Case Law Details
Robotix Learning Solutions P. Ltd Vs ITO (ITAT Chennai)
ITAT Chennai held that as computer and robotix kit is totally different, depreciation @15% and not @60% available on Robotix kits.
Facts- Assessee claimed depreciation on Robotix kits @60%. However, the same was reduced to 15% by the Assessing Officer citing ITAT order dated 12.09.2018 in assessee’s own case. On appeal, CIT(A) confirmed the disallowance made by the Assessing Officer. Accordingly, being aggrieved, the present appeal is filed.
Conclusion- In identical matter, Coordinate Bench of Tribunal held that the computer is totally different which comprises processing data and not the machinery which undertakes works as per the instruction given through the computer. Therefore, computer is a different one and robotix kits are entirely different machineries. Hence, this Tribunal is of the considered opinion that the assessee is not eligible for depreciation @ 60% as claimed. Accordingly, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Held that by following the decision of the Tribunal, the Assessing Officer has reduced the claim of depreciation on Robotix kits @ 15%, which was rightly confirmed by the ld. CIT(A). We find no infirmity in the order passed by the ld. CIT(A) on this issue.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 3, Chennai dated 05.03.2020 relevant to the assessment year 2016-17. The assessee has raised the following grounds of appeal:
1. The order of the Commissioner of Income Tax (Appeals) – 3, Chennai dated 05.03.2020 in I.T.A.No. 105/CIT(A)-3/18-19, for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
2. The CIT (Appeals) erred in sustaining the-disallowance of various expenses charged under the head ‘Administrative Expenses’ at the rate of 20% of the total claim and consequently erred in sustaining the addition of Rs.7,25,814/-in the computation of taxable total income without assigning proper reasons and justification.
3. The CIT (Appeals) failed to appreciate that the presumption of non production of vouchers/invoices for incurring of such expenses to the extent of the debit was wholly unjustified and ought to have appreciated that the non appreciation of the complete evidence for incurring of such expenses would vitiate the findings in para 7.3 of the impugned order.
4. The CIT (Appeals) erred in sustaining the disallowance of depreciation to the extent of Rs. 12,02,244/- on the misconstruction of the provisions of section 32 of the Act and misreading of the facts available on record without assigning proper reasons and justificati6n.
5. The CIT (Appeals) failed to appreciate that the findings in para 7.4.9 to para 7.4.11 of the impugned order were wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts and in law.
6. The CIT (Appeals) erred in sustaining the disallowance of presumed excess claim of depreciation on Robotix Kits without assigning proper reasons and justification and consequently erred in sustaining the addition of Rs.16,19,956/- in the computation of taxable total income without assigning proper reasons and justification.
7. The CIT (Appeals) failed to appreciate that the claim of depreciation at 60% was erroneously reduced to 15% and ought to have appreciated that the restriction of the depreciation based on wrong understanding of the facts and mechanical adoption of the findings in the earlier appellate orders was wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts and in law
8. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law.
9. The Appellant craves leave to file additional grounds/arguments at the time of hearing.
3. The first ground is general in nature and requires no adjudication. Ground No. 2 & 3 relates to confirmation of disallowance of administrative expenses. In the assessment order, 20% of “Other Administrative Expenses” was disallowed and added to the total income since the assessee did not furnish the supporting details like bills/vouchers during the course of assessment proceedings. On appeal, after considering the submissions of the assessee, remand report of the Assessing Officer as well as objections of the assessee, the ld. CIT(A) has confirmed the disallowance.
4. On being aggrieved, the assessee is in appeal before the Tribunal. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. During the course of assessment proceedings, the Assessing Officer has noted in the P & L account under the head “Other Administrative Expenses” that the assessee has claimed certain expenses under Membership & Subscription charges of ₹.3,36,343/-, designing and other works of ₹.4,48,924/-, credit card payments of ₹.3,91,220/-, travelling expenses – Director of ₹.7,87,566/-, travelling & conveyance – foreign of ₹.5,81,524/-, travelling & conveyance expenses of ₹.10,83,492/-. When the Assessing Officer show-caused the assessee as to why 20% of these expenses should not be disallowed as the assessee has not given any details/breakup with regard to these expenses, the assessee has produced only the ledgers and certain invoices and vouchers. The Assessing Officer has noted that the vouchers are self made and not signed by the recipient. As personal element involved in these expenses cannot be denied, the Assessing Officer disallowed 20% of the above expenses and brought to tax. On appeal, after considering the submissions of the assessee, remand report of the Assessing Officer as well as objections of the assessee, the ld. CIT(A) has confirmed the disallowance and dismissed the ground raised by the assessee.
