THOMAS COOK (INDIA) LTD, MUMBAI V. ADDL CIT 1(3), MUMBAI

ITA 858/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3168 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: K
• Next Hearing Date: 11-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-02-2014
• Court: TRIBUNAL
• Assessee Lawyers: ARPIT AGARWAL
• Keywords: Sale consideration of property below Jantri Value; Depreciation
• Section: 143(3); 32

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI G.S. PANNU, AM AND SHRI SANDEEP GOSAIN, JM . / I.T.A. NO. 858/ MUM/2014 ( / ASSESSMENT YEAR : 2007 - 08 THOMAS COOK (INDIA) LIMITED, THOMAS COOK BUILDING, DR. D.N. ROAD, FORT, MUMBAI 400 001. / VS. ADDL. COMMISSIONER OF INCOME TAX 1(3), MUMBAI. ./ PAN : AAACT4050C ( / APPELLANT ) .. ( / RESPONDENT ) . / I.T.A. NO. 738/ MUM/2014 ( / ASSESSMENT YEAR : 2007 - 08 ADDL. COMMISSIONER OF INCOME TAX 1(3), MUMBAI. / VS. THOMAS COOK (INDIA) LIMITED, THOMAS COOK BUILDING, DR. D.N. ROAD, FORT, MUMBAI 400 001. ./ PAN : AAACT4050C ( / APPELLANT ) .. ( / RESPONDENT ) A SSESSEE BY SHRI DHANESH BAFNA & SHRI ARPIT AGARWAL REVENUE BY : SHRI SANJEEV JAIN / DATE OF HEARING : 11 - 8 - 2015 / DATE OF PRONOUNCEMENT : 30. 09.2015 [ / O R D E R PER G . S . PANNU , AM THESE ARE CROSS APPEALS , I . E . , BY THE ASSESSEE AND THE REVENUE , DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX , ( HEREINAFTER REFERRED TO AS THE CIT ( A ) ) DATED 18 . 11 . 2013 , WHICH IN - TUR N HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER U / S . 143 ( 3 ) OF THE INCOME TAX ACT , 1961 ( HEREINAFTER REFERRED TO AS THE ACT ) DATED 10 . 02 . 2011 PERTAINING TO ASSESSMENT YEAR 2007 - 08 2 ITA 858/M/14 & ITA 738/M/14 PAGE 2 OF 8 THE RESPECTIVE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND THE REVENUE READ AS UNDER: - GROUNDS OF APPEAL RAISED BY THE ASSESSEE 1. DISALLOWANCE OF CLAIM OF DEPRECIATION ON DATA CABLES OF RS. 5.87.205/ - . ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ('CIT(A)'} ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER MAKING AN ADJUSTMENT OF RS. 5.87,205/ - TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF 'EXCESSI VE CLAIM OF DEPRECIATION ON DATA CABLES BY APPLYING RATE OF DEPRECIATION OF 15% APPLICABLE TO THE BLOCK OF 'PLANT AND MACHINERY' AS AGAINST THE RATE OF 60% (I.E. RATE APPLICABLE TO THE BLOCK' COMPUTER') . GROUND 2: DISALLOWANCE OF CLAIM OF DEPRECIATION O N JODHPUR PROPERTY OF RS 2,07,435/ - . ON THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) (,CIT(A),} ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER (' THE AO') IN MAKING ADDITION OF RS. 2,07,435/ - TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF 'EXCESSIVE CLAIM OF DEPRECIATION ON JODHPUR PROPERTY'. THE APPELLANT SUBMITS THAT SINCE SUCH EXPENSES ARE OF CAPITAL IN NATURE AND THE DEPRECIATION CLAIM SHOULD BE ALLOWED AS DEDUCTIONS IN COMPUTING THE TOTAL INCOME. GRO UNDS OF APPEAL RAISED BY THE REVENUE 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHETHER THE CIT(A) IS RIGHT IN ALLOWING DEPRECIATION ON PRINTERS & SCANNERS AT THE RATE OF 60% INSTEAD OF 15% RELYING UPON THE DECISION OF HON'BLE KOLKATA ITAT IN SAMIRAN MAJUMDAR {280 ITR (AT) 74 (KOLKATA)).' