Commissioner Of Income Tax,Chennai v. M/S.cactus Imaging India Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.04.2018 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SESHASAYEE T.C.(Appeal) Nos.921 & 922 of 2008 Commissioner of Income Tax,Chennai. ... Appellantin both T.Cs. Vs. M/s.Cactus Imaging India Pvt. Ltd.,No.21, South Phase,SIDCO Industrial Estate,Guindy, Chennai-32. ... Respondentin both T.Cs. Appeals filed under Section 260A of Income Tax Act, 1961,against the order dated 16.11.2007 passed by the Income TaxAppellateTribunal, Madras“A”Bench,Chennai, inI.T.A.Nos.1170/Mds/2007 and 2015/Mds/2006 for the assessmentyears 2004-05 and 2003-04 respectively. ITA/1170/MDA/2007 preferred against the Order of theCommissioner of Income Tax Chennai 34 dated 13/02/2007 inITA.No. 445/2006-2007/A-III for the mssessment year 2004-2004against the Order of the Assistant commissioner of Income – TaxCompany circle (3), Chennai dated 10/08/2006 in G.T.P.No/PA.No.BCC 2899P for the assessment year 2004-2005. TTA 2015/MDS/2006 preferred against the Commissioner of IncomeTax (Appeals) – III Chennai dated 29/06/2006 in ITA.No.686/2005-06A-III for the assesment year 2003-2004 and againstthe order of the Assistant Commissioner of Income – Tax CompanyCircle – I (3) Chennai dated 21/02/2006 in G.T.No.PANOAABCC2899P for the assesment year 2003 & 2001. For Appellant:Mr.T.RavikumarFor Respondent:Mr.R.Sivaraman C O M M O N J U D G M E N T (Judgment of the Court was delivered by T.S.SIVAGNANAM, J.) Heard Mr.T.Ravikumar, learned counsel for theappellant/Revenue and Mr.R.Sivaraman, learned counsel for therespondent/assessee. 2. These tax case appeals, by the Revenue, have beenadmitted on the following substantial question of law: “Whether on the facts and circumstances ofthe case, the Tribunal was right in holding thatprinters are eligible for 60% depreciation, whenthe entry in the depreciation table specificallysays, “computers including computer software?”” 3. These appeals are directed against the orders passedby the Income Tax Appellate Tribunal, Madras “A” Bench, Chennaiin I.T.A.Nos.1170/Mds/2007 and 2015/Mds/2006 dated 16.11.2007,for the assessment years 2004-05 and 2003-04 respectively. TheTribunal, by the impugned judgment, dismissed the appeals filedby the Revenue challenging the orders passed by the Commissionerof Income Tax (Appeals)-III, dated 29.06.2006 and 13.02.2007. 2. These tax case appeals, by the Revenue, have beenadmitted on the following substantial question of law: “Whether on the facts and circumstances ofthe case, the Tribunal was right in holding thatprinters are eligible for 60% depreciation, whenthe entry in the depreciation table specificallysays, “computers including computer software?”” 3. These appeals are directed against the orders passedby the Income Tax Appellate Tribunal, Madras “A” Bench, Chennaiin I.T.A.Nos.1170/Mds/2007 and 2015/Mds/2006 dated 16.11.2007,for the assessment years 2004-05 and 2003-04 respectively. TheTribunal, by the impugned judgment, dismissed the appeals filedby the Revenue challenging the orders passed by the Commissionerof Income Tax (Appeals)-III, dated 29.06.2006 and 13.02.2007. 4. The issues, which fell for consideration were whetherthe depreciation claimed by the respondent/assessee on printersat 60% was right and whether the printers would be includedwithin the term 'computer' as contained in old Appendix I ClauseIII(5). The said entry states that computers including computersoftware are eligible for depreciation at 60% on written downvalue. The assessing officer, while completing the assessmentunder Section 143(3) of the Income Tax Act, 1961 held that theprinters are not the normal printers, but they are high valueprinters used for printing banners and advertisement materialsof large sizes and cannot be treated as a peripheral to acomputer and the printer purchased by the petitioner cannotperform any other function as performed by a normal computer.Accordingly, the claim for depreciation at 60% was denied.Before the Commissioner of Income Tax (Appeals), it appears thata video demonstration was conducted before him and upon goingthrough the technical manual of the printers, found that theprinter cannot be used without the computer and concluded thatit is a part of the computer system. Accordingly, the appealsfiled by the assessee were allowed. These orders were affirmedby the Tribunal by pointing out that the printers sought to betreated as computers for the purpose of allowing high rate ofdepreciation, that is, 60%. It followed the decision of theKolkata 'B' Bench of the Tribunal in the case of the Income TaxOfficer v. Samiran Majumdar (2006) 98 ITD 119 (Kol.), in whichthe Tribunal had relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Karnataka Power Corporation (2000)162 CTR (SC) 249. 