4.1 In this case, since personal element involved in these expenses cannot be denied, the Assessing Officer disallowed 20% of the expenses claimed under the head “Other Administrative Expenses”. On perusal of the orders of authorities below, we find that both the Assessing Officer as well as ld. CIT(A) has not doubted about incurring of administrative expenses. In these circumstances, we are of the opinion that disallowance of 10% of these expenses would relevant and to meet the ends of natural justice. Accordingly, we sustain the disallowance under the head “Other Administrative Expenses” only to the extent of 10% of the total expenses claimed by the assessee.
5. Ground No. 4 & 5 relates to disallowance of prior period depreciation claimed at ₹.12,03,224/-. The Assessing Officer show-caused the assessee as to why the above claim of expenses should not be disallowed in the absence of any detail provided by the assessee. Since the assessee has neither provided any details to substantiate the above expenses nor raised any objection to the proposed addition, the Assessing Officer disallowed the above expenses of ₹.12,03,244/- and brought to tax. On appeal, before the ld. CIT(A) the assessee has submitted that at times it was not possible to account for expenses which have spilled over to other financial years and could not be debited in the year of incurrence. After considering the submissions of the assessee and as per the principle laid down by the Mumbai benches of the Tribunal in the case of M/s. Tipco Industries Ltd. v. ACIT (ITA No. 5708/Mum/ 2009), wherein, it was held that the expenditure relating to one year cannot be claimed in any other year, the ld. CIT(A) dismissed the ground raised by the assessee. The depreciation has to be claimed in the year under consideration only and thus, we find no reason to interfere with order passed by the ld. CIT(A) on this issue. Accordingly, the ground raised by the assessee is dismissed.
6. Ground No. 6 & 7 relates to disallowance of excess depreciation claimed on Robotix Kits of ₹.16,19,956/-. The assessee has claimed depreciation on Robotix kits @ 60%. The rate was reduced to 15% by the Assessing Officer in the assessment order citing the ITAT order dated 12.09.2018 in assessee’s own case. On appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer.
6.1 Before us, the arguments of the ld. Counsel for the assessee is that robotix kit is a part and parcel of the computer and therefore, the assessee is eligible for claiming 60% depreciation. Further by relying upon the decision of the Tribunal in the case of Financial Software and Systems Private Limited v. ACIT in I.T.A. Nos. 2564 & 2566/Chny/2018 dated 07.06.2019, wherein, the Tribunal has considered that the ATM machine is eligible for 60% depreciation for the reason that computer is attached to ATM and similarly, it was prayed for allowing 60% depreciation.
6.2 On other hand, the ld. DR strongly relied upon the decision of the Tribunal in assessee’s own case for the assessment year 2014-15 in ITA No. 2669/Chny/2017 dated 12.09.2018 and supported the orders of authorities below.
6.3 We have heard the rival contention. During the assessment year 2014-15 similar issue on an identical fact was subject matter in appeal and after considering the submissions of the assessee, the Coordinate Benches of the Tribunal has observed as under:
“4. We heard Shri B. Sagadevan, the Ld. Departmental Representative also. Admittedly, the assessee purchased robotix kits for the purpose of its business. Since computers are operating the robotix kits, the assessee claimed depreciation @ 60% which is eligible for computers. The question arises for consideration is whether robotix kits can be considered as computer merely because the same are operated through computer? It is common knowledge that nowadays the entire industry is automated and machineries are operated through computer. It does not mean that the entire industrial undertaking was a computer. The computer or software installed therein may be used for operating industrial machineries. In this case also, the computer or software attached is used for operation of robotix kits. Therefore, it cannot be construed as if the robotix kits itself is a computer. This Tribunal is of the considered opinion that the computer is totally different which comprises processing data and not the machinery which undertakes works as per the instruction given through the computer. Therefore, computer is a different one and robotix kits are entirely different machineries. Hence, this Tribunal is of the considered opinion that the assessee is not eligible for depreciation @ 60% as claimed. Accordingly, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.”
By following the above decision of the Tribunal, the Assessing Officer has reduced the claim of depreciation on Robotix kits @ 15%, which was rightly confirmed by the ld. CIT(A). We find no infirmity in the order passed by the ld. CIT(A) on this issue.
6.4 The case law relied on by the ld. Counsel for the assessee in the case of Financial Software and Systems Private Limited v. ACIT (supra) has no application to the facts of the present case for the reason that the computer or software attached is used for operation of robotix kits and therefore, it cannot be construed as if the robotix kits itself is a computer. Thus, the ground raised by the assessee is dismissed.
7. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on 22nd February, 2023 at Chennai.
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