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHETHER THE CIT(A) IS RIGHT IN ALLOWING DEPRECIATION ON SWITCHES & ROUTERS AT THE RATE OF 60% INSTEAD OF 15% RELYING UPON THE DECISION OF HON'BLE ITAT, S PECIAL BENCH, MUMBAI IN THE CASE OF DATACRAFT INDIA LTD. [ITA NO. 7462 & 754/MUM/2007J.' 3 ITA 858/M/14 & ITA 738/M/14 PAGE 3 OF 8 2. THE ASSESSEE BEFORE US IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956 AND IS INTER - ALIA ENGAGED IN THE BUSINESS OF T OUR OPERATOR, TRAVEL AG ENT AND AUTHORIZED DEALER IN FOREIGN EXCHANGE , ETC. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED A RETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 25,53,92,971/ - WHICH WAS REVISED TO RS. 24,20,16,971/ - . THE RETURN OF INCOME FILED BY THE AS SESSEE WAS SUBJECT TO A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT, WHEREBY, THE TOTAL INCOME HAS BEEN ASSESSED AT RS. 39,50,69,030/ - AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCES. THE CIT(A) HAS ALLOWED CERTAIN PARTIAL RELIEF AND ACCORDINGLY THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US ON THE STATED GROUNDS OF APPEAL. 3. GROUND OF APPEAL NO. 1 RAISED BY THE ASSESSEE AND GROUND OF APPEAL NO S . 1 & 2 RAISED BY THE REVENUE RELATE TO THE CLAIM OF DEPRECIATION ON CERTAIN COMPUTER PERIPHERALS. SI NCE THE CROSS GROUNDS RELATE TO THE SAME ISSUE, THEY ARE BEING TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. 4. IN THIS CONTEXT, THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT UNDER THE HEAD COMPUTER, THERE WAS A TOTAL ADDITION OF RS. 8,93, 92,778/ - ON WHICH ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 60%. ASSESSING OFFICER FURTHER NOTICE D THAT THE FOLLOWING FIVE ITEMS TOTALLING TO RS. 80,46,483/ - WERE ALSO CLASSIFIED UNDER THE HEAD COMPUTERS ON WHICH DEPRECIATION AT THE RATE OF 60% WAS CLAIMED: - 4 ITA 858/M/14 & ITA 738/M/14 PAGE 4 OF 8 PARTICULARS AMOUNT (RS.) PRINTER 3040213 DATA CABLE 130490 ROUTER 3094066 SCANNER 315423 SWITCH 291880 ____ TOTAL 80,46,483 5. ACCORDING TO THE ASSESSING OFFICER, THE ABOVE ITEMS , BEING DATA CABLE S , ROUTER S , SCANNER S , PRINTER S , AND SWITCHES WERE COMPUTER PERIPHERALS AND CANNOT BE CONSIDERED AS A PART OF COMPUTER FOR THE PURPOSES OF ALLOWING DEPRECIATION AT THE RATE OF 60%. HE TREATED THE AFORESAID ITEMS AS PART OF PLANT & MACHINERY ENTITLED TO THE DEPRECIATION AT THE RATE OF 15%, AND CONSEQUENTLY, THE CLAIM OF DEPRECIATION WAS DISALLOWED TO THE EXTENT OF RS. 36 ,20,918/ - . 