Only on computer 60% depreciation is allowed not on networking equipment

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH `E’: NEW DELHI

BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND

SHRI K.D. RANJAN, ACCOUNTANT MEMBER

I.T. A. No.1665/Del/2011

Assessment Year: 2003-04

Dy. Commissioner of Income-tax,

Circle 6(1), New Delhi.

(Appellant)

Vs.

M/s. Microsoft Corporation

India Pvt. Ltd., F-40, NDSE

Part-I, New Delhi.

PAN: AAACM5586C

(Respondent)

C.O. No.152/Del/2011

Assessment Year: 2003-04

M/s Microsoft Corporation

India Pvt. Ltd., F-40, NDSE

Part-I, New Delhi.

PAN: AAACM5586C

(Appellant)

Vs.

Dy. Commissioner of I.Tax,

Circle 6(1), New Delhi.

 (Respondent)

Department by: Shri R.S. Negi, Sr. DR.

Assessee by: Shri Nageshwar Rao, Advocate &

Mrs. Preety Goel, CA

O R D E R

PER K.D. RANJAN, ACCOUNTAT MEMBER:

The appeal by the Revenue and cross objection by the assessee for Assessment Year 2003-04 arise out of the order of the Commissioner of Income-tax (Appeals)-IX, New Delhi. The grounds of appeal raised by the Revenue are reproduced as under:-

“1. The order of Learned CIT(Appeals) is erroneous & contrary to facts & law.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to allow depreciation @ 60% on ITG Networking equipments as against 25% allowed by the Assessing Officer.

3. The Ld. CIT(A) ignored the finding recorded by the Assessing Officer and the fact that the depreciation on ITG Networking equipment is allowable @ 25% on ITG Networking equipment i.e. equivalent to plant & machinery.”

2. The only issue for consideration in Revenue’s appeal relates to directing the Assessing Officer to allow depreciation @ 60% on ITG Networking equipment as against 25% allowed by the AO. The AO allowed depreciation @ 25% treating the networking cables and equipments as plant and machinery.

3. On appeal the learned CIT(A) allowed depreciation @ 60% following the decision of Hon’ble Delhi High Court in the case of CIT vs. BSES Yamuna Powers Ltd., reported in 2010-TIOL-636-HC-DEL-IT, wherein it has been held that computer accessories and peripherals such as printers, scanners, servers etc. are entitled to higher rate of depreciation @ 60%.

4. Before us when case came up for hearing the learned AR of the assessee submitted that the issue is squarely covered by the decision of ITAT in the case of the assessee for Assessment Year 2002-03 in ITA No.4173/Del/2010 dated 19.11.2010. On the other hand, the learned Sr. DR supported the order of the AO.

5. We have heard both the parties and gone through the material available on record. ITAT in assessee’s own case vide order dated 19.11.2010 allowed depreciation @ 60% on ITG networking equipment by observing as under:-

“16. From the above note, it is clear that the above equipment primarily include the routers, switches, modems, etc. which are in the nature of input and output support devices which performs the functions including communication and control and, thus, they are computer hardware when they are used along with computer and when their functions are integrated with `computer’. Such devices used as part of the computer in its functions and, thus, it can be termed as `computer’ only, therefore, eligible for depreciation @ 60%. Therefore, also we find no infirmity in the claim of the assessee of depreciation @ 60% of ITG networking equipments.”

Since the issue is squarely covered by the decision of ITAT in the assessee’s own case as also by the decision of Hon’ble Delhi High court in the case of BSES Yamuna Powers Ltd. (supra), we do not find any infirmity in the order of CIT(A) deleting the addition on account of difference in depreciation. The Assessing Officer is directed to allow depreciation on ITG Networking Equipments and cables etc. @ 60%.

6. In the result, appeal filed by the Revenue is dismissed.

7. Now coming to cross objection filed by the assessee. The grounds of cross objection are reproduced as under:-

“That on the facts and in the circumstances of the case and in law the learned CIT-A in not holding that the Reassessment proceedings initiated under section 147 of the Act by the learned AO were bad in law and accordingly, the reassessment order passed under section 147 of the Act is invalid and is therefore, liable to be quashed.”

8. The only issue for consideration in assessee’s cross-objection relates to reopening of assessment u/s 147 of the Act. The facts of the case stated in brief are that the Assessing Officer reopened assessment for Assessment Year 2003-04 on the ground that the assessee had been allowed inadvertently depreciation on networking equipments @ 60% under the category of computer whereas it should have been allowed @25% as in the case of plant & machinery.

9. Before us when case came up for hearing, it was argued by the learned AR of the assessee that on identical facts for Assessment Year 2002-03, the assessment was reopened and the Tribunal after detailed discussion has held that reopening of assessment was not valid. It was also submitted that the Hon’ble Delhi High Court has upheld the order of ITAT vide their order dated 11.07.2011 in ITA 820/2011. Therefore, reopening of assessment is bad in law.

10. On the other hand, the learned Sr. DR submitted that in Assessment Year 2003-04 the assessment has been reopened within the period of 4 years and therefore, the decision for Assessment Year 2002-03 cannot be applied as in that year the reopening was made after period of 4 years.

11. We have heard both the parties and gone through the material available on record. The assessee has taken the ground relating to reopening of assessment before the CIT(A). However, the learned CIT(A) has decided this ground of appeal by stating that this ground being general in nature did not require any specific adjudication. Before the CIT(A) the assessee had taken the following ground regarding reopening of assessment under sec. 147 of the Act:-

“1. That the reassessment proceedings initiated under section 147 of the Income tax Act 1961, (the Act”) by the learned Deputy Commissioner of Income Tax, Circle 6(1), New Delhi (hereinafter referred to as “the learned Assessing Officer”) are bad in law and accordingly, the reassessment order issued under section 147 of the Act is invalid and is liable to be quashed.”

12. We have gone through the ground of appeal raised before the CIT(A). On perusal of this ground of appeal it is clear that the assessee had not taken the ground relating to assumption of jurisdiction on a specific point indicating whether there was change of opinion or there was no material or it was barred by limitation etc. The ground of appeal raised by the assessee is not specific in nature. We therefore, agree with the finding of the learned CIT(A) that ground raised by the assessee is general which did not require any specific adjudication. Accordingly, we do not find any infirmity in the order passed by the learned CIT(A) dismissing ground of appeal for initiation of proceedings u/s 147 of the Act. Accordingly, cross objection filed by the assessee is dismissed.

13. In the result, the cross objection filed by the assessee is dismissed.

14. To sum up, the appeal by the Revenue and cross objection filed by the assessee are dismissed.

15. This decision is pronounced in the Open Court on 11th May, 2012.

                                                      Sd/-                              Sd/-

                                            (R.P. TOLANI)            (K.D. RANJAN)

                                    JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 11th May, 2012.

Copy of the order forwarded to:-

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR

*mg

By Order

Deputy Registrar, ITAT.