Income Tax Appellate Tribunal - Ahmedabad
Gujarat Water Infrastructure Ltd.,, ... vs Department Of Income Tax on 9 December, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " A "
Before Shri MUKUL Kr. SHRAWAT, JUDICIAL MEMBER and
Shri D.C. AGRAWAL, ACCOUNTANT MEMBER
Date of hearing : 09/12/2010 Drafted on: 09/12/2010
ITA No.1671/AHD/2008
Assessment Year : 2005-06
Asst.CIT Vs. M/s.Gujarat Water
Gandhinagar Circle Infrastructure Ltd.
Gandhinagar 1 s t Floor
Dr.Jivraj Mehta Bhavan
Gadhinagar
PAN/GIR No. : AABCG 2341 N
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri M. Mathivanan
Respondent by: Shri Parnil H.Shah
ORDER
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
This is an appeal at the behest of the Revenue which has emanated from the order of the Learned CIT(Appeals)- Gandhinagar dated 29/02/2008 and the grounds raised are decided as follows:
2. Ground No.1 (1) The Learned CIT(Appeals) has erred in law and on facts of the case in deleting the addition at Rs.5,10,000 disallowed and claimed as ROC.
2.1. Facts in brief as emerged from the corresponding assessment order passed u/s. 143(3) of the I.T. Act, 1961 dated 23/11/2007 ITA No.1671/Ahd/2008 Asst.CIT vs. M/s.Gujarat Water Infrastructure Ltd.
Asst.Year - 2005-06 -2- were that the assessee-company is engaged to prepare, promote finance, operate and maintaining drinking water supply scheme and water purification in the State of Gujarat. In respect of the first ground, the observation of the Assessing Officer was that the assessee has claimed ROC fees of Rs.5,10,000/- u/s.35D of the I.T.Act. However, as per Assessing Officer, the fees was paid to increase the capital of the company, therefore, held that the expenditure was 'capital in nature'. Accordingly, the said claim was disallowed. When the matter was carried before the first appellate authority, it was held as under:-
"2.1. The matter has been considered. In view of the fact that the claim u/s.35D has been admitted for assessment year 2002-03 and for assessment year 2003-04 (post CIT(A)'s directions), there appears to be no reason for the same being not allowed for this year. In fact, most of the expenses covered u/s.35D are capital in nature, which are allowed in the shape of deferred revenue expenses and therefore possibly the Assessing Officer has not appreciated the merit of that section. Therefore, the appellant's claim of Rs.5,10,000/- u/s.35D is allowed."
2.2. On hearing the submissions of both the sides, we find no fallacy in the afore reproduced judgement of Learned CIT(Appeals). He has rightly expressed that the expenditure which are covered u/s.35D are capital in nature, however, statute has allowed them though with certain conditions and in a way those expenditure were allowed as if those are deferred Revenue expenses. Considering the totality of the facts and circumstances of the case in the light of the Statutory provisions, we hereby ITA No.1671/Ahd/2008 Asst.CIT vs. M/s.Gujarat Water Infrastructure Ltd.
Asst.Year - 2005-06 -3- confirm the view taken by Learned CIT(Appeals). This ground of the Revenue is dismissed.
3. Ground No.2 (2) The learned CIT(Appeals) has erred in law and on facts of the case in directing the Assessing Officer to allow deduction on expenditure of Rs.2 lakhs pertaining to feasibility study report which was not claimed in the return of income.
3.1. The assessee-company has obtained a feasibility study report and a sum of Rs.10 lacs was debited in the accounts. A 20% deduction of Rs.20,000/- was made by invoking the provisions section 35D of the I.T.Act. The said claim was disallowed and the assessee had gone in appeal. Learned CIT(Appeals) has considered the provisions of section 35D of the I.T.Act and directed to allow 20% of the claim of expenses incurred towards feasibility study vide paragraph reproduced below:-
"3.2. The matter has been considered. While the Authorised Representative's reference to CIT(A)'s order dated 6/11/2006 in the context is not clear because the said order does not contain any direction with respect to the allowability of expenses pertaining to feasibility study report within the context of section 35D, but the fact that while restricting the claim of Rs.2,00,000/- by including it within the purview of section 35D the Assessing Officer, (thereby in the process, the Department) committed itself to keep giving a deduction of Rs.2,00,000/- in the next four years also. The Assessing Officer has been very specific in his finding in the assessment order for assessment year 2002-03 but even if he ITA No.1671/Ahd/2008 Asst.CIT vs. M/s.Gujarat Water Infrastructure Ltd.
