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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI GEORGE GEORGE K
IN THE INCOME TAX APPELLATE TRIBUNAL “A’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA No.1397/Bang/2019 Assessment Year: 2012-13 The Asst. Commissioner of M/s. Msource (India) Pvt. Ltd. 1st Floor, WTC 3 Block, B Bagmane World Income Tax, Circle - 4(1)(2), Room No.230, 2nd Technology Centre, Floor, BMTC Building, 80 Feet Road, Vs. K. R. Puram, Marathahalli, 6th Block, Koramangala, Outer Ring Road, Doddenekundi, Bangalore – 560 095. Bangalore-560 024. PAN NO : AACCM 2097 G APPELLANT RESPONDENT C.O. No.57/Bang/2019 (in ITA No.1397/Bang/2019) M/s. Msource (India) Pvt. Ltd. Vs. The Asst. Commissioner of Bangalore-560 024. Income Tax, PAN NO : AACCM 2097 G Bangalore – 560 095. APPELLANT RESPONDENT Assessee by : Shri. K. R. Girish, CA Revenue by : Shri. Kannan Narayanan, D.R. Date of Hearing : 01.12.2020 Date of Pronouncement : 03.12.2020 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal is by the Revenue directed against the order of CIT(A) dated 27.03.2019 and C.O. by assessee.
ITA No. 1397/Bang/2019 C.O. No.57/Bang/2019 2 2. In the appeal, the Revenue has raised the following grounds:
In C.O. the assessee has challenged that the order has been passed in violation of the principles of natural justice. However, at the time of hearing, this C.O. was not pressed by the assessee. Accordingly, we dismiss C.O. as not pressed. Coming to the Revenue’s appeal, the facts are that the Assessment Order under section 143(3) was passed on 22.04.2016 determining the total income of the assessee at Rs.68,20,52,160/-. The assessee said to be claimed depreciation on plat and machinery @ 60% against the applicable rate of 10%. However, the AO disallowed the claim under section 14A of the Income Tax Act, 1961 (hereafter called ‘the Act’). In addition to this, there was a disallowance with regard to interest on belated TDS claimed. On appeal, CIT(A) observed that these issues cannot be taken up under section 154 of the Act as these issues are highly debatable. Against this, Revenue is in appeal before us. Learned AR submitted that the assessee made a disallowance under section 14A of the Act amounting to Rs.6,79,829/-. However, under section 14A r.w.r. 8D, it would be at Rs.83,10,213/-. This was recomputed by AO under section 154 of the Act. Regarding depreciation on Plant and Machinery, it was submitted that the assessee claimed depreciation at 60% though the entitlement is @ 10%. Regarding interest on belated TDS, it was submitted that it is in panel in nature and it cannot be deductible while computing the income of the assessee. On the other, AR submitted that the disallowance under section 14A of the Act is very much debatable and for computing the disallowance under section 14A of the Act, various factors has to be considered with regard to applicability of Rule 8D and such debatable issue cannot be entertained in proceeding under section 154 of the Act. Regarding depreciation it was submitted that assessee has clearing mentioned in the block of assets what are the assets entitled for depreciation @ 10% and 60% under the head Plant and Machinery. The head shown under Plant and Machinery also includes
ITA No. 1397/Bang/2019 C.O. No.57/Bang/2019 3 various computer and computer parts which was shown separately by assessee to schedule to accounts as these are computer and computer parts entitled to depreciation at 60% and there is no error in claiming the depreciation @ 60% which is being computer and computer peripherals. Regarding interest on delayed payment of TDS, it was submitted that interest on delayed payment of Service Tax and TDS which was in the nature of compensatory and not int he nature of penalty and being a compensatory nature, it is allowable expenditure.
We have heard both the parties and perused the material on record. The assessee disclosed the office equipment under separate head entitled for 60% depreciation. Now the question before us is whether these office equipment – computers or computer parts are entitled for depreciation at 60%. The learned DR submitted that in the judgment of Madras High Court in the case of CIT Vs. Pierce Leslie and Co. Ltd., 99 taxman 471 and in the case of CIT Vs. Alankar Borewells 133 taxman 91, it was held that the rate of depreciation could be rectified while proceeding under section 154 of the Act. If the AO applied the wrong provision of law in the original Assessment or applied wrong rate of depreciation, it could be rectified in proceeding under section 154 of the Act. In our opinion, this view of the DR is justified. We find that as per entry No.5 in the new Appendix I attached to Income Tax Rules, 1962, w.e.f. Assessment Year 2006-07 onwards, applicable rate of depreciation for computer or computer parts is at 60%. Further, in the case of M/s. Mphasis Ltd., in ITA No.242/Bang/2014, the Tribunal vide order dated 09.08.2017 held that computer accessories are entitled for depreciation at 60%. Accordingly, we direct the AO to grant depreciation on these items at 60%, and we uphold the order of CIT(A) on this issue.
4.1 With regard to disallowance under section 14A r.w.r. 8D, the assessee itself disallowed Rs.6,79,829/- under section 14A r.w.r. 8D. The AO has to go
ITA No. 1397/Bang/2019 C.O. No.57/Bang/2019 4 through various components like interest bearing funds, average value of investment, average value of total assets as appeared in the Balance Sheet of the assessee on the day and last day of the previous year, amount of expenditure directly relating to income which does not form a part of the total income. Being so, the issue is very debatable, the disallowance cannot be proceeded under section 154 of the Act. As rightly pointed out by CIT(A) that rectification under section 154 of the Act can only be made with regard to mistake of fact or law committed by the officer passing the order becomes apparent from the record, rectification is not possible if the question is debatable. A point which was not examined on facts or in law cannot be dealt with as a mistake apparent from the record.
4.2 With regard to disallowance of interest on delayed payment of TDS, in our opinion, it is compensatory in nature and not penal in nature as held by Co-ordinate Bench in the case of M/s. IDS Next Business Solutions Pvt. Ltd., in ITA No.510/Bang/2018 vide order dated 15.06.2018. Accordingly, it is an allowable expenditure. In this issue, CIT(A) has taken correct view and no interference is called for.
In the result, appeal of the Revenue and C.O. of the assessee are dismissed.
Pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/- (GEORGE GEORGE K) (CHANDRA POOJARI) Judicial Member Accountant Member Bangalore, Dated : 03.12.2020. NS*
ITA No. 1397/Bang/2019 C.O. No.57/Bang/2019 5
Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order
Asst. Registrar, ITAT, Bangalore.