NATIONAL COLLATERAL MANAGEMENT SERVICES P.LTD, MUMBAI v. ADDL CIT RG 7(1), MUMBAI

ITA 2237/MUM/2013 | 2007-2008
Pronouncement Date: 28-09-2016 | Result: Allowed

Appeal Details

RSA Number 223719914 RSA 2013
Assessee PAN AACCN0054C
Bench Mumbai
Appeal Number ITA 2237/MUM/2013
Duration Of Justice 3 year(s) 6 month(s) 8 day(s)
Appellant NATIONAL COLLATERAL MANAGEMENT SERVICES P.LTD, MUMBAI
Respondent ADDL CIT RG 7(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-09-2016
Date Of Final Hearing 18-06-2015
Next Hearing Date 18-06-2015
Assessment Year 2007-2008
Appeal Filed On 20-03-2013
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R.C. SHARMA (ACCOUNTNAT MEMBER) AND SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) ITA NO. 2237/MUM/2013 ASSESSMENT YEAR: 2007-08 NATIONAL COLLATERAL MANAGEMENT VS. ADDL CIT RG 7 (1) SERVICES P. LTD. AAYAKAR BHAVAN 954 GAYATRI TOWERS APPASAHEB MUMBAI- 400020 MARATHE MARG PRABHADEVI MUMBAI 400025 PAN NO. AACCN0054C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. BHUPENDRA KHARKHARIS RESPONDENT BY : SHRI. RANDHIR GUPTA (DR) DATE OF HEARING : 27/07/20 16 DATE OF PRONOUNCEMENT : 28/09/2016 O R D ER PER SANDEEP GOSAIN J.M PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAI NST THE ORDER OF LD. CIT(A)-20 MUMBAI DT. 07/12/2012 ON THE GROUND MEN TIONED HEREIN BELOW : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE AUTHORITIES BELOW ERRED IN RESTRICTING THE CLAIM OF DEPRECIATION ON COMPUTER SOFTWARES FORMING PART OF THE BLOCK OF ASSETS OF CO MPUTERS AT THE RATE OF 25% AS AGAINST THE RATE OF 60% CLAIMED BY THE APPELLANT AN D THEREBY DISALLOWING THE CLAIM OF DEPRECIATION TO THE EXTENT OF RS. 13 66 77 3/- AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE PROVISIONS O F THE INCOME TAX ACT 1961 AND THE RULES MADE THERE UNDER. 2 2. THE ONLY GROUND RAISED BY THE ASSESSEE IS AGAINS T RESTRICTING THE CLAIM OF DEPRECIATION ON COMPUTER SOFTWARES FORMING PART OF THE BLOCK OF ASSETS. 3. LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMI TTED THAT THE ASSESSEE COMPANY IS ENGAGED IN COLLATERAL MANAGEMENT I.E; CO NTROLLING AND MITIGATING RISK FOR MAJORITY OF THE AGRO AND INDUSTRIAL COMMOD ITIES PROCUREMENT OF FOOD GRAINS ON BEHALF OF FCI. IT WAS SUBMITTED BY LD. AR THAT WITH EFFECT FROM 2003-04 COMPUTER SOFTWARE HAS BEEN SUBSEQUENTLY INCLUDED IN THE TABLE OF DEPRECIATION RATE GIVEN IN APPENDIX-2 INCOME TAX RULE 1962 ALONG WITH COMPUTER (AT S.NO. 5 UNDER THE HEAD III MACHINERY & PLANT) WITH DEPRECIA TION RATE OF 60%. AND TAKING INTO CONSIDERATION THE SAID FACT THE ASSESSEE DURIN G THE YEAR UNDER CONSIDERATION AFTER PURCHASE OF COMPUTER SOFTWARE H AD CLAIMED DEPRECIATION @ 60%. HOWEVER THE ASSESSING OFFICER AFTER SEEKING REPLY FROM THE ASSESSEE HAD PASSED ORDER OF ASSESSMENT THEREBY RESTRICTING THE DEPRECIATION @ 25% INSTEAD OF 60% ON THE GROUND THAT IN TERMS OF SECTION 32 (1 )(II) AS AMENDED FROM 01/041998 DEPRECIATION ON KNOW-HOW PATENTS COPY RIGHTS TRADE MARK LICENSES ETC IS TO BE GIVEN @ 25% UNDER THE CATEGO RY OF INTANGIBLE ASSETS MENTIONED IN PART B OF THE DEPRECIATION SCHEDULE IN THE APPENDIX-1 OF THE INCOME TAX RULES. