHOULD BE ALLOWED DEPRECIATION @ 25%. H OWEVER, THE AO TOOK THE VIEW THAT THEY FALL IN THE CATEGORY OF BUILDING AND HENC E HE RESTRICTED THE DEPRECIATION TO 10%. THE LD CIT(A) ALLOWED THE CLAIM OF THE ASSESS EE BY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL IN THE FOLLOWING CASES:- (A) JCIT VS. NATIONAL AIRPORT AUTHORITY OF INDIA ( 2008-TIOL-135-ITAT-DEL) (B) HAL VS. ACIT IN ITA NO.776/BANG/86 BY BANGALOR E BENCH OF ITAT. SINCE A PARTICULAR VIEW HAS BEEN TAKEN BY THE ABOVE SAID BENCHES OF TRIBUNAL, WE ARE INCLINED TO FOLLOW THE DECISION RENDERED IN THOSE C ASES. HOWEVER, WE NOTICE THAT THE LD CIT(A) DID NOT VERIFY WHETHER ALL THE ASSETS STATED ABOVE ARE COVERED BY THE ABOVE SAID DECISIONS. HENCE FOR THE PURPOSE OF CARRYING ON NE CESSARY VERIFICATION, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SA ME TO THE FILE OF AO WITH THE DIRECTION TO FOLLOW THE DECISION OF THE TRIBUNALS R EFERRED SUPRA AND DECIDE THE ISSUE ACCORDINGLY. I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 7 9. THE REMAINING ISSUE RAISED BY THE DEPARTMENT IN ASSESSMENT YEAR 2005-06 RELATES TO THE ALLOWABILITY OF SET OFF OF BROUGHT FORWARD D EPRECIATION ON THE INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. SINCE WE HAVE ALREADY HELD THAT THE INCOME DERIVED BY THE ASSESSEE BY WAY OF ROYALTY, R ENT AND SERVICES AND CERTAIN MISCELLANEOUS INCOME ARE TO BE ASSESSED UNDER THE H EAD INCOME FROM BUSINESS, IN OUR VIEW, THIS ISSUE HAS BECOME INFRUCTUOUS. 10. NOW WE SHALL TAKE UP THE APPEAL FILED BY TH E ASSESSEE RELATING TO THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED SIX GROUNDS. THE ASSESSEE DID NOT PRESS GROUND NO.1 AND THE LD A.R HAS STATED THAT THE GROU ND NO.3 RELATING TO THE ASSESSMENT OF INTEREST INCOME IS SETTLED AGAINST THE ASSESSEE. ACCORDINGLY BOTH THE GROUNDS ARE DISMISSED. IN GROUND NO.6, THE ASSESSEE IS QUESTIO NING THE INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C). WHEN THE ASSESSED INCOM E IS MORE THAN THE RETURNED INCOME, THEN THE EXPLANATION 1 TO SEC. 271 AUTOMATIC ALLY COMES INTO PLAY, WHICH PLACES RESPONSIBILITY UPON THE ASSESSEE. ACCORDINGLY WE D O NOT FIND ANY INFIRMITY IN THE ACTION OF THE AO IN THIS REGARD AND HENCE WE UPHOLD THE DE CISION OF LD CIT(A) ON THIS ISSUE. 11. IN GROUND NO.2, THE ASSESSEE IS CHALLENGING THE DECISION OF LD CIT(A) IN CONFIRMING THE ACTION OF THE AO IN ALLOWING DEPRECI ATION ON COMPUTER PERIPHERALS AT 15% INSTEAD OF 60% CLAIMED BY THE ASSESSEE. THE LD A.R PLACED RELIANCE ON THE DECISION OF TRIBUNAL IN THE FOLLOWING CASES TO CONT END THAT THE COMPUTER PERIPHERALS ARE ALSO ELIGIBLE FOR DEPRECIATION @ 60%. 1. ITO KOLKATTA VS. SAMIRAN MAJUMDAR (98 ITD 119) (KOL) 2. ITO VS. OMNI GLOBE INFORMATION TECHNOLOGIES IN DIA (P) LTD (131 ITD 280) (DELHI) 3. DY. CIT VS. DATA CRAFT INDIA LTD (133 TTJ 377 )(MUM)(SB). IN VIEW OF THE DECISION OF MUMBAI SPECIAL BENCH, WE ARE INCLINED TO ACCEPT THE VIEWS OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW DEPRECIATION ON COMPUTER PERIPHERAL S AT THE RATE APPLICABLE TO THE COMPUTERS. I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 8 12. THE