Luthra & Luthra Law Office , New Delhi vs Department Of Income Tax

Deputy CIT, Vs. M/s. Luthra & Luthra Law Office, Circle-3(1), 103-Ashoka Estate, Barakhamba New Delhi. Road, New Delhi-1100 01 (PAN: AABFL3712B) (Appellant) (Respondent)

ITA No.2112/Del/2013 Assessment Year: 2009-10

M/s. Luthra & Luthra Law Office, Vs. Deputy CIT, 103-Ashoka Estate, Barakhamba Circle 37(1), Road, New Delhi-1100 01 New Delhi. (PAN: AABFL3712B) (Appellant) (Respondent)

Revenue by: Shri Gaurav Dudeja, Sr. DR Assessee by: S/Shri Vikas Srivastava, Parag Mohanty & Ms. Varsha Bhattacharya, ARs

Date of hearing : 07.01.2015 Date of pronouncement: :03.2015

ORDER

PER I.C. SUDHIR: JUDICIAL MEMBER These are the cross-appeals wherein the Revenue has questioned First

Appellate Order on the following grounds:

1. In the facts and circumstances of the case, the Learned CIT(Appeals) grossly erred in deleting the addition made by the 2

A.O. on account of depreciation on computers of Rs.30,82,560 through the assessee could not prove the genuineness of the purchase of new computers on which depreciation was claimed.

2. In the facts and circumstances of the case, the Learned CIT(Appeals) grossly erred in deleting the addition made by the A.O. not appreciating the fact that the assessee failed to furnish the details of computers purchased on which depreciation was claimed.

3. In the facts and circumstances of the case, the Learned CIT(Appeals) grossly erred in deleting the addition made by the A.O. not appreciating the fact that just mere obtaining PAN. VAT certificated does not conclusively prove the identity of party from whom computers were claimed to have purchased. Further, payment through banking channel also does not conclusively prove the genuineness of the transactions.

4. The appellant craves leave to all amend or modify the ground of appeal before or during the course of the appeal.

It is prayed that the order of CIT(A) is contrary to the facts on record and the settled position of law; and the order of the A.O. deserves to be restored."

2. The issue involved in the above grounds is as to whether deletion of

disallowance of Rs.30,82,560 made on account of depreciation on computers

by the Learned CIT(Appeals) is justified or not.

3

3. In support of the grounds involving the above issue, the learned Sr.DR

submitted that despite several opportunities during the course of assessment

proceedings, the assessee could not establish the existence of the company

from which it had claimed to have purchased the computers on which

depreciation was claimed. In this regard, he referred contents of para Nos.

3.1 to 5.7 of the assessment order. He submitted that onus of establishment

of genuineness of the claim was lying upon the assessee to which it has

failed to. The Learned CIT(Appeals) was thus not justified in deleting the

disallowance.

4. The Learned AR on the other hand tried to justify First Appellate

Order reiterating the submissions made before him. He submitted that all the

necessary details of the purchase of the computers were filed before the

Assessing Officer and the payments were made through cheques. The

company from whom 100 computer systems were purchased had raised an

invoice for payments and had also levied value added tax on the same, a

copy whereof was furnished before the Assessing Officer. The payment

made through cheque to the said company for the computers was duly

cleared from the bank account of the assessee. He contended that the

computers were purchased by the assessee in July 2008 and the Assessing

Officer had got examined their physical presence by sending somebody on 4

their given address in December 2011. Thus, it was possible that the

company might have shifted its address or might have reorganized its

business. The Learned AR also pointed out that the Delhi Value Added-tax

website contains details of the VAT registration for the company and the

address of the company on the website matches with the address provided on

the invoice. The Learned AR submitted further that section 32 of the

Income-tax Act, 1961 provides that an assessee needs to own (wholly or

partly) an assets and use it for the purpose of its business/profession to claim

depreciation on such assets. He placed reliance on the following decisions:

i) U.B. Engineering Ltd. vs. JCIT - 113 ITD 577 (Pune);

ii) Mather & Platt (India) Ltd. vs. CIT (1987) - 32 Taxman 38 (Calcutta);

iii) CIT vs. M.K. Brothers (1987) - 30 Taxman 547 (Guj.);

iv ) DCIT vs. Rajeev Ji Kalathil (2014) - 51 Taxman.com 514 (Mum.)

5. Considering the above submissions and having gone through the

orders of the authorities below as well as the decisions relied upon, we find

that the assessee had furnished all the necessary details of the purchases of

100 computer systems from Lavena Sales Co. Pvt. Ltd. like invoice for

payment raised by the seller company wherein they had also levied value

added tax on the same, their address and that the amount for these computers 5

was paid through a cheque which was duly cleared from the bank account of

the assessee. The assessee had also obtained copies of its VAT registration,

memorandum and articles of association etc. Only because the said company

was not found on the given address after the lapse of three years from the

date of the purchase, the Assessing Officer disallowed the claimed

depreciation by the assessee on those computers. There is no dispute that to

examine genuineness of depreciation claimed under the provisions of sec. 32

of the Act, all that needs to be established is ownership of depreciable assets

and their use in the business of the assessee. The Pune Bench of the ITAT

in the case of U.B. Engineering Ltd. vs. JCIT (supra) where the genuineness

of purchase of certain gas cylinder was questioned in a claim of depreciation

for the same, held that the ownership of the gas cylinder, their use in the

business of the assessee and genuineness of payment for such gas cylinders

was deemed to be sufficient to prove the genuineness of the transaction.