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER WRONGLY HELD SOFTWARE TO BE LICENSES RESTRICTED THE DEPRECIATION @ 25%. IT WAS FURTHER ARGUED THAT LD. DR LD. CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSESSE WH ILE UPHOLDING THE ORDER OF ASSESSING OFFICER TO RESTRICT. IN SUPPORT OF HIS C ONTENTION LD. DR RELIED UPON THE DETAILED SUBMISSION FILED BEFORE ASSESSING OFFICER AS WELL AS GROUND RAISED BEFORE CIT(A) WHICH ARE SUBSEQUENTLY MENTIONED IN PARA NO. 3.2 OF THE ORDER PASSED BY THE LD. CIT(A). LD. AR IN ORDER TO STRENGTHEN HIS ARGUMENT RELIED U PON THE FOLLOWING DECISIONS: I. AMWAY INDIA VS. DCIT 114 TIJ 476 (DELHI) (SPECI AL BENCH) II. DCIT VS. DATACRAFT INDIA LTD. 133 TIJ 377 (SPE CIAL BENCH) III. CONTAINER CORPORATION OF INDIA LTD. VS. ACIT [ 2009] 30 SOT 284 [DELHI] 3 4. ON THE OTHER HAND LD. DR RELIED UPON THE ABOVEME NTIONED ORDER AND ALSO RELIED UPON THE ORDER PASSED BY LOWER AUTHORIT IES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL PLACED ON RECORD BEFORE US. AND AFTER ANALYSING THE ORDER PASSED BY THE LD. CIT(A) WE ARE OF THE CONSIDERED VIEW THAT SOFTWARE CONSISTS OF THE PROGRAMS AND APPLICATION THAT RUN ON COMPUTERS AND COMPUTER INCLUDING COMPUTER SOFTWARE ON WHICH RATE OF DEPRECIATION HAS BEEN PRE SCRIBED AS 60%. AND THE SAID RATES ARE EFFECTIVE FROM ASSESSMENT YEAR 2003- 04 WHEREIN THE COMPUTER SOFTWARE HAS ALREADY BEEN INCLUDED IN THE CATEGORY OF COMPUTER FOR THE PURPOSE OF ALLOWING DEPRECIATION AT THE HIGHER RATE OF 60%. AS PER THE PROVISIONS OF INCOME TAX ACT ARE CONSIDERING UP TO ASSESSMENT YEAR 2002-03 COMPUTERS WERE ELIGIBLE FOR DEPRECIATION @ 60% FROM ASSESSME NT YEAR 2003-04 BENEFIT OF SUCH ENHANCED DEPRECIATION RATE HAS BEEN EXTENDED A LSO TO COMPUTER SOFTWARE. IN THIS RESPECT OUR ATTENTION WAS DRAWN TO NOTE NO. 7 TO APPENDIX I AS APPLICABLE FROM ASSESSMENT YEAR 2003-04 WHICH DEFIN ES COMPUTER SOFTWARE TO MEAN ANY COMPUTER PROGRAMME RECORDED ON ANY DISC TYPE PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE. THUS FOR INCOME TAX PURPOSES SOFTWARE HAS TO BE SHOWN UNDER THE BLOCK OF ASSET S COMPUTERS INCLUDING COMPUTER SOFTWARE. WE ARE ALSO OF THE VIEW THAT COMPUTER SOFTWARE CA NNOT WORK IN ISOLATION AND ALSO WORKING ON COMPUTER SYSTEM WITHOUT A SOFTWARE WOULD BE FUTILE AND EVEN 4 COMPUTER SOFTWARE WHICH IS INSTALLED ON COMPUTER SY STEM SEPARATES THE COMPUTER HARDWARE AND BEING ON INTEGRAL PART IS ELI GIBLE FOR DEPRECIATION. WE FOUND OUR SUPPORT FROM THE FOLLOWING DECISIONS: 1) RELIANCE IS ALSO PLACE ON THE DECISION IN THE CA SE OF AMWAY INDI