Asst.Year - 2005-06 -4- had not meant the mere fact that deduction given u/s.35D would tantamount to the admission of claim for the next four years without requiring any further action on the part of the appellant. Filing of a revised return would be necessary in case the appellant has to make any fresh claim or revise any existing claim. The two situations are very different and hence the Assessing Officer's insistence that the claim could have been allowed only if a revised return has been filed, would be improper. Therefore, the Assessing Officer is directed to allow the 20% of the claim of expenses towards feasibility study report i.e. Rs.2,00,000/- for this year.
3.2. As we have already discussed in above para that the provisions of section 35D of the I.T.Act are in the context of expenditure which are capital in nature but to be treated as a deferred Revenue expenditure with certain conditions. Since the claim has been disallowed by the Assessing Officer only on account of the reason that the expenditure was capital in nature, therefore, the same was not in accordance with the provisions of section 35D of the I.T.Act, which was rightly allowed by the Learned CIT(Appeals). We hereby confirm the view taken by the Learned CIT(Appeals) and this ground of the Revenue is dismissed.
4. Ground No.3 (3) The learned CIT(Appeals) has erred in law and on facts of the case in directing to allow depreciation on computer software which was not claimed in the return of income.
4.1. Following the past history of the case, the Assessing Officer has disallowed the claim of depreciation on computer software. It was contested before Learned CIT(Appeals) ,who has referred the ITA No.1671/Ahd/2008 Asst.CIT vs. M/s.Gujarat Water Infrastructure Ltd.
Asst.Year - 2005-06 -5- previous history and thereupon taken a decision that the assessee was entitled for 60% depreciation on computer software, relevant para reproduced.
"4. The third ground of appeal is against the Assessing Officer not allowing depreciation on the residual W.D.V. in terms of assessment order for assessment year 2002-03. Referring to his letter dated 12/03/2007, the Authorised Representative brought to the notice that for assessment year 2002-03, the Assessing Officer has disallowed an expenditure of Rs.3,09,710/- on computer software treating it as a capital expenditure and had allowed 60% depreciation thereof. Since the year in question is the third assessment year and the computation of W.D.V. after allowable depreciation, such a claim comes to Rs.11,893/- for the year concerned, which the Assessing Officer should have allowed. The Assessing Officer's version in the assessment order is that since the assessee has not claimed such depreciation in the return of income and no revised return has been filed, the claim of the assessee cannot be accepted. It was stated by the Authorised Representative that the claim was duly allowed by the Assessing Officer for assessment year 2003-04 consequent to our request letter dated 3/3/2006 so it was presumed that for this year also the claim will be allowed on the basis of the letter."
5. On hearing the submissions of both the sides, we have gathered that there is no dispute in respect of the nature of the asset, i.e. computer software and the Assessing Officer has simply disallowed the claim following his predecessor's view. But the fact was , as admitted before us , that the year under consideration was the third of year of grant of claim hence successively ought to be allowed. Further undisputedly, as per the Income Tax Rules and the depreciation chart annexed therein a claim of depreciation at ITA No.1671/Ahd/2008 Asst.CIT vs. M/s.Gujarat Water Infrastructure Ltd.
Asst.Year - 2005-06 -6- the rate of 60% is prescribed for computers for the year under consideration. In view of this, we find no fallacy in the order the Learned CIT(Appeals). This ground of the Revenue is also dismissed.
6. In the result, appeal of the Revenue is dismissed.
Order signed, dated and pronounced in the Court on 16/ 12 /2010.
Sd/- Sd/- ( D.C. AGRAWAL) ( MUKUL Kr. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 16/ 12 /2010 T.C. NAIR, Sr. PS Copy of the Order forwarded to : 1. The Assessee. 2. The Department. 3. The CIT Concerned. 4. The ld. CIT(Appeals)-Gandhinagar
5. The DR, Ahmedabad Bench. 6. The Guard File.
BY ORDER, स×याǒपत ूित //True Copy// (Dy./Asstt.Registrar), ITAT, Ahmedabad
1. Date of dictation.......................09/12/2010
2. Date on which the typed draft is placed before the Dictating Member 09/12/2010.................. Other Member.....................
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S......16/12/10.
6. Date on which the file goes to the Bench Clerk.................. 16/12/10
7. Date on which the file goes to the Head Clerk..................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................