2019 (6) TMI 1454 - AT - Income Tax

Depreciation on Automated Teller Machines (ATM) - @ 15% OR 60% - whether the ATMs are eligible for depreciation at the rate of 60% treating it at par with the computer and computer peripherals? - HELD THAT - We find that the decision of Hon ble Bombay High Court on the very same issue is in favour of the assessee in the case of CIT vs Saraswat Infotech Ltd 2013 (1) TMI 861 - BOMBAY HIGH COUR - We direct the ld AO to grant depreciation at the rate of 60% on ATMs for the Asst Year 2013-14 and the grounds raised by the assessee in this regard are allowed. Deduction u/s 80JJAA - Deduction claimed in the return of income filed in ITR-6 but not been claimed in the statement of computation of total income filed for the Asst Year 2013-14 - no evidence to prove that the assessee had submitted the audit report for the claim of deduction u/s 80JJAA of the Act before the ld AO as mandated in the said section - HELD THAT - Assessee is entitled for deduction u/s 80JJAA of the Act. However, we find lot of force in the argument of the ld DR that the assessee should have obtained audit report and submit the same before the ld AO atleast before the completion of assessment proceedings. The orders of the lower authorities does not speak about the same and since this being a statutory requirement, we deem it fit and appropriate, in these peculiar facts and circumstances, in the interest of justice and fairplay, to remand the matter to the file of ld AO only for the limited purpose to verify whether the assessee had submitted the audit report for claiming deduction u/s 80JJAA of the Act and decide the issue in the light of the aforesaid decision of this tribunal in assessee s own case for the earlier years. Accordingly, the grounds raised by the revenue are allowed for statistical purposes.

Summary

Issues Involved:
1. Depreciation rate on Automated Teller Machines (ATMs).
2. Deduction under Section 80JJAA of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Depreciation Rate on Automated Teller Machines (ATMs):

The primary issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in restricting the allowance of depreciation on ATMs at 15% instead of the 60% claimed by the assessee. The assessee, engaged in software development and ATM services, argued that ATMs should be classified as "computers" and thus eligible for a higher depreciation rate due to their functional similarities with computers. The Assessing Officer (AO) disagreed, treating ATMs as mere electronic devices and allowing only a 15% depreciation rate, referencing the Karnataka High Court's decision in Diebold Systems (P) Ltd vs CIT.

The Tribunal found that ATMs perform logical, arithmetic, and memory functions akin to computers, supported by the Special Bench of the Mumbai Tribunal's decision in Dy. CIT v. Datacraft India Ltd. and the Delhi Tribunal's decision in Global Trust Bank Ltd. Furthermore, the Tribunal noted that the Karnataka High Court's decision was under the Karnataka Sales Tax Act, not the Income Tax Act. The Tribunal also referenced the Bombay High Court's decision in CIT vs Saraswat Infotech Ltd., which supported a higher depreciation rate for ATMs.

Thus, the Tribunal directed the AO to allow depreciation at 60% for ATMs for the assessment years 2013-14 and 2014-15.

2. Deduction under Section 80JJAA of the Income Tax Act:

The second issue was whether the CIT(A) was justified in allowing the assessee's claim for deduction under Section 80JJAA. The AO had disallowed the claim, noting that the assessee did not claim it in the computation of total income due to a declared loss. However, the CIT(A) allowed the deduction based on the Tribunal's decisions in the assessee's favor for previous years.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee met the conditions for deduction under Section 80JJAA. However, the Tribunal remanded the matter to the AO to verify whether the assessee had submitted the required audit report before the completion of assessment proceedings, as mandated by the section.

Conclusion:

- The appeals of the assessee for the assessment years 2013-14 and 2014-15 were allowed, granting a 60% depreciation rate on ATMs.
- The revenue's appeal was allowed for statistical purposes, remanding the issue of the Section 80JJAA deduction back to the AO for verification of the audit report submission.