TMI Blog2008 (7) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... per VI has defined the term computer - held that:- POS terminals and ATMs are not treated to be as computer and therefore the lower authorities have rightly allowed depreciation at the rate of 25 per cent which is applicable to plant and machinery. The rate of 60 per cent which is applicable to computers is not applicable to POS terminals and ATMs. - Decided against the assessee. - 4494 (MUM.) OF 2003 AND 403/(MUM.) OF 2005 - - - Dated:- 31-7-2008 - ASHA VIJAY RAGHAVAN, JUDICIAL MEMBER AND A.L. GEHLOT, ACCOUNTANT MEMBER D.P. Bapat for the Appellant. Sishir Srivastava for the Respondent. ORDER A.L. Gehlot, Accountant Member. - These appeals filed by the assessee being ITA No. 403/Mum./05 as well as the revenue being ITA No. 4494/Mum./03 are directed against the order of learned CIT(A) - XXIX, Mumbai, passed on 29-10-2004, for the assessment year 2001-02 and the order of learned CIT(A)-XXV, dated 26-3-2003 for assessment year 1999-2000 respectively. Since common grounds are involved in both these appeals, a consolidated order is passed for the sake of convenience. 2. Ground No. 2 of the assessee s appeal reads as under : "The learned CIT(A) further erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een considered carefully. The contention of the Assessing Officer has also been considered. I have also gone through the details of travelling expenses filed in paper book on page No. 1. The appellant is only a licensee. The licence has been obtained from a foreign collaborator viz., FBS and consideration for that is being paid as a royalty on percentage basis of sales. The appellant had not acquired the asset in any manner from the foreign collaborators. The employees of the foreign collaborators have visited India to assist the appellant to modify/customize the software to suit the company s business needs. The ownership of the software is of FBS and the appellant s right is limited to the use of software for a period of ten years under the licence. The expenditure on travelling, therefore, cannot be termed as a capital expenditure. Thus, in my view, the Assessing Officer is not correct in treating the said expenditure as capital expenditure. The Assessing Officer is, therefore, directed to treat the said expenditure of Rs. 13,99,568 as revenue expenditure and allow the deduction accordingly." 4.2 To decide the issue we would like to refer following clauses of the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be forgotten that the agreement is between the appellant company and its collaborator, who were free to devise the agreement in the manner suits to both of them. Even though the expenditure and payment of Rs. 2,45,46,000 has been calculated on the basis of US$100 per man hour the basic character of the expenditure does not get changed on this account. As per provisions of the Act, technical know-how and licence are treated as intangible capital assets. In view of the above discussion and for the reason discussed in the assessment order, I am of the opinion that assessee has acquired a long term enduring benefit and, therefore, expenditure of Rs. 2,45,46,000 is of capital nature and Assessing Officer, therefore, was right in disallowing it by treating the same as of capital nature. Disallowance, therefore, is upheld." 5. The learned DR relied upon the decision of ITAT Special Bench Delhi in the case of Amway India Enterprises v. Dy. CIT [2008] 111 ITD 112. After hearing the learned AR we find that the facts of the case are required to examine in the light of the above decision of ITAT SB Delhi ( supra ). We, therefore, find it proper to send the matter back to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was not found acceptable to the Assessing Officer and, therefore, he treated the same as plant and machinery and applied the depreciation as applicable to the plant and machinery instead of computer. In assessment year 1999-2000, the CIT(A) decided the issue in favour of the assessee by observing as under : "I have considered the submissions of the learned AR carefully and I have also gone through the contentions of the Assessing Officer. The appellant s claim of depreciation has been reduced by Rs. 1,03,59,352 on the ground that the appellant is not eligible to claim depreciation at the rate of 60 per cent on certain terminals and related accessories and support equipment. The details of such machinery as filed in the paper book on pages 46 to 52 clearly reveal that these terminals and related accessories are computers. These are the devices through which the appellant conducts its business. These terminals have hardware viz. , memory, display card reader, printer, peripheral ports, modem and protocols. Physically its weight is 4.65 (116 mm), width 5.83", length 11.85" and shipping weight 3.3 lbs. This device is also having key board and the device is known as Omni-460. I ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e input device also includes the cards and the terminals performs only a specialized function. In this behalf, it was submitted that the cards were not input device at all. In fact, the cards contain a database which is electronically transmitted into the terminal system by the use of the input devices inbuilt in the terminal. Further, AR placing reliance on the definition of computer given in the Information Technology Act countered by the Assessing Officer s argument that it has not claimed depreciation at the rate of 60 per cent on the machines operated by the computer devices, AR stated before the CIT(A), during the course of appeal proceedings for assessment year 1999-2000 that the depreciation has been claimed on the computer themselves. It was in this background that the CIT(A) observed that these terminals and related accessories are computers. These are the devices through which the appellant conducts its business. These terminals have hardware viz., memory, display card reader, printer, peripheral ports, modem and protocols. This device is also having keyboard and the device is known as Omni-460. Referring