5. Mr.T.Ravikumar, learned counsel for the Revenuestrenuously contended that the equipment, which was imported bythe petitioner and used by them, is not a normal printer andprinter having not been defined under the old appendix (referredsupra), the assessing officer was right in rejecting the claimof depreciation at 60%. 6. With regard to how an entry has to be interpreted,the learned counsel referred to the decision of the Hon'bleDivision Bench of this Court in the case of Bimetal BearingsLtd., v. State of Tamil Nadu (1991) 80 STC 167. The learnedcounsel also referred to the decision of the Hon'ble DivisionBench of this Court in the case of Dinamalar v. Income TaxOfficer reported in (2016) 97 CCH 0004 ChenHC. 7. We need not labour much to answer the substantialquestion of law, which has arisen for consideration in theinstant case, as in the assessee's own case, the question hasbeen decided in favour of the assessee and the appeal filed bythe Revenue, viz., T.C.(A) No.867 of 2014, was dismissed by theHon'ble Division Bench by judgment dated 18.11.2014. Theoperative portion of the judgment reads as follows: 7. We need not labour much to answer the substantialquestion of law, which has arisen for consideration in theinstant case, as in the assessee's own case, the question hasbeen decided in favour of the assessee and the appeal filed bythe Revenue, viz., T.C.(A) No.867 of 2014, was dismissed by theHon'ble Division Bench by judgment dated 18.11.2014. Theoperative portion of the judgment reads as follows: “4.The issue that arises for considerationis whether the printing machinery, namely printerand scanner, should be treated as an integral partof computer and eligible for 60% depreciation asagainst 25% as indicated by the Department. Thereis no dispute on the fact that the printer andscanner is used as an office equipment in businessand that is part and parcel of the computer systemas decided by the Tribunal in all the subsequentassessment years viz., 2003-04, 2004-05 and 2005-06. The Commissioner of Income Tax (Appeals) aswell as the Tribunal have consistently taken theview that the printer and scanner should be treatedas an integral part of the system and cannot beused without a computer and depreciation at 60%should be allowed. 5.We find that this material fact has beenconsistently followed by the first AppellateAuthority and the Tribunal in the assessee's owncase and we find no material or reason to differfrom the said finding of fact. Further more, wefind that this issue is a pure question of fact andno question of law arises for consideration in thisTax Case (Appeal). Accordingly, this Tax Case(Appeal) stands dismissed. No costs.” 8. From the aforementioned decision, we find, theDivision Bench noted the decision of the Commissioner of IncomeTax (Appeals) for the assessment years 2003-04 and 2004-05,which was affirmed by the Tribunal and the orders passed by theTribunal are challenged in the appeals before us. Therefore, wedeem it fit and appropriate to consider the submission of thelearned counsel for the Revenue. The decision in the case ofBimetal Bearings Ltd. (supra) explains as to how an entry has tobe interpreted in a taxation statute. 9. The Hon'ble Division Bench took note of the decisionof the Hon'ble Supreme Court pointing out that the 'entry' to beinterpreted is in a taxing statute; full effect should be givento all words used therein and if a particular article would fallwithin a description, by the force of words used, it isimpermissible to ignore the description, and denote the articleunder another entry, by a process of reasoning. 10. It was further pointed out that the rule ofconstruction by reference to contemporanea expositio is a well-established rule for interpreting a statute by reference to theexposition it has received from contemporary authority, thoughit must give way where the language of the statute is plain andunambiguous. 11. By applying the rule of interpretation, we find thatthe relevant entry under old appendix I Clause III(5) states“computers including computer software” and the Notes under theAppendix defines 'computer software' in Clause 7 to mean anycomputer program recorded on disc, tape, perforated media orother information storage device. Noteworthy to mention thatthe notes contained in the appendix, the term “computer” has notbeen defined. Therefore, as pointed out by the Division Benchin Bimetal Bearings Ltd. (supra), if a particular article wouldfall within the description by the force of words used, it isimpermissible to ignore the word description. Thus, going bythe usage of the equipment purchased by the petitioner, we haveto take a decision. 12. The Commissioner of Income Tax (Appeals) onexamining the manner in which the equipment functions by way ofvideo demonstration, recorded that the printer cannot be usedwithout a computer, that is, it is part of the computer system. 12. The Commissioner of Income Tax (Appeals) onexamining the manner in which the equipment functions by way ofvideo demonstration, recorded that the printer cannot be usedwithout a computer, that is, it is part of the computer system. 13. In paragraph 6 of the order passed by theCommissioner of Income Tax (Appeals), it has been stated that itcan be inferred that the machines “computer printers” underconsideration can either be called computers-printers, since alot of independent functions done by the computers are done bythese printers and they can be called an integral part of thecomputer system. Therefore, the Commissioner of Income Tax(Appeals) came to the conclusion that it should be treated aspart of the computer and an accessory to the Computer. This factual finding cannot be dislodged by us, as no material hasbeen placed by the Revenue before this Court. 14. Above all, we should bear in mind, it is a claim fordepreciation and if two views are possible, one which is infavour of the assessee should be preferred. 15. Learned counsel for the Revenue relied upon thedecision in the case of Dinamalar (supra). We find the casearose out of a different factual matrix and the question of law,which fell for consideration before the Division Bench waswhether the claim made by the assessee for depreciation at 80%against the Control Panel Board and transformer by classifyingit under head “B”, Instrumentation and Monitoring System formonitoring energy flows, in the depreciation table New Appendix-I-III-(8)(ix)B, is right. In the factual scenario, the Hon'bleDivision Bench held that the machinery will not fall under thesaid category viz., under the head Instrumentation andMonitoring for monitoring energy flow and therefore, we findthat the decision in the case of Dinamalar (supra) is clearlydistinguishable on facts. 16. Further more, we note that in so far as the appealfiled by the Revenue in the assessee's own case for theassessment year 2005-06 in T.C.(A) No.543 of 2009 is concerned,the said appeal was dismissed as withdrawn by the Hon'bleDivision Bench by judgment dated 21.01.2016 on account of lowtax effect. 17. Be that as it may, the concurrent findings of thefirst appellate authority as affirmed by the Tribunal holds thatthe claim by the assessee at 60% is acceptable. Thus, for theabove reasons, we find that since in respect of percentage ondepreciation claimed in respect of the very same machinery hasbeen permitted for the earlier years and affirmed by theDivision Bench, the Revenue cannot take a difference stand. 18. For all the above reasons, the appeals are dismissedand the substantial question of law framed for consideration isanswered in favour of the assessee and against the Revenue. Nocosts. Sd/-Assistant Registrar(CS IV) abr //True copy//Sub Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1.The Commissioner of Income Tax-I, Chennai. Chennai. 2.The Income Tax Appellate Tