Income Tax Appellate Tribunal - Delhi
Anurag & Co., New Delhi vs Assessee on 29 March, 2011
ITA NO. 2160/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "A", NEW DELHI
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 2160/Del/2011
A.Y. : 2001-02
M/s Anurag & Co., Vs. ACIT, Central Circle-25,
C/o Vinod Kumar Bindal & Co., New Delhi
Chartered Accountants,
Shiv Sushil Bhawar,
D-219, Vivek Vihar, Phase-I,
New Delhi - 110 095
(PAN/GIR NO. : AADCA2536P)
(Appellant ) (Respondent )
Assessee by : Sh. Sanjay K. Bindla, CA
Department by : Sh. Pirthi Lal, Sr. D.R.
ORDER
PER SHAMIM YAHYA: AM This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax passed u/s. 263 of the I.T. Act for assessment year 2001-02 vide order dated 29.3.2011.
2. In this case Assessing Officer while passing order u/s. 153A of the I.T. Act, 1961 assessed income at ` 18,14,527/-. Ld. Commissioner of Income Tax observed that it was found that the Assessing Officer treated the expenses of computer software amounting ` 2,86,000/- as revenue expenses instead of capital expenses. He further observed that Assessing Officer has allowed the depreciation on electrical fittings @ 25% instead of 10% and thus allowing the enhanced depreciation of ` 12,286/-.
1ITA NO. 2160/Del/2011 2.1 Assessee contended before the Ld. Commissioner of Income Tax that two views are possible on the issue in this case and Assessing Officer has adopted one such view. Hence, the view taken by the Assessing Officer cannot be considered as erroneous or prejudicial to the interest of revenue so as to assume the jurisdiction to revise the assessment order u/s. 263 of the I.T. Act, 1961. Ld. Commissioner of Income Tax held that even if debate is possible it is necessary for the Assessing Officer to adopt the most genuine and most reasonable view. He observed that the perusal of the assessment order shows that the Assessing Officer has not discussed this aspect and no query was raised during the course of assessment proceedings to ascertain whether the expenses of computer software were in the nature of revenue expenses or under the head capital expenditure.
2.2 As regards depreciation of electrical fittings, assessee had submitted that the electrical fittings were used for generator and computer and therefore, the same were in the nature of plant and machinery on which depreciation @ 25% was correctly claimed and correctly allowed in the assessment order. Ld. Commissioner of Income Tax did not accept this contention. He observed that the perusal of the assessment order shows that the Assessing Officer has not made efforts to know whether these electrical fittings were part of generator, computer or otherwise. He held that allowing 25% depreciation on these electrical fittings without making an enquiry regarding the nature of these electrical fittings is erroneous and pre- judicial to the interest of revenue. Accordingly, Ld. Commissioner of Income Tax concluded that Assessing Officer was directed to modify the assessment order and to enhance the income by way of treating the expenses on computer software as capital expenditure and by way 2 ITA NO. 2160/Del/2011 of allowing 10% depreciation on electrical fittings instead of 25% after making enquiry regarding the nature of electrical fittings.
3. Against the above order the Assessee is in appeal before us.
4. We have heard the rival contentions and perused the records. Ld. Counsel of the assessee submitted that the issue is involved is debatable on which two views was possible and the Assessing Officer has adopted one of the views. In such circumstances, he contended that assumption of jurisdiction u/s. 263 was not valid. He further submitted that due enquiries were made by the Assessing Officer on this issue. Hence he pleaded that this cannot be a case of no enquiry on the issues. He further submitted that there is a difference between lack of enquiry and inadequate enquiry. In this regard, he placed reliance upon the Hon'ble Jurisdictional High Court decision in the case of C.I.T. vs. Vodafone Essar South Ltd. in I.T.A. No. 119/2012 vide order dated 20.11.2012.
4.1 As regards issue of depreciation @ 25% on electrical fittings, ld. Counsel of the assessee submitted that upto the present assessment year, there is no separate heading for electrical fittings and depreciation was being claimed @25% on such items. He submitted that only w.e.f. A.Y. 2003-04, it was specified that on furniture, fixture and fittings and electrical fittings, the depreciation is allowable @ 15% on it. Hence, ld. Counsel of the assessee pleaded that Assessing Officer has taken a correct decision and hence, there is no ground for the Ld. Commissioner of Income Tax to assume the jurisdiction u/s. 263 of the I.T. Act.
4.2 Ld. Departmental Representative on the other hand relied upon the order of the Ld. Commissioner of Income Tax.
3ITA NO. 2160/Del/2011
5. We have carefully considered the submissions and perused the records. We find that during the relevant previous year, assessee's firm was a stockiest of M/s Mahashian Di Hatti Ltd. dealing in various spices and other products manufactured by that company. The assessee incurred a sum of ` 2,86,000/- towards an application software used for recording its financial transactions and controlling inventory by upgrading its existing computer software programmes. The same was debited to the profit and loss account for the year and claimed as revenue expenditure. In this regard, Assessing Officer has made the enquiry on the subject vide letter dated 26.8.2008 vide item no. 26 Assessing Officer has duly asked the following "nature of software expenses of ` 2,86,000/- and prove that it is not of capital nature." Hence, it is clear from the above, that Assessing Officer has made due enquiry on the subject of treatment of software expenses. In this regard, case laws relied upon by the ld. Counsel of the assessee in the case of C.I.T. vs. Vodafone Essar South Ltd. (Supra) is clearly applicable. In this case the Jurisdictional High Court has held as under:-
" In the present case, the records reveal that the assessee was specifically queried regarding the nature and character of the one-time regulatory fee paid by it as well as the bank and stamp duty charges. A detailed explanation in the form of statements and other documents required of by the Assessing Officer were produced at the stage of original assessment. Clearly this was not a case of "No Enquiry". The lack of any discussion on this cannot lead to the assumption that the Assessing Officer did not apply his mind. The 4 ITA NO. 2160/Del/2011 proceeding in fact shows that Assessing Officer directed his mind specifically on this aspect and then concluded that the expenditure was in the revenue field. Moreover the decision in Comsat Max Ltd. has ruled that the expenditure was revenue; it constituted one plausible or reasonable view. Under these circumstances, the Commissioner could not have validly exercised his supervisory or revisionary power under Section 263. As far as the other issues i.e. bank guarantee charges and stamp duty are concerned, this Court is of the opinion that the decision in India Cements Vs. CIT 60 ITR 52 conclude the issue. These expenses had to be regarded as falling properly in revenue filed. Report further notices that CIT (Appeals) did not specifically furnish any reasons to say why the original assessment order was unsupportable in law, in the final order made by him."
6. From the above, we find that the assessee was specifically queried regarding the nature and character of software expenses. Hence, it is clearly not a case of no enquiry. The lack of any discussion on this aspect in assessment order cannot lead to the conclusion that Assessing Officer did not apply his mind. Hence, we find that in light of the Hon'ble Jurisdictional High Court decision as cited above, the Ld. Commissioner of Income Tax could not have validly exercised his supervisory or revisionary powers u/s. 263 as regards treatment of software expenses.
5ITA NO. 2160/Del/2011
7. As regards the issue of claim of depreciation of electrical fittings @25% instead of 15%, we find that in the present year under consideration in the table of depreciation rates, no separate mention was made for electrical fittings. It was only w.e.f. A.Y. 2003-04 that the electrical fittings were included in the furniture & fixture @ 15% rate was specified. Hence, in the present assessment year the view that electrical fittings were entitled for depreciation @25% as applicable to machinery cannot be said devoid of cogency. Assessing Officer has adopted one view out of the possible two views. Hence, we find that on this issue also Ld. Commissioner of Income Tax could not have assumed the jurisdiction u/s. 263.
8. In light of the aforesaid discussions and precedents, we set aside the order of the Ld. Commissioner of Income Tax passed u/s. 263 of the I.T. Act and decide the issue in favour of the assessee.
9. In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 14/12/2012.
Sd/- Sd/-
[U.B.S. BEDI]
BEDI] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 14/12/2012
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
6