to the definition of computer given in the Information Technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ATM is one machine. For the purposes of Customs Tariff also, whereas computer falls under heading 84.73, ATMs fall under sub-heading 8472.90'. AR has stated that circular of the Board should not be applied for adjudging the issue under consideration because circulars issued under a different legislation should not be applied, ipso facto , for resolving the issue under the Income-tax Act. Further CIT(A) while deciding appeal for assessment year 1999-2000 has considered the provisions of Information Technology Act. I am afraid aforesaid contention is not tenable. It appears that AR/appellant wants to draw benefit of depreciation at the rate of 60 per cent by reading their own version of definition of computers under the Information Technology Act by disregarding the circular issued by the Board. If the circular of the board for adjudicating the issue in the opinion of AR cannot be applied then on the same reasoning definition of computer given under the Information Technology Act can also not be applied under the Income-tax Act. It may be stated here that Appendix-I to Income-tax Rules which contains the table of rates at which depreciation is admissible has specifically ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion at the rate of 60 per cent is allowable on computer software with effect from assessment year 2003-04. Had it been the intention of Legislature to allow depreciation at the rate of 60 per cent on the computer software even in the earlier years, the relevant provisions/rules would have been made effective retrospectively. In view of above discussion, various contentions of AR/appellant are not acceptable and it is held that Assessing Officer was right in not allowing depreciation at the rate of 60 per cent on POS terminals, ATMs, computer software and accessories. In view of above discussion, total disallowance of depreciation of Rs. 3,55,47,515 is upheld." 8. The learned AR reiterated the submissions which were made before the revenue authorities. The learned AR further submitted that these POS terminals are related assets are of computers. These are the devices through which the assessee conducts its business. These terminals have hardware viz., memory, display card reader, printer, peripheral ports, modem and protocols. This device is also having keyboard and the device is known as Omni-460. The learned AR relied upon the order of the CIT(A) for assessment year 1999-200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secondly, the circular has specifically referred to the Customs tariff entries whereunder a separate tariff classification has been prescribed for ATMs in addition to a distinct entry for computers. There is no such independent and separate prescription of ATMs in the Appendix to the Income-tax Rules, wherein rates of depreciation have been prescribed, providing for separate entry for ATMs in addition to the entry for computers. Reliance is placed on the decision of Hon ble Supreme Court in the case of Gem Granites v. CIT [2004] 271 ITR 322 1 . In particular, reference is invited to the following observations made at pages 330/331 of the reported judgment : Doubtless, the Customs Tariff Act and the Central Excise Tariff Act both draw a distinction between minerals and processed minerals. For example in Chapter 27 of the Customs Tariff Act, a distinction has been drawn between mineral fuels, mineral oils and mineral products. However a classification which is relevant for the purpose of determination of rate of duty cannot be imported into the Income-tax Act which makes no such distinction . It is therefore respectfully sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n defined in the Income-tax Act. Where anything is not defined in the IT Act, generally we take the help of rules of interpretation. Some of the oft cited decisions on the interpretation of fiscal statute we would like to discuss as under. The oft-quoted observations of Rowlatt J. in the case of Cape Brandy Syndicate v. IRC [1921] 1 KB 64 ought also to be noticed here. The learned Judge observed : "In a taxing statute, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly to the language used." 10.1 The observations of Rowlatt J. as above stand accepted and approved by the House of Lords in a later decision, in the case of Canadian Eagle Oil Co. Ltd. v. King [1946] AC 119. Lord Thankerton also in a manner similar in IRC v. Ross and Coulter [Bladnoch Distillery Co. Ltd.] 1948 1 ALL ER 616 at page 625 observed : "If the meaning of the provision is reasonably clear, the courts have no jurisdiction to mitigate such harshness." 10.2 The decision of the Apex Court in Keshavji Ravji Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s computer . We noticed no such intention of the Legislature was there when higher rate of depreciation was not provided for computers nor it comes under the simple meaning of the word computer . 10.5 If we see the simple meaning of "computer," we find that computer means "one that computes; specifically a programmable electronic device that can store, retrieve, and process data". (201 ITR 24). Computer a hardware, a machine or apparatus, mechanical, electric or electronic for carrying on special complex calculations dealing with numerical data or with stored items of other information or used for controlling manufacturing process or co-coordinating parts of a large organization. The Institute of Chartered Accountants of India in its study material PEE II Information Technology Paper VI has defined the term computer as follows : "The term computer can logically be applied to any calculating machine. However, in common usage, the definition of a computer has become more limited in a contemporary usage. We now define a computer as an electronic data processing device capable of receiving input, storing sets of instructions for solving problems and generating output with hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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