Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs M/S. Indraprastha Gas Ltd., New Delhi on 25 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C" NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
&
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No.4985/DEL/2014
Assessment Year: 2007-08
Dy.CIT, Circle-11(1), New Delhi v. M/s. Indraprastha Gas
Ltd.,
Plot No.4, IGL Bhawan,
Sector-9,
R.K. Puram, New Delhi.
TAN/PAN: AAACI5076R
(Appellant) (Respondent)
Appellant by: Shri Amit Jain, Sr.D.R.
Respondent by: Shri H.P. Agrawal, Adv.
Date of hearing: 26 02 2018
Date of pronouncement: 25 04 2018
ORDER
PER AMIT SHUKLA, J.M.:
The aforesaid appeal has been filed by the Revenue against the impugned order dated 18.06.2014, passed by learned CIT (Appeals)-XV, New Delhi for the quantum of assessment passed u/s.143(3)/147 for the Assessment Year 2007-08. In the grounds of appeal, the Revenue has raised the following grounds:-
1. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs. 1,30,37,257/-
made on account of excess depreciation.
2. On the facts and circumstances of the case and in law, I.T.A. No.4985/DEL/2014 2 the CIT (A) has erred in deleting the Disallowance of excess depreciation of Rs. 1,32,62,985/- on intangible software.
3. On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in quashing the assessment order by holding that there was a change of opinion despite that fact that there was failure on the part of assessee to disclose truly & fully business activities and the fact that intangible assets on which depreciation is claimed on higher rate."
2. The facts in brief are that, in the case of the assessee original assessment u/s.143(3) was completed at an income of Rs.2,21,96,44,290/- in the month of December, 2008. Later on, assessee's case has been sought to be reopened u/s.147 by issuance of notice u/s.148 dated 27.03.2012 after recording the following 'reasons':-
"assessment 143(3) of the IT Act, of M/s Indraprastha Gas Ltd. for the assessment year 2007-08 was completed in December 2009 determining total income at Rs.2,21,96,44,290/-. On perusal of the record it is revealed that the assessee has claimed Rs. 1,30,37,257/- as additional depreciation on plant and machinery as per Depreciation chart under Income Tax Act. As per 3CD Report the assessee is not a manufacturer but is engaged in the distribution of natural gas in the commercial and domestic sector and compressed natural gas in the automobiles. Therefore, the additional depreciation claimed by the assessee is not allowable expenditure as it has not fulfilled the conditions. Further the assessee has claimed and has been allowed depreciation on I.T.A. No.4985/DEL/2014 3 intangible software @ 60% as applicable to computer instead of 25% as applicable to intangible assets. Thus the assessee has claimed excess depreciation of Rs.1,32,62,985/- on software. By doing so, the assessee has claimed excess additional depreciation and excess depreciation of Rs.2,63,00,242/- (Rs.1,30,37,257 + Rs.1,32,62,985/-).
Based on the above facts, I have reason to believe that the income of the assessee chargeable to tax to the extent of Rs.2,63,00,242/- has escaped assessment."
3. In response to the said notice, assessee filed its objection to challenging the validity of reopening u/s 147 and it was submitted that it has claimed depreciation on computer software amounting to Rs.1,32,62,985/- @ 60%, and therefore, there was no reason to restrict the depreciation to 25% on the computer software; and in support various decisions were also relied upon. However, the Assessing Officer held that rate of depreciation on intangible assets is to be allowed @25% and not @ 60%. Accordingly excess depreciation of Rs.2,63,00,242/- was disallowed and added back.
4. Before the ld. CIT(A), the assessee submitted that firstly, Assessing Officer has passed the order without disposing of the objection raised, challenging the validity of reopening; and secondly, all the primary facts relating to claim of depreciation were duly disclosed by the assessee at the time of original assessment proceedings and figures relating to depreciation on computer software. Regarding additional I.T.A. No.4985/DEL/2014 4 depreciation u/s. 32(1)(iia), it was submitted that it was worked out by the Assessing Officer on the basis of the records produced before the Assessing Officer in the original assessment proceedings. Thereafter, no new information had come to the knowledge of the Assessing Officer and same material and tax audit report has been used for reopening the assessment which is bad in law as it amounts to 'change of opinion'. Various decisions were cited and relied upon which has been incorporated by the ld. CIT (A) at pages 5 to 6 of the appellate order. On merits, it was submitted that now there are number of judgments including that of Hon'ble Delhi High Court in the case of BSES Rajdhani Powers Ltd., 40 taxman.com 108 (Del), wherein Hon'ble High Court has upheld the depreciation @60% on computer peripherals on the issue of additional depreciation also no new tangible material has come on record and entire details of additional depreciation allowance was there in the audit report which has been taken duly noted by Assessing Officer in the original assessment proceedings.