NEXT ISSUE RELATES TO THE PROPORTIONATE DISALLOWANCE OF BANK CHARGES AND INTEREST EXPENSES ATTRIBUTABLE TO THE FUNDS DIVERTE D TO THE SISTER CONCERN OF THE ASSESSEE. ACCORDING TO THE TAX AUTHORITIES, THE AS SESSEE DID NOT RECEIVE ANY INCOME FROM THE INVESTMENT MADE IN THE SUBSIDIARY COMPANIE S. THE ASSESSEE DID NOT SHOW THAT THERE WAS COMMERCIAL EXPEDIENCY IN MAKING THE SAID INVESTMENTS. THE LD CIT(A) HAS ALSO OBSERVED THAT THE ASSESSEE DID NOT STRONGL Y ARGUE ABOUT THE POSSIBLE DIVERSION OF RESERVES AND SURPLUS HELD IN THE BOOKS OF ACCOUN T. HENCE THE DISALLOWANCE OF RS.31,88,157/- MADE BY THE AO WAS CONFIRMED BY LD C IT(A). BEFORE US, THE LD A.R CONTENDED THAT THE ASSESSEE HAS GOT ADEQUATE RESERV ES AND SURPLUS FOR MAKING INVESTMENT IN SUBSIDIARY COMPANIES. 13. THE ASSESSEE HAS FILED A COPY OF ANNUAL REP ORT FOR THE YEAR ENDING 31.3.2007. FROM THE SAID ANNUAL REPORT, WE NOTICE THAT THE ASS ESSEE DID NOT POSSESS ANY RESERVES AND SURPLUS AS ON 31.3.2006, BUT THE RESERVES AND S URPLUS AS ON 31.3.2007 STOOD AT RS.16.39 CRORES, WHICH MEANS THAT THE ASSESSEE HAS RECOUPED THE PAST LOSSES ONLY DURING THE YEAR UNDER CONSIDERATION. IT IS PERTINE NT TO NOTE THAT THE PROFIT ACCRUES AS AT THE YEAR END AND HENCE THE SUM OF RS.16.39 CRORES S HALL BE DEEMED TO HAVE BEEN ACCRUED AS ON 31.3.2007. ON THE OTHER HAND THE INV ESTMENT MADE IN THE SUBSIDIARY COMPANIES STOOD AT RS.7.20 CRORES AND RS.10.25 CROR ES AS ON 31.3.2006 AND 31.3.2007 RESPECTIVELY, MEANING THERE BY THAT INVESTMENTS HAV E BEEN MADE SUFFICIENTLY PRIOR TO REALISATION OF RESERVES AND SURPLUS. HENCE, WE ARE NOT ABLE TO APPRECIATE THE CONTENTIONS OF THE ASSESSEE IN THIS REGARD. ACCORD INGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 14. THE NEXT GROUND RELATES TO THE QUESTION OF RATE OF DEPRECIATION ALLOWABLE ON ELECTRICAL FITTINGS. THE AO RESTRICTED THE CLAIM O F DEPRECIATION ON ELECTRICAL FITTINGS AT 10%, THOUGH THE ASSESSEE HAD CLAIMED DEPRECIATION A T THE RATE OF 15%. THE AO HAS OBSERVED THAT THE ASSESSEE DID NOT SUBSTANTIATE ITS CLAIM THAT THE ELECTRICAL FITTINGS ARE ELIGIBLE FOR DEPRECIATION AT 15%, I.E., AT THE RATE APPLICABLE TO PLANT & MACHINERY. IN THE ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE, THE L D CIT(A) ALSO CONFIRMED THE ACTION I.T.A. NOS. 807/COCH/08, 375/COCH/09, 392 & 373/COCH/2010 9 OF THE AO. BEFORE US ALSO, THE ASSESSEE DID NOT FU RNISH ANY EXPLANATION. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DEC ISION OF LD CIT(A) ON THIS ISSUE. 15. IN THE RESULT, THE APPEALS OF THE REVENUE A RE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 04-05-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 4TH MAY, 2012 GJ COPY TO: 1. M/S. COCHIN INTERNATIONAL AIRPORT LTD., 4 TH FLOOR, GCDA COMPLEX, MARINE DRIVE, KOCHI-682 031. 2.THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), ERNAKULAM. 3.THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-1, KO CHI. 4.THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI 5.THE COMMISSIONER OF INCOME-TAX, KOCHI. 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER ( ASSISTANT REGISTRAR) I.T.A.T. COCHIN