Shri Dipak M.Doshi, Baroda V. The Income tax Officer,Ward-5(3), Baroda

ITA 819/AHD/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1166 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D V SINGH SRDR
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO. 819/AHD/2012 ( / ASSESSMENT YEAR :2007-08) DIPAK M.DOSHI 2 ND FLOOR, D TOWER KUNJ RESI-CUM-PLAZA RAJMAHAL ROAD, VADODARA / VS. THE INCOME TAX OFFICER WARD-5(3) BARODA ./ ./ PAN/GIR NO. : ABQPD 6238 E ( ' / APPELLANT ) .. ( #' / RESPONDENT ) ' $ / APPELLANT BY : SHRI MANISH J.SHAH, AR #' % $ / RESPONDENT BY : SHRI D.V. SINGH, SR.DR &'( % ) / DATE OF HEARING 11/08/2015 *+, % ) / DATE OF PRONOUNCEMENT 21/08/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-V, BARODA [CIT(A) IN SHORT] DATED 27/03/2012 PERTAINING TO ASSESSMENT Y EAR (AY) 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 01. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AS WELL A S IN LAW THE LRD.CIT(A)-V, BARODA WAS ERRED IN CONFIRMING 10% OF VARIOUS EXPENSES AS PERSONAL EXPENSES EVEN THOUGH EXPENSES WERE INCURRED ITA NO.819 /AHD /2012 DIPAK M. DOSHI VS. ITO ASST.YEAR 2007-08 - 2 - FOR THE PURPOSE OF BUSINESS AND ERRED IN APPLYING S EC.38(2) OF THE I.T.ACT. 02. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AS WELL A S IN LAW THE LRD.ITO, WARD-5(3), BARODA WAS ERRED IN CONFIRMING DISALLOWANCE OF DEPRECIATION ON COMPUTERS ON THE GROUND THAT THE SAME WERE NOT PUT TO USE EVEN THOUGH SAME WERE USED FOR THE PURPO SE OF BUSINESS. 03. THE APPELLANT PRAYS TO YOUR HONOR TO LEAVE, AMEND, ALTER OR CANCEL ANY GROUND OF APPEAL AT THE TIME OF HEARING. RELIEF CLAIMED IN APPEAL (1) APPELLANT PRAYS YOUR HONOUR TO ALLOW 10% OF VARIOUS EXPENSES FROM POSTAGE AND TELEPHONE, VEHICLE, PETROL AND MOTOR CA R DEPRECIATION WHICH WERE DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A)-V, BARODA. (2) ALLOW DEPRECIATION ON COMPUTERS. (3) ANY OTHER RELIEF WHICH IS PERMISSIBLE AS PER THE LA W AND FACTS AND CIRCUMSTANCE OF THE CASE. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE A SSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 21/12/2009; THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION(S) OUT OF EXPENSES OF RS.11,386/- AND DISA LLOWANCE OF DEPRECIATION OF COMPUTERS OF RS.5,61,883/-. AGAINS T THE SAID ASSESSMENT ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.C IT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DISMIS SED THE APPEAL. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), ASSESSEE I S NOW IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING, THE LD.COUNSEL FOR THE A SSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS THE GROUND NO.1 BEIN G SMALLNESS OF THE ITA NO.819 /AHD /2012 DIPAK M. DOSHI VS. ITO ASST.YEAR 2007-08 - 3 - AMOUNT INVOLVED. THE LD.SR.DR HAS NO OBJECTION. IN VIEW OF THE SUBMISSION MADE BY THE LD.COUNSEL FOR THE ASSESSEE AT BAR, WE DISMISS THE GROUND NO.1 OF ASSESSEES APPEAL AS NOT PRESSED. 4. GROUND NO.2 IS AGAINST CONFIRMATION OF DISALLOWA NCE OF DEPRECIATION ON COMPUTERS ON THE GROUND THAT THE SA ME WERE NOT PUT TO USE. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF DE PRECIATION. HE SUBMITTED THAT THE ASSESSEE MADE A CLAIM OF RS.5,39 ,110/- AS DEPRECIATION ON COMPUTERS. HOWEVER, THE AO DID NOT ALLOW THE SA ME ON THE GROUND THAT THE COMPUTERS WERE NOT PUT TO USE, ALTHOUGH T HE ASSESSEE HAS PLACED ON RECORD TRIAL RUN OF THE COMPUTERS. HE DREW OUR ATTENTION TOWARDS PAGE NO.11 OF THE ASSESSEES PAPER-BOOK, WHEREIN A LETTE R DATED 06/11/2006 IS ENCLOSED. AS PER THIS LETTER, A PROPOSAL IS MADE F OR HIRING COMPUTERS ON LEASE FOR A PERIOD OF THREE YEARS. THE LD.COUNSEL FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TOWARDS PAGE NO.12 OF THE PAPER- BOOK IN SUPPORT OF HIS CONTENTION THAT 88 COMPUTERS WERE RECEIVED. SI NCE THE TRIAL RUN WAS CARRIED OUT BY THE ASSESSEE, ASSESSEE IS ENTITLED F OR DEPRECIATION. HE PLACED RELIANCE ON THE JUDGEMENT(S) OF HONBLE HIGH COURT OF GUJARAT RENDERED IN THE CASE OF ACIT VS. ASHIMA SYNTEX LTD. REPORTED AT [2001] 251 ITR 133 (GUJ) AND OF KOSHA CUBIDOR CONTAINERS L TD. VS. DY.CIT REPORTED AT [2015] 53 TAXMANN.COM 86 (GUJARAT). ITA NO.819 /AHD /2012 DIPAK M. DOSHI VS. ITO ASST.YEAR 2007-08 - 4 - 4.1. ON THE CONTRARY, LD.SR.DR OPPOSED THE SUBMISSI ONS MADE BY THE LD.COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT AS PER LETTER DATED 23/03/2007, THE ASSESSEE HAS ONLY CONFIRMED THE REC EIPT OF THE COMPUTERS, BUT IT DOES NOT DEMONSTRATE THAT THE TRIAL RUN WAS CARRIED OUT. HE SUBMITTED THAT BEFORE THE AO NO EVIDENCE WAS PLACED ON RECORD DEMONSTRATING THAT THE COMPUTERS WERE PUT TO USE DU RING THE YEAR UNDER APPEAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENTS RELIED UPON BY THE LD.COU NSEL FOR THE ASSESSEE. THE AO DISALLOWED THE CLAIM ON THE BASIS THAT THE C OMPUTERS ARE NOT PUT TO USE. THE AO WAS OF THE VIEW THAT THERE MUST BE ACTUAL, EFFECTIVE AND REAL USER IN THE COMMERCIAL SENSE. AND THE USER MU ST BE SO LINKED WITH THE BUSINESS THAT IT CAN BE SAID THAT THERE IS AN I MMEDIATE NEXUS BETWEEN THE USER AND THE BUSINESS, I.E. THE REAL BUSINESS O F THE ASSESSEE. THE LD.CIT(A) HAS DECIDED THIS ISSUE BY OBSERVING AS UN DER:-- 5.2. I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE FACTS OF THE CASE AS WELL AS THE OBSERVATION MADE BY THE AO AND THE ARGU MENTS PUT FORTH BY THE AR. FROM THE LETTERS OF RISHABH SOFTWARE ADDRE SSED TO THE APPELLANT, IT IS SEEN THAT THE APPELLANT WAS REQUIR ED TO SUPPLY COMPUTERS AT THE SITE OF RISHABH SOFTWARE IN SMALL LOTS OF 10 TO 15 MACHINES WHICH WERE TO BE TESTED BEFORE BEING PUT TO ACTUAL USE. MOREOVER, THE ACTUAL HIRING OF MACHINES WAS SUPPOSED TO START ONCE ENTIR E INFRASTRUCTURE OF RISHABH SOFTWARE WAS IN PLACE AND PROJECTS, FOR WHI CH IT WAS BEING CREATED, STARTED. VIDE LETTER DATED 23 RD MARCH 2007, RISHABH SOFTWARE INFORMED THE APPELLANT THAT THEY CONFIRM RECEIPT OF 88 COMPUTERS WHICH ITA NO.819 /AHD /2012 DIPAK M. DOSHI VS. ITO ASST.YEAR 2007-08 - 5 - WILL BE RETAINED BY THEM FOR USE ON LEASE FOR A PER IOD OF THREE YEARS. THIS WAS SUBJECT TO POSITIVE REPORT ON TESTING WHIC H WAS EXPECTED TO BE RECEIVED BY THE END OF THE WEEK. IT WAS FURTHER ST