Medsave Healthcare (Tpa) Ltd., New ... vs Department Of Income Tax

DCIT Vs. Medsave Healthcare (TPA) Ltd. Circle - 6(1), Room No. 413, F- 701A, Lado Sarai, C.R.Building, I.P.Estate Mehrauli I New Delhi New Delhi PAN : AABCS8148M Pin : 110030 (Appellant) (Respondent)

Appellant by : Sh. P.Dam Kanunjna, Sr. Dr Respondent by : Sh. Sanjay Joshi, CA

Date of hearing : 27/05/2015 Date of pronouncement : 29 /05/2015

ORDER

Per N.K.Saini, A. M. :

This appeal by the department is directed against the order

dated 22/08/2013 of CIT(A)- IX, New Delhi.

2 ITA No. 5897/ Del/2013

2. First issue in this appeal vide ground no. 1 relates to the deletion

of disallowance of Rs. 2,16,000/- made by the AO u/s 40(a) (ia) of the

Act . The facts related to this issue in brief are that the AO during the

course of assessment proceedings noticed that the assessee had

claimed Generator hire charges of Rs. 1,80,000/- and vehicle hire

charges of Rs. 90,000/- in the P & L Account but had not deducted

TDS on the said payments as per the provisions of Section 194 (I) of

the Income Tax Act, 1961 (hereinafter referred to as the Act). He

therefore made the disallowance of Rs. 2,16,000/- by invoking the

provisions of Section 40(a) (ia) of the Act.

3. Being aggrieved the assessee carried the matter to the Ld.

CIT(A) and submitted as under :-

"The provisions of Section 40 (a) (ia) of the Act has two limbs, one is where, inter alia, assessee has to deduct tax and second where after deducting tax, inter alia, the assessee has to pay into Government Account. It is not the case of the AO that tax has not been deposited after deduction has been made and therefore the second limb of the Section is not applicable in the present case. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is shortfall in deduction. Section 40(a) (ia) of the Act refers only to the duty to deduct tax and pay to Government Account. If there is any shortfall the assessee can be declared to be an assessee in default u/s 201 of the Act and no disallowance can be made by invoking the provisions of Section 40(a) (ia) of the Act. This 3 ITA No. 5897/ Del/2013

is covered by the decision of the Calcutta High Court in the CIT, Kolkata - XI, vs. M/s S.K. Tekriwal [ ITAT No. 183 of 2012 : GA No. 2069 of 2012] and by the decision of ITAT, Delhi-Bench H in the case of UE Trade Corporation (India) Ltd. vs. DCIT, Circle 18(1) in ITA No. 2303/Del/2011. In case of the appellant for the A.Y. 2009-10, on similar facts and grounds additions have been deleted by the Ld. (CIT(A) - IX in Appeal No. 44/11-12 Order dated 08.03.2013."

4. The Ld. C.I.T. (A) after considering the submissions of the

assessee deleted the addition by observing in para 4.2 of the

impugned order as under :-

"On the amount paid as the generator hire charges and vehicle hire charges, the appellant made TDS at the rate of 2% + Education cess instead of 10% + Education cess. According to AO, the deduction should have been at the rate of 10% and the short deduction of TDS attracts the provision of Section 40(a) (ia) and hence the expense is not allowable. Against the same ground of appeal by the appellant in the earlier year (2009-10) relying on the decision laid down in the case as cited by appellant, my Ld. predecessor has decided that "if there is any shortfall the assessee can be declared to be an assessee in default u/s 201 of the Act and no disallowance can be made by invoking the provisions of Section 40(a) (ia) of the Act." I agree with the decision of my Ld. predecessor and hence the addition of Rs. 2,16,000/- is deleted. This ground of appeal is allowed."

5. Now, the department is in appeal, the Ld. DR supported the

order of the AO and reiterated the observations made in the

assessment order dated 14.12.2012. In his rival submissions, Ld. 4 ITA No. 5897/ Del/2013

Counsel for the assessee reiterated the submissions made before the

authorities below and further submitted that the issue under

consideration is squarely covered in favour of the assessee vide

order dated 9th January, 2015 of the ITAT, Delhi Bench B, New Delhi

in ITA No. 751/Del./2013for the assessment year 2009-10 in the case

of ADIT, International Taxation vs. Express Drilling Systems LLC.

