Income Tax Appellate Tribunal - Mumbai
Resins & Platics Ltd., , Mumbai vs Assessee on 2 August, 2011
आयकर अपील य अ धकरण,
धकरण मंुबई यायपीठ 'डी
डी'
डी मंुबई ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, MUMBAI
सव ी वजयपाल राव,
राव या.
या स एवं, डी.
डी क णाकर राव,
राव लेखा सद य ।
BEFORE SHRI VIJAY PAL RAO, JM & SHRI D. KARUNAKAR RAO,RAO, AM
आयकर अपील सं./I.T.A.
I.T.A. No. 7452/Mum/2011
( नधारण वष / Assessment Year : 2005-06)
Resins & Plastics Ltd. बनाम/ DCIT Range 8(3)
बनाम
Plot No. A-8, Marol Indl. Aayakar Bhavan
Vs.
Estate of MIDC, Cross Road Mumbai-400020
"B" Street No. 5, Andheri (E)
Mumbai-400093
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACR1888C
(अपीलाथ /Appellant
Appellant)
Appellant .. ( यथ / Respondent)
Respondent
अपीलाथ ओर से / Appellant by : Shri Dalpat Shah
यथ क ओर से/Respondent by : Shri Shekhar L. Gajbhiye
सनवाई
ु क तार ख / D at e o f H e a ri n g : 6th August 2013
घोषणा क तार ख/D
ख a te O f P ro n o u n c e m e n t: 14th August 2013
आदे श / O R D E R
PER : वजयपाल राव, या.स. / VIJAY PAL RAO, JM
This appeal by the assessee is directed against the order dated 2.8.2011 of Commissioner of Income Tax(Appeals) arising from penalty order passed u/s 271(1)(c) of Income Tax Act for the assessment year 2005-06.
2. The assessee has raised the following grounds in this appeal:
"1.1 The ld. C.I.T (Appeals) - 18, Mumbai, erred in confirming the penalty levied of ` 50,800/- u/s 271(1)(c) r.w. Explanation -1 on disallowance of claim for depreciation on computer software acquired ignoring the fact that the claim was made under a bonafide belief and all the particulars and details were furnished to the said A.O. to substantiate the claim made.2 ITA No. 7452/M/2011
Resins & Plastics Ltd.
1.2 The ld. C.I.T. (Appeals) erred in not appreciating the fact that the licensed version of the software was acquired and installed before 31st March and hence had claimed depreciation u/s 31(1)(ii) under a bonafide belief.
1.3 The said C.I.T. (Appeals) also erred in not considering the decision of Hon'ble Supreme Court in the case of CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC)."
3. The assessee had claimed depreciation amounting to ` 1,42,100/- on software of ` 11.36.803/-. The software was stated to be acquired vide invoice dated 31.3.2005. The Assessing Officer disallowed the claim of the assessee on the ground that the implementation of the software was as per order dated 26.5.2005 and payment was made on 3.5.2005. Hence the AO held that the software was not put to use during the relevant previous year. The disallowance of depreciation has been confirmed by the CIT(A) and further by this Tribunal. In the mean time, the AO initiated the proceedings u/s 271(1)(c) and levy the penalty of ` 50,800/- vide order dated 7.5.2010. The assessee challenged the levy of penalty before the CIT(A) but could not succeed.
4. Before us the Ld. AR of the assessee has submitted that the claim of depreciation was disallowed on the ground that the software was not put to use during the year under consideration whereas the assessee has acquired the software vide invoice dated 31.3.2005 and included the same in the block of assets. Thus, the Ld. AR has submitted that the claim of the assessee is bonafide because the software agreement was signed on 23.3.2005 and was ready to use though it was implemented after 31.3.2005. Therefore, the assessee has made a bonafide claim and 3 ITA No. 7452/M/2011 Resins & Plastics Ltd.
disclosed all relevant particulars regarding the claim of depreciation. He has relied upon the decision of Hon'ble Supreme Court in case of CIT Vs Reliance Petroproducts Pvt. Ltd. 322 ITR 158. The Ld. Counsel has further submitted that the preliminary requirement prior to the implementation of the software were completed during the year under consideration. He has further pointed out that the software in question was a customise version and a lot of preliminary ground work was to be completed before it is finally installed and started. The work has already started in order to make the implementation w.e.f. 1.4.2005, the payment and so-called purchase order was none but confirmation towards payment of second instalment against the bill dated 31.3.2005. He has also relied upon the following decisions:
Balaji Vegetables Products P. Ltd. Vs CIT 290 ITR 172(Kar) CIT Vs Chamundeswari Sugar Ltd. 309 ITR 326(Kar) Narang International Hotels (P) Ltd. 137 ITD 53 (Mum)(TM) ITO Vs Parikh Investment & Development (P) Ltd. 43 SOT 537(Mum)
5. On the other hand, the Ld. DR has submitted that the disallowance of depreciation has been confirmed by this Tribunal on the ground that the software in question was not put to use. Therefore, the assessee made an incorrect claim by furnishing inaccurate particulars of income. He has relied upon the orders of the authorities below and submitted that when the asset in question was finally acquired and put to use only after the year under consideration then making the claim of depreciation of such asset is amount to furnishing inaccurate particulars of income.4 ITA No. 7452/M/2011
Resins & Plastics Ltd.
6. Having considered the rival submissions as well as careful perusal of the relevant record we find that the disallowance of depreciation has been confirmed by this Tribunal in the quantum appeal on the ground that the implementation of the software was on 26.5.2005 which was after 31.3.2005 therefore just because the license agreement was signed on 23.3.2005 it could not be said that use of software was proved. Thus, it is clear from the order of this Tribunal in quantum appeal that the disallowance of depreciation was confirmed on the ground that undisputedly the implementation schedule was after the end of the relevant previous year. It is not the case of the revenue that the claim of the assessee is bogus or absolutely wrong. The assessee claimed depreciation based on the fact that the software in question was acquired vide invoice dated 31.3.2005 and was under the process of implementation. The assessee has furnished all the relevant record including bills, agreement and fact regarding the implementation as well as the inclusion of the software in the block of assets. Therefore, in our view the claim of the assessee falls under the category of bonafide claim though not allowable under the provisions of section 32 of the Income Tax Act because the asset was not put to use but still there was scope of bonafide belief when the assessee claimed the depreciation on the ground that the asset in question was ready to use and in the process of implementation. In the facts and circumstances of the case we are of the view that the claim of the assessee does not amount to furnishing of inaccurate particulars of income or concealment of particulars of income. 5 ITA No. 7452/M/2011
Resins & Plastics Ltd.
Hence, in view of the decision of Hon'ble Supreme Court in case of CIT Vs Reliance Petroproducts Pvt. Ltd. (supra) the penalty levied u/s 271(1)(c) is not justified and same is deleted.
6. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on this 14th day of August 2013 आदे श क घोषणा खले ु यायालय म दनांकः 14th अग त को क गई ।
Sd/- Sd/-
(डी. क णाकर राव) ( वजयपाल राव)
लेखा सद य या यक सद य
(D. KARUNAKAR RAO) (VIJAY PAL RAO)
Accountant Member Judicial Member
Place: Mumbai : Dated: 14th August 2013
Subodh
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai