9911796707
TMI Blog2015 (10) TMI 2013X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the AO has investigated the issue and took an opinion that it might have not been reflected specifically in the assessment order. If the ld.Commissioner has a different opinion on this issue, then it would become a debatable one. According to the assessee, in various judgements, it has been held that the software expense is to be allowed as revenue expenditure. Considering the nature of its debatable-ness, we are of the view that the assessment order cannot be branded as an erroneous order on this issue. The assessee as an entity ought to be engaged in the manufacturing activity. It ought to have installed plant & machinery. It is not necessary that new machinery should be part of the manufacturing activity. The additional deprecation will be admissible. This also to be termed as debatable issue and the ld.AO has taken a view of this aspect, which could not be subject to action under section 263. The AO has invited the explanation of the assessee, gone through the details submitted by it, and thereafter, allowed the depreciation including additional depreciation as per law. His view may not get approval from the point of view of the ld.Commissioner, but, the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted the assessment without appreciating the provisions of section 32 of the Act. 2. It is further seen that the assessee has claimed additional depreciation of ₹ 23.35 la on fire safety equipments, weight scale, printer, storage tank etc. It appears that the AO has completed the assessment without appreciating the provisions of section 32(1)(iia) of the Act. 2. In view of the above, it appears to the undersigned that the order dated 30.3.2013 passed under section 143(3) of the I.T. Act, 1961 by the DCIT, Circle-1, Ahmedabad is erroneous and prejudicial to the interest of Revenue within the meaning of section 263(1) of the I.T.Act, 1961. 3. You are, therefore, requested to show cause as to why appropriate order under section 263(1)of the I.T.Act, 1961 be not passed in your case to eliminate the above errors. For this purpose, the hearing in your case is fixed on 20/3/2015 at 3.30PM at the above address. You may attend personally or through an authorized representative on the scheduled date and time or submit your written reply within supporting evidences. In case nothing is heard from you by the said date, it shall be presumed that you have nothing to state in this ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S and claimed depreciation @ 60% as same are integral part of computer and cannot run independently and/or installed to work efficiently and smoothly. Reliance placed on: Sr.NO. Name of case law Citation Ratio 1. BSES Yamuna Power Ltd. 358 ITR 47 (Del.) Depreciation @ 60% on computer peripherals such as printers, scanners, 2. Navneet Publications (I) Ltd ITA # 1137/Mum/2010 Depreciation @ 60% on SAP software. 3. Ushodaya Enterprises Ltd. 41 taxmann.com 304 (Hyd.) Depreciation @ 60% on computer peripherals such as printers, scanners, software, modems, switches, hubs, cable/cards etc. 4. Macwber Engineering System (I) (P.) Ltd. 33 taxmann.com 587 (Mum.) Depreciation on UPS at rate at which deprecation was allowable to computers." 6. Alternatively, he contended that software expenses incurred on SAP licence ought to have been allowed as revenue expenditure. In support of his contentions, he placed on record copies the following decisions: Varinder Agro Chemicals Ltd. : 309 ITR 272 (P&H) Rober Bosch India Ltd. : 50 taxmann.com 275 (Kar.) Karuru Vysya Bank Ltd. : 54 taxmann.com 324 (Mad.) Lubrizol India Ltd. : 37 taxmann.com 294 (Bom.) 7. The ld.couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) "record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. Explanation-1 has been substituted by the Finance Act 1998 (26 of 1988). It threw a light to some extent the scheme of the Act. Under clause (a) of the Explanation, it has been provided that an order of the assessment made by the Income Tax Officer on the basis of a direction issued by the Jt. Commissioner u/s 144A would be an order of the Income Tax Officer. In other words, if directions of binding nature were issued by a higher authority translated into the order of the Income Tax Officer, then that order would be considered of the Assessing Officer and not of the higher authorities. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order he does not make an elaborate discussion in that regard. 11. Apart from the above principles, we deem it appropriate to make reference to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sun Beam Auto reported in 227 CTR 113 referred by ld. Counsel for the assessee, and Gee Vee Enterprises Ltd vs. Addl. Commissioner of Income Tax (99 ITR 375) . In the case of Sun Beam Auto, the Hon'ble High Court has pointed out a distinction between lack of inquiry and inadequate inquiry. If there is a lack of enquiry, then the assessment order can be branded as erroneous. The following observations of the Hon'ble Delhi High Court are worth to note: "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts stated in the return when the circumstances of the case are such as to provoke an inquiry… It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would made such an inquiry prudent that the word 'erroneous' in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 13. The light of the above, let us examine the facts of the present case. As far as the first proposition of the ld.counsel for the assessee is concerned, we find merit. The whole assessment order cannot be cancelled, because it contained large number of issues. The ld.CIT sought to take action under section 263 qua two issues only, and to that extent the assessment would only be set aside. Therefore, subject to over overall findings in this appeal, we modify the order of the ld.Commissioner to the extent that in case the order under section 263 is being upheld, which we are going to discuss in subsequent paragraphs, then the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) relying upon the decisions of the Madras High Court in the case of VTM Ltd (Supra) and in the case of Hi Tech Arai Ltd. (Supra). In both the aforesaid decisions, the Madras High Court had an occasion to consider the similar issue and it is held that while claiming the deduction under Section 32(1)(iia) of the Income-tax Act setting up wind-mill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that the setting up of new machinery or plant should have been acquired and installed by an assessee, who was already engaged in the business of manufacture or production of any article or thing. Considering the aforesaid facts and circumstances and considering the relevant provisions of Section 32(1)(iia) of the Income-tax Act, which was prevailing at the relevant time, i.e. during the year under consideration, it cannot be said that the ITAT by applying the ratio of decision of the Madras High Court in the case of VTM Ltd. (Supra) and in the case of Hi Tech Arai Ltd. (Supra) has committed any error in deleting the addition of ₹ 1,17,98,030/- on account of disallowance of additional depreciation of Win ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