6. IN APPEAL, THE CIT(A) HAS ACCEPTED THE POSITION OF THE ASSESSEE THAT SO FAR AS THE ITEMS SUCH AS PRINTER S , ROUTER S , SCANNER S , AND SWITCHES ARE CONCERNED, THE SAME ARE TO BE UNDERSTOOD AS PART AND PARCEL OF THE COST OF COMPUTERS ENTITLED FOR DEPRECIATION AT THE RATE OF 60%. ON THIS ASPECT OF THE MATTER, REVENUE IS IN APPEAL BEFORE US. WITH REGARD TO THE COST OF DATA CABLE, THE CIT(A) CONCUR RED WITH THE ASSESSING OFFICER THAT THE SAME IS ENTITLED FOR DEPRECIATION AT THE RATE OF 15 %. ON THIS ASPECT, ASSESSEE IS IN APPEAL BEFORE US. 5 ITA 858/M/14 & ITA 738/M/14 PAGE 5 OF 8 7 . THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) AND THE ASSESSING OFFICER HAVE ERRONEOUSLY DISALLOWED THE HIGHER RATE OF DEPRECIATION ON THE COST OF DATA CABLES HOLDING IT NOT TO BE A PART OF C OMPUTER . HE SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BIRLA SOFT LTD. IN ITA NO. 1284 OF 2011 DATED. 15.12.2011 HAS DECIDED A SIMILAR ISSUE HOLDING THAT THE COMPUTER PERIPHERALS , LIKE CD WRITERS, PRINTER S , NET WORK CABLES, SWITCHES, RACKS, ISOLATORS, DIVIDERS , ETC. ARE ENTITLED TO DEPRECIATION @ 60% AND, THEREFORE, THE ASSESSEE SHOULD BE ENTITLED TO HIGHER RATE OF DEPRECIATION ON THE COST OF DATA CABLES ALSO. 8 . THE LD. D.R., ON THE OTHER HAND, HAS SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 9 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE CASE OF BIRLA SOFT LTD. (SUPRA) , THE QUESTION BEFORE THE HONBLE HIGH COURT WAS AS TO WHETHER THE COMPUTER PERIPHERALS , LIKE CD WRITERS, PRINTER, NET WORK CABLES, SWITCHES, RACKS, ISOLATORS, DIVIDERS, ETC. ARE ENTITLED FOR DEPRECIATION AT THE RATE OF 60% OR AT THE NORMAL RATE APPLICABLE TO PLANT & MACHINERY . THE HONBLE HIGH COURT FOLLOWING ITS EARLIER DECISION IN THE CASE OF CIT VS. BSES YAMUNA PVT. LTD. 40 TAXMANN.COM 108, HELD THAT SUCH COMPUTER PERIPHERALS FORM A INTEGRAL PART OF THE COMPUTER SYSTEM AND HENCE THEY WERE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60% . THEREFORE, WE ARE UNABLE TO FIND ANY FAULT WITH THE DECISION OF THE CIT(A) IN HOLDING THAT DEPRECIATION AT THE RATE OF 60% IS ALLOWABLE ON THE COST OF PRINTERS, ROUTERS, SCANNERS AND SWITCHES. THEREFORE, WE FIND NO MERIT IN THE GROUNDS RAISED BY THE REVENUE. 6 ITA 858/M/14 & ITA 738/M/14 PAGE 6 OF 8 1 0 . COMING TO THE APPEAL OF ASSESSEE , WHERE THE DISPUTE IS WITH REGARD TO THE RATE OF DEPRECIATION APPLICABLE TO THE COST OF DATA CABLES ; H EREIN ALSO, WE FIND THAT ASSESSEE IS LIABLE TO SUCCEED IN VIEW OF THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF BIRLA SOFT LTD. (SUPRA), WHEREIN, THE NETWORK CABLE S HAVE BEEN HELD ENTITLED TO DEPRECIATION AT THE RATE OF 60%. THUS, ON THIS ASPECT, THE GROUND OF APPEAL NO. 1, RAISED BY THE ASSESSEE IS ALLOWED , AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 1 1 . THE ONLY OTHER GROUND REMAINING IN THE APPEAL OF ASSESSEE IS WITH REGARD TO THE DEPRECIATION ON JODHPUR PROPERTY. ON THIS ASPECT, IT WAS A COMMON POINT BETWEEN THE PARTIES THAT SIMILAR ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE FOR ASSESSMENT YEAR 2006 - 0 7 BY THE TRIBUNAL VIDE ITA NO. 9156/MUM/2010, DATED 31.12.2013. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 31.12.2013 READS AS UNDER: - 21. GROUND NO.6 RELATES TO THE DISALLOWANCE OF DEPRECIATION OF RS. 2,20,817/ - RELATING TO LEASEHOLD PRE MISES. LOWER AUTHORITIES DISALLOWED THE SAME FOR THE REASONS THAT THE SAID PREMISE WAS ACQUIRED BY THE ASSESSE PERPETUAL LEASE BASIS. HOWEVER, HE FAIRLY SUBMITTED THAT THE ASSET WAS NOT PUT TO USE NOT ONLY DURING THE YEAR BUT ALSO TILL DATE. THE SAID PREMI SE WAS NOT USED AS THE SAME IS NOT FIT FOR COMMERCIAL USE. DURING THE PROCEEDINGS BEFORE US, IT WAS DISCUSSED ABOUT THE ALLOWABILITY OF THE DEPRECIATION WHEN THE ASSET IS ADMITTEDLY UNUSED, THOUGH THE SIX YEARS ARE LAPSED TILL DATE. IN THIS REGARD, LD COUN SEL ARGUED THAT THE ASSET ONCE INCLUDED IN THE BLOCK OF ASSETS, THE SAME WILL LOOSE ITS INDIVIDUAL IDENTITY, THEREFORE, THE DEPRECIATION SHOULD BE ALLOWED ON THE BLOCK OF ASSETS. PER CONTRA, IT IS THE ARGUMENT OF THE LD DR THAT WHEN AN INELIGIBLE ASSET IS INCLUDED IN THE BLOCK OF ASSETS, IT IS JUSTIFIED THAT THE ASSET SHOULD NOT BE EXCLUDED AND IS INELIGIBLE FOR GRANT OF DEPRECIATION. 7 ITA 858/M/14 & ITA 738/M/14 PAGE 7 OF 8 22. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. IT IS AN UNDISPUTED FAC T THAT THE ASSET WAS NEVER PUT TO USE TILL DATE AND THEREFORE, IT IS NOT LEGALLY CORRECT THAT THE LEASED PREMISE WAS CAPITALIZED AND ADDED TO THE BLOCK OF ASSETS. THEREFORE, SUCH INELIGIBLE ASSET, WHICH IS NOT FULFILLED THE CONDITIONS OF SECTION 32 OF THE ACT SHOULD NOT HAVE BEEN INCLUDED IN THE BLOCK OF ASSETS. THERE ARE NUMBER OF DECISIONS TO SUPPORT THE SAID VIEW. CONSEQUENTLY, THE DECISION GIVEN BY THE DRP IN PARA 6 AND THE CONCLUSION OF THE AO GIVEN IN PARA 7 OF THE ASSESSMENT ORDER ARE SUSTAINED. IT A LSO STATED THAT THE ASSESSEE STOPPED MAKING DEPRECIATION ON THESE ASSETS. ACCORDINGLY, THE GROUND NO.6 RAISED BY THE ASSESSEE IS DISMISSED . 1 2 . RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENT WHICH HAS BEEN RENDERED UNDER IDENTICAL CIRCUMSTANCES, THE GROUND OF APPEAL NO. 2, RAISED BY THE ASSESSEE IS DISMISSED. 1 3 . RESULTANTLY, W HEREAS ASSESSEES APPEAL IS PARTLY ALLOWED , THE CROSS - APPEAL BY THE REVENUE IS DISMISSED , AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 T H SEPTEMBER , 2015. 3 0 . 0 9 . 3 2 0 1 5 S D / - S D / - (SANDEEP GOSAIN) (G.S. PANNU ) / J UDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 3 0 . 0 9 . 2 0 1 5 . . ./ SKS 8 ITA 858/M/14 & ITA 738/M/14 PAGE 8 OF 8 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED, MUMBAI 4. / CIT - CONCERNED, MUMBAI 5. , , / DR, ITAT, MUMBAI A BENCH 6. / GUARD FILE .