V. DCIT 114 TIJ 476 (DELHI) (S.B) WHEREIN IT HAS OBSERVED THAT COMPUTER AND COMPUTER SOFTWARE ARE TWO DIFFERENT ITEM OF ASSETS. WITH EF FECT FROM 1ST APRIL 2003. COMPUTER SOFTWARE HAS BEEN CLASSIFIED AS A TANGIB LE ASSET UNDER THE HEADING PLANT IN APPENDIX I TO THE IT RULES ENTITLED TO D EPRECIATION AT 60% FROM 1 ST APRIL 2003. THE TRIBUNAL FURTHER OBSERVED AT PARAGRAPH 55 PG. N O. 525 AS UNDER: THAT COMPUTER SOFTWARE HAS NOT BEEN DEFINED IN TH E ACT BUT IN NOTE-7 TO APPENDIX-I TO THE INCOME-TAX RULES IT HAS BEEN EXP LAINED TO INCLUDE COMPUTER PROGRAMME RECORDED ON ANY DISC TAPE PERFORATED M EDIA OR OTHER INFORMATION STORAGE DEVICE. THEREFORE COMPUTER SOFTWARE (WHETHE R IN CANNED FORM OR UNCANNED FORM) IS GOODS AND A TANGIBLE ASSET BY ITS ELF. II) DCIT VS. DATACRAFT INDIA LTD. 133 TIJ 377 (SB) (MUM) WHEREIN THE TRIBUNAL OBSERVED THAT THE DEFINITION OF COMPUTER SHOULD NOT BE RESTRICTED TO THE CENTRAL PROCESSING UNIT OF COMPUTER BUT SHOULD ALSO EXTEND TO ALL THE INPUT AND OUTPUT DEVICES WHICH SUPPORT COMPUTER IN THE RECEIPT OF IN PUT AND OUTFLOW OF OUTPUT TO AND FROM COMPUTER. IN VIEW OF THE BROADER DEFINITIO N GIVEN TO COMPUTERS ROUTERS AND SWITCHES WHICH FORM PART AND PARCEL OF COMPUT ER ALSO QUALIFY FOR DEPRECIATION AT 60%. IN THE SAID JUDGMENT THE HONB LE SPECIAL BENCH HAS ALSO OBSERVED AT PG. 384 AND 385 THAT W.E.F A.Y. 2003-04 COMPUTER SOFTWARE WILL BE ELIGIBLE FOR ENHANCED RATE OF DEPRECIATION @ 60%. III) CONTAINER CORPORATION OF INDIA LTD. VS. ASSIST ANT COMMISSIONER OF INCOME-TAX CIRCLE 3(1) NEW DELHI [2009] 30 SOT 284 (DELHI) WHE REIN IT WAS HELD THAT THE ACCESSORIES AND PERIPHERALS OF COMPUTERS PROVIDE IN PUT PROCESSING STORAGE AND VARIOUS OUTPUT DEVICES. THE OUTPUT DEVICES SUCH AS PRINTER SCANNER ETC. ARE COMPUTER PERIPHERALS AND FORM ESSENTIAL PARTS OF PC . THESE OUTPUT DEVICES CANNOT WORK IN ISOLATION AND ALSO WORKING ON COMPUT ER SYSTEM WITHOUT AN OUTPUT 5 DEVICE SUCH AS PRINTER WOULD BE FUTILE. IN VIEW OF THE ABOVE THE CLAIM OF DEPRECIATION AT 60% ON PRINTER SCANNER AND OTHER C OMPUTER PERIPHERALS IS COMPLETELY JUSTIFIED. THE CLAIM OF DEPRECIATION OF 60% FURTHER GETS JUSTIFIED IN VIEW OF THE FACT THAT EVEN COMPUTER SOFTWARE WHICH IS IN STALLED ON COMPUTER SYSTEM SUPPORTS THE COMPUTER HARDWARE AND IS ELIGIBLE FOR DEPRECIATION AT 60%. ACCORDINGLY WE REQUEST YOUR GOODSELF TO KINDLY CONS IDER THE ABOVE MATTER AND ALLOW THE DEPRECIATION @60% ON COMPUTER SOFTWARE AN D OBLIGE. THEREFORE KEEPING IN VIEW OUR AFOREMENTIONED FINDIN G WE ALLOW THIS GROUND RAISED BY THE ASSESSEE AND AO IS DIRECTED TO RE-CO MPUTE ASSESSMENT BY GIVING DEPRECIATION @ 60% TO THE ASSESSEE. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER 2016. SD/- SD/- (R.C. SHARMA.) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 28/09/2016 AG (ON TOUR) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT MUMBAI