6. We have considered the submissions both the parties and

carefully gone through the material available on the record. In the

present case, it is an admitted fact that the Ld. CIT(A) deleted this

addition by following the judgment of the Hon'ble Kolkata High Court

in the case of M/s. S.K.Tekriwal in ITA No. 183 of 2012 and also on

this basis that his predecessors has deleted the addition in the

preceding year vide order dated 08.03.2013. The Ld. Counsel for the

assessee stated at the bar that the said order dated 08.03.2013 was

not challenged by the department. Therefore, on the basis of principle

of consistency the issue may be decided in favour of the assessee.

The said contention of the assessee was not controverted by the ld.

D.R. It is also noticed that the identical issue has been decided in

favour of the assessee vide order dated 9th January, 2015 in the case

of ADIT International Taxation vs. Express Drilling Systems LLC 5 ITA No. 5897/ Del/2013

(Supra) where in relevant findings has been given in para 6 and 6.1 is

reads as under :-

"6. We find that deletion of disallowance is challenged before us on the ground that TDS is not made at the correct rate as per the S. 194J. This issue is no more res integra. This Bench of the Tribunal in its order in ITA no. 2429/Del/2011 for AY 2008-09 in the case of M/s Solutions Inforsystems Pvt. Ltd. vide order dt. 12.12.2013, at para 9 has held as "9. In ground no. 2 the issue is whether deduction u/s 40 (a) (ia) can be made when tax has been deducted at source u/s 194C instead of 194J. This Bench of the Tribunal in the case of Hero MotorCorp followed the decision of Hon'ble Calcutta High Court and eld as follows. The Hon'ble Calcutta High Court in the case of CIT vs. S.K.Tekriwal (ITA no. 183 of 2012 has held as follows :

"We are of the view that the provisions of section 40(a) (ia) of the Act has two limbs one is where, inter alia, assessee has to deduct tax and the second where after deducting tax, inter alia, the assessee has to pay into Government Account. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is a short fall in deduction. With regard to the short fall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, 'on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub section (a) of section139. This section 40(a) (ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a) (ia) of the Act.

Accordingly, we confirm the order of CIT(A) allowing the claim of assessee and this issue of revenue's appeal is dismissed."

6 ITA No. 5897/ Del/2013 We find no substantial question of law is involved in this case and therefore, we refuse to admit the appeal. Accordingly, the appeal is dismissed."

The assessee further relied on the following decisions:

DCIT vs. Chandabhoy & Jossobhoy (ITA no. 20/Mum/2010 (Mum.) UE Trade Corporation (India) Ltd. v. DCIT 28 Taxmann.com 77 (Del.) and other cases.

As this is not a case of non-deduction of tax but a case where tax has been deducted at a lower rate that too under the bona fide belief that deduction was properly made, we accept the contention of the assessee. Respectfully following the judgment of the Hon'ble Calcutta High Court in the case of S.K. Tekrisal (supra) this ground is allowed deleting the disallowance made u/s 40(a) (ia).

9.1. Respectfully following we allow ground no. 2." 6.1. Respectfully following the same we uphold the order of the First appellate Authority and dismiss this ground of the Revenue."

7. Since the facts of the present case are similar to the facts

involved in the aforesaid referred to case of M/s Express Drilling

Systems LLC, therefore, by following the said order dated 9th

January, 2015. We do not see any infirmity in the order of the Ld.

CIT(A) on this issue.

8. The next issue vide ground no. 2 relates to the deletion of

disallowance of Rs. 15,83,875/- made by the AO on account of

depreciation.

9. The facts related to this issue in brief are that the AO during the

course of assessment proceedings noticed that the assessee 7 ITA No. 5897/ Del/2013

purchased Printers , scanners & UPS and had claimed depreciation

@ 60% as against 15% allowable. The AO disallowed a sum of Rs.

15,83,875/- and added the same in the income of the assessee.

10. Being aggrieved the assessee carried the matter to the Ld.

CIT(A) and submitted as under :-

"a. A computer system per se consists of multiple parts and devices such, desktop, CPU, UPS, storage device, printers, scanners, keyboards, printers, visual display units, disk drives, magnetic tape drives etc. A computer as an electronic data processing device is capable of receiving input, storing sets of instructions for solving problems and generating output with high speed and accuracy, Printers, scanners, NT Server, etc., form an integral part of the computer and the same, therefore, should be placed under the computer basket. Also it is pertinent to note that UPS is an integral part of desktops. UPS by the uninterrupted power supply prevents loss of data due to power failure as well as unables the system to function at high speed and accuracy. Had it not been for computers, UPS would have never been purchased. Their use is confined to a computer system. Such installation therefore remains a part of computer only. Further, UPS are connected to LAN, PCS, Servers etc. hence they form an integral part of the computer system. Considering that they are connected to the computer system and are not used for any other purpose and the further fact that the computers could not have functioned properly without support from UPS, they are considered as integral part of computer. As in a laptop a battery form its integral part, the same is the position with UPS. The difference being that one is internally fitted whereas the other is an external device. A UPS serves as a support function to the computer for its efficient working and cannot be construed to have its individual identity other than that of computers. Thus computer peripherals printers, scanners, NT server, UPS etc. only serving the purpose of computers can only be 8 ITA No. 5897/ Del/2013

considered to be part of computers and no other item of assets.

b. The Kolkata Bench in Income Tax Officer vs. Samiran Majumdar (2006) 280 ITR 74 in dealing with the definition of computer also relying on the decision of the Apex Court in Karnataka Power Corporation (supra) held that printer and scanner could not be used without the computer so that it held that the two would form an integral part of the computer system. In the like manner an uninterrupted Power Systems are also to be used only with a computer hence they are to be treated as computer for the purpose of allowing higher rate of depreciation @ 60% only. This decision has been followed by the Delhi Bench in Container Corporation of India Ltd. vs. Asstt. CIT in ITA no.s 2851 & 3680/Del/2007. c. The Delhi High Court in CIT vs. Orient Ceramics & Industries Ltd. (2011) 56DTR397 held that UPS would form part of computer peripherals and accessories and accordingly will depreciate at 60%rate. The previous decision in CIT vs. BSES Yamuna Power Ltd. in ITA no. 1267 dated 31.08.2010 did lend favour here where there was reference to use of the terms computer peripherals and accessories viz. printers, scanners, server etc. The Court went by the reasoning that computer accessories and peripherals cannot be used without the computer hence these would form part of computer only. Likewise UPS use is confined to a computer system hence such installation too therefore remain a part of computer only as held by Delhi High Court.

d. The Delhi Bench in ACIT, New Delhi vs. HCL Comnet Ltd., ITA Nos. 322 and 2583, ITA No. 2239 wherein it has been observed that this issue has been discussed and decided in a number of case by the jurisdictional ITAT as well as Delhi High Court, where it has been held that the computer accessories and peripherals, printers and scanner, UPS etc. are entitled to higher rate depreciation @ 60% on the ground that such accessories and peripheral form an essential part of the computer system and the same cannot be used without the computer. The AO was therefore directed to allow depreciation on UPS, printer and scanner etc @ 60% as claimed by the appellant.

9 ITA No. 5897/ Del/2013 e. The impugned order disallowing the claim of the appellant for depreciation @60% on printers, scanners and UPS thus is bad in law and needs to be struck down."

11. The Ld. CIT(A) after considering the submissions of the assessee

and by following the ratio laid down by the Hon'ble Jurisdictional High

Court in the aforesaid referred to cases i.e. CIT vs. Ceramics &

Industries Ltd. etc. directed the A.O. to allow the claim of the

assessee. Now the department is in appeal.

12. The Ld. DR supported the order of the AO and the Ld. Counsel

for the assessee, in his rival submissions reiterated the submissions

made before the Ld. CIT(A) and strongly supported the impugned

order.

13. We have considered the submissions of both the parties and

carefully gone through the material available on the record. It is

noticed that the Hon'ble Jurisdictional High Court in the case of CIT vs.

Ceramics & Industries Ltd. (Supra) held that UPS is a part of the

computer peripherals & accessories and accordingly depreciated @

60%. Since the identical issue has been decided by the Hon'ble

Jurisdictional High Court in the aforesaid referred to case by holding

that the assessee is entitled to higher rate of depreciation @ 60% and

the Ld. CIT has followed the ratio laid down by the Hon'ble 10 ITA No. 5897/ Del/2013

Jurisdictional High Court, therefore, we do not see any merit in the

appeal of the department on this issue.

In the result, appeal of the department is dismissed.

(Order pronounced in open court on 29th May, 2015.)

Sd/- Sd/-

(Diva Singh) (N.K.Saini) Judicial Member Accountant Member

Dated 29th May, 2015 B.Rukhaiyar

Copy forwarded to 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT (ITAT), New Delhi. AR, ITAT

N. Delhi 11 ITA No. 5897/ Del/2013