×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
07-06-2019, Financial Software and Systems, Section 2(i), 2(15),Tribunal Chennai
These appeals of the assessee arise out of the orders of the Ld. Commissioner of Income Tax (Appeals)-6, Chennai vide proceedings in ITA Nos. 587/CIT(A)-6/2016-17 and ITA No.408/CIT(A)-6/2016-17 both dated 29.06.2018 for the assessment years 2013-14 & 2014-15 respectively against the orders of assessment passed by the ACIT, Corporate Range-2, Chennai (herein after referred to as Ld. AO) u/s. 143(3) of the Income Tax Act,1961 (herein after referred to as the Act). The Revenue has raised an appeal against the order of the Ld.CIT(A) for the assessment year 2013-14. As the issues involved in all these appeals are identical in nature, the same are taken up together and disposed off by this common order fo the sake of convenience.
2. The facts of Asst Year 2013 14 are taken up for adjudication and the decision rendered thereon would apply with equal force for Asst Year 2014-15 also except with variance in figures in respect of assessee appeal
3. The Ground No. 1 raised by the assessee is general in nature and does not require any specific adjudication.
4. The only identical issue to be decided in these appeals is as to whether the ld CITA was justified in restricting the allowance of depreciation on Automated Teller Machines (ATM) at the rate of 15% as against the claim of 60% by the assessee in the facts and circumstances of the case.
5. The brief facts of this issue are that the assessee is engaged in the business of software development, sale, service and maintenance of ATMs for banks. The assessee entered into contracts with Banks wherein the assessee was awarded the contract to carry out end to end maintenance, software development and integration between ATMs and Banks. It is not in dispute that the ownership of such ATMs would be retained with the assessee company together with the risks and responsibilities of maintaining such ATMs. The return of income for the Asst Year 2013-14 was filed by the assessee company originally and later the same was revised u/s 139(5) of the Act on 19.11.2014 declaring loss of Rs 27,70,84,312/- During the course of assessment proceedings, the ld AO show caused the assessee as to why the depreciation on ATMs should be granted at the rate of 15% as against the rate of 60% claimed by the assessee. The assessee replied that it had capitalized the ATMs in its books as ‘Computers’ and had accordingly claimed depreciation on such machines at the rate of 60% asprescribed under the Income Tax Rules, 1962 on the basis of functional similarities between ATMs and Computers and on the ground that ATM machines are computerized telecommunication device and would fall under the definition of ‘computer network’ which is included in the definition of ‘computers’ as per the provisions of section 2(i) of the Information Technology Act, 2000. It was also pleaded that the ATM would not work and operate unless it is computerized and linked with the main server. The assessee pleaded that the functions performed by ATMs are to be construed at par with Computers and accordingly entitled for depreciation at the rate at which computers are eligible. The ld AO however disregarded the contentions of the assessee and treated the ATMs as mere Electronic devices and granted depreciation at the rate of 15% by placing reliance on the decision of Hon’ble Karnataka High Court in the case of Diebold Systems (P) Ltd vs CIT reported in (2006) 144 STC 59 (Kar) wherein the Hon’ble Court examined the question whether an ATM machine as a computer with reference to Entry 20(2)(b) of Part C of the Second Schedule to the Karnataka VAT Act, 2003 captioned ‘Computer Terminals’. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us.