5. Ld. CIT(A), firstly held the proceedings u/s.148 to be invalid for the reasons that there is no tangible material or information coming on record after the completion of the assessment and hence there cannot be any reason to believe for reopening the case; and secondly, Assessing Officer has not disposed of the objection as per the guidelines laid down by the Hon'ble Supreme Court in the case of GKN Drive shafts (India) Ltd., reported in (2003) 259 ITR 19 (SC). On I.T.A. No.4985/DEL/2014 5 the issue of rate of depreciation @60% or @25% he held that there is Hon'ble Jurisdictional High Court decision, wherein it has been held that for computer peripherals like software depreciation should be allowed @60%. Similarly, for allowance u/s. 32(1)(2a) he made a following observation:-
"6.5 Regarding the Ground No.4, I find that the only reason for reopening the assessment was self-revealation to the AO on perusal of item no.8 in Part-B, where against nature of business or profession, "Distribution of Natural Gas in commercial and Domestic sector and Compressed Natural Gas in Automobiles" was shown. However, in the same Audit Report, the tax Auditor has given the working of allowable additional depreciation, which was not given any regard by the AO. Therefore, the item No.8 (Part B) of the audit report itself cannot be the sole reason for making the disallowance allowance u/s 32(1) (iia). Moreover, even in item no.8, nowhere it has been mentioned that the appellant was not a 'manufacturer'. The business of distribution of natural gas itself may itself involve certain manufacturing activities, which could not be viewed on perusal of the basic information given under this item alone but requires appreciation of full range of facts to arrive at a decision. The Ld. AO has been vested with vide investigation powers in this regard and in expected to exercise the same before passing quasi-judicial orders. While the AO may have observed that the appellant was engaged in 'distribution of natural gas', on the strength of such unsubstantiated observation alone, it will be too simplistic to hold that the appellant was not a 'manufacturer', keeping in I.T.A. No.4985/DEL/2014 6 view the fact that the appellant is a registered excise tax payer, as conversion to compressed natural gas from natural gas is treated as 'manufacturing' under the Excise Duty Act. Therefore, it is held that the appellant was eligible to claim additional depreciation u/s 32(1)(iia). These details were also furnished before the Ld. AO during the course of impugned proceedings, however, as the assessment order itself is too brief and non-speaking these contentions have not been discussed in the impugned order and hence not rebutted by the AO. In view of this, on merit also, none of these grounds are held to be sustainable."
6. After considering the submissions made by the parties and on perusal of the impugned order, we find that there is no legal or factual infirmity in the order of the ld. CIT(A) for the reason that;
Firstly, in this case original assessment was passed u/s.143(3), wherein not only the assessee's claim for depreciation @60% has been allowed but also the claim of additional depreciation which was elaborately given in the audit report that assessee was treated as a manufacturer under the Excise Duty Act and is eligible for claim of additional depreciation. There is no tangible material coming on record to show that Assessing Officer could have 'reason to believe' that such an order passed by the Assessing Officer is either contrary to the law or there was non-appreciation to the facts. In fact, on the basis of same material only Assessing Officer has sought I.T.A. No.4985/DEL/2014 7 to take different opinion which is now permissible in law in view of the judgment of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd, reported in 320 ITR 561.
Secondly, in so far as rate of depreciation on computer software is concerned, now it is well settled proposition of various courts including that of Hon'ble Jurisdictional High Court that deprecation for the computer peripherals and the software has to be allowed @60% and hence on this count also depreciation allowed @60% by the ld. CIT (A) is correct in law.
Lastly, on the issue of additional allowance of depreciation, it has been elaborately discussed that the assessee has been treated as manufacturer under Excise Duty Act whereby it is converting compressed natural gas from natural gas which has been reckoned as manufacturing process. Once all these facts have been duly appreciated during the course of original assessment proceedings and same has been allowed by the Assessing Officer, then there was no reason to take a different opinion without any tangible material coming on record, either suggesting that assessee is not a manufacturer at all for which it is not entitled for claim of additional allowance of depreciation.
7. Thus, on these counts, we hold that neither the reopening u/s.147 was valid nor on merits Assessing Officer I.T.A. No.4985/DEL/2014 8 was justified in making such additions. Accordingly, the order of the ld. CIT (A) is confirmed.
8. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on 25th April, 2018.
Sd/- Sd/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25th April, 2018