Similar view has been expressed in the above cited decisions on the issue of

genuineness of the purchases transaction. We are thus of the view that the

Learned CIT(Appeals) was justified in deleting the disallowance of the

claimed depreciation made by the Assessing Officer. The same is upheld.

The grounds involving the issue are accordingly rejected.

6. The appeal is accordingly dismissed.

6 ITA No.2112/Del/2013:

7. The assessee has impugned First Appellate Order on the following

grounds:

1. The order passed by the Learned CIT(Appeals)-XXVIII, New Delhi (Ld.CIT(A) under sec. 250 of the Income-tax Act, 1961("the Act") is bad in law and on facts and circumstances of the case.

2. The Learned CIT(Appeals) as well as leaned Assessing Officer (hereinafter referred as 'Ld.A.O.') have erred in law and on facts and circumstances of the case by disallowing a proportion of the Revenue expenditure incurred by the appellant towards payment of software license fees on the ground that the license was valid for a period outside the relevant period.

3. The Learned CIT(Appeals) as well as Ld.A.O., while disallowing the Revenue expenditure incurred by the appellant, have erred in ignoring the fact that the appellant was maintaining its books of account on cash basis of accounting and thus, the expenditure cannot be disallowed on the basis of period of software license".

8. Ground No.1 is general in nature, hence, does not need independence

adjudication.

7

9. Ground Nos. 2 and 3 involve the issue as to whether the Learned

CIT(Appeals) was justified in upholding the disallowance of proportion of

the Revenue expenditure incurred by the assessee towards payment of

software license fee on the basis that the license fee was valid for a period

outside the assessment year?

10. At the outset of hearing, the Learned AR pointed out that the issue

raised in the above grounds is squarely covered by the decision of Delhi

Bench of the ITAT in the case of assessee itself for the assessment year

2008-09 vide order dated 06.09.2012 in ITA No. 2497/Del/2012. The

Learned AR referred para No.18 of the order of the ITAT in support.

11. The learned Sr.DR on the other hand placed reliance on the orders of

the authorities below.

12. Having gone through the orders of the authorities below and the above

cited decisions of the ITAT, we find that the authorities below have denied

the claimed expenses of Rs.32,58,667 holding that the amount pertained to

financial year 2009-10 whereas the case of the assessee is of financial year 8

2008-09. The assessee had purchased software which were annual licenses

to be used for the period of one year. These software licenses were not

renewed in the next year. The assessee bought another software. The

licenses were bought in between the financial years and worked for some

part of the next financial year also. Keeping in view this material fact, the

disallowance has been made on proportionate basis. The Assessing Officer

has dealt with the issue in para Nos. 6.1 to 6.6 of the assessment order. In

concluding para No. 6.6, he held that out of Rs.78,20,800 claimed by the

assessee, only Rs.45,62,133 belong to financial year 2008-09 and remaining

amount of Rs.32,58,667 belong to financial year 2009-10. Therefore, only

Rs.45,62,133 is being allowed as expenses and remaining amount of

Rs.32,58,667 is being added to the income. The Learned CIT(Appeals) has

upheld this finding of the Assessing Officer. The orders of the authorities

below on the issue is reasoned one, hence, we are not inclined to interfere

therewith. The cited decision of the ITAT in the case of assessee itself for

the assessment year 2008-09 does not cover the issue. In para No. 18 of the

said order, as referred by the Learned AR, the issue involved was as to

whether the software expenses claimed was Revenue or capital in nature.

Thus, this decision does not help to the assessee on different issue in the

present case. The ground Nos. 2 and 3 are accordingly rejected. 9

13. In result, the appeal is dismissed.

14. In summary, both the appeals are dismissed.

Decision pronounced in the open court on 23.03.2015

Sd/- Sd/-

( J.S. REDDY ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 23 /03/2015 Mohan Lal

Copy forwarded to:

1) Appellant

2) Respondent

3) CIT

4) CIT(Appeals)

5) DR:ITAT

ASSISTANT REGISTRAR

Date Draft dictated on computer 19.03.2015 Draft placed before author 19.03.2015 Draft proposed & placed before the second member

Draft discussed/approved by Second Member. 23.03.2015 Approved Draft comes to the Sr.PS/PS 26.03.2015 Kept for pronouncement on 23.03.2015 File sent to the Bench Clerk 26.03.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk.

Date of dispatch of Order.

10