ATED IN THE LETTER THAT THE APPELLANT COULD START RAISING INVOICES TO START FOR LEASE RENT W.E.F. APRIL, 2007. THUS, LETTER CLEARLY SHOWS THAT THE C OMPUTERS WERE SUPPOSED TO BE PUT TO USE IN THE BUSINESS OF LEASIN G ONLY W.E.F. 1 ST APRIL, 2007. PRIOR TO THAT PERIOD THEY WERE IN THE PROCES S OF MAKING THEM READY FOR HIRING BY RISHABH SOFTWARE. TILL THE COM PUTERS WERE HIRED THEY WERE PROPERTY OF THE APPELLANT AND WERE NOT TO PUT TO ANY USE IN THE BUSINESS OF THE APPELLANT AND NO INCOME WAS ACTUALL Y DERIVED FROM THEM. 5.1. THE ASSESSEE HAS RELIED UPON A LETTER DATED 23 /03/2007 IN SUPPORT OF THE CONTENTION THAT THE COMPUTER WERE PUT TO USE . THE CONTENTS OF THE LETTER ARE REPRODUCED HEREUNDER:- 23 RD MARCH 2007 TO: LANTECH D-12, KUNJ RESI-CUM-PLAZA NR.POLO CLUB PALACE ROAD BARODA 390 001 HELLO DEEPAKBHAI WE HEREBY CONFIRM HAVING RECEIVED 88 COMPUTERS, WHI CH, IS AS PER OUR DISCUSSION AND UNDERSTANDING, AND THE SAME WILL BE RETAINED BY US FOR USE ON LEASE FOR A PERIOD OF 3 YEARS. THIS HAS BEEN SUBJECT TO POSITIVE REPORT ON TESTING , WHICH COMPRISED OF CHECKING THE DETAILED CONFIGURATION OF ALL THE MACH INES BY OUR SST DEPARTMENT. WE WILL RECEIVE THIS WEEK THE FINAL CO NFIRMATION FROM OUR SST DEPARTMENT ABOUT THE COMPUTERS RECEIVED THIS WE EK. ITA NO.819 /AHD /2012 DIPAK M. DOSHI VS. ITO ASST.YEAR 2007-08 - 6 - THIS ACTIVITY WILL TAKE ANOTHER COUPLE OF DAYS TO C LOSE. HENCE, EFFECTIVELY YOU CAN START RAISING YOUR INVOICE FOR LEASE RENT W.E.F. APRIL 07 AT THE RATES MUTUALLY AGREED UPON. FOR RISHBHI SOFTWARE P.LTD. SD/- RAMESH V.IYER HEAD COMMERCIAL 5.2. A BARE READING OF ABOVE CONTENTS, MAKES IT CL EAR THAT TOTAL NUMBER OF COMPUTERS RECEIVED WERE 88 IN NUMBERS AND THESE COMPUTERS WERE SUBJECT TO POSITIVE REPORT ON TESTING. IT IS NOT C OMING OUT FROM THE RECORDS THAT WHEN THE TESTING WAS CARRIED OUT AND WHETHER T HE TESTING WAS CARRIED OUT FOR THE PURPOSE OF BUSINESS REQUIREMENTS. IN T HE ABSENCE OF SUCH MATERIAL EVIDENCE, NO INFERENCE CAN BE DRAWN WITH R EGARD TO USAGE OF THE COMPUTERS. UNDER THESE FACTS, WE DEEM IT PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF AO FOR VERIFICATION AND THE AO IS HEREBY DIRECTED TO CARRY OUT FURTHER VERIFICATION OF THE GENUINENESS O F CERTIFICATE AND CLAIMED TRIAL RUN OF COMPUTERS. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 21 ST DAY OF AUGUST, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( PRAMOD KUMAR ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 21/ 08 /2015 0)..& , '.&../ T.C. NAIR, SR. PS ITA NO.819 /AHD /2012 DIPAK M. DOSHI VS. ITO ASST.YEAR 2007-08 - 7 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 123 4 / CONCERNED CIT 4. 4 ( ) / THE CIT(A)-V, BARODA 5. 5'6 &23 , ) 23 , , 1 / DR, ITAT, AHMEDABAD 6. 689 :( / GUARD FILE. / BY ORDER, #5 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 13.8.15 (DICTATION-PAD 6+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..18.8.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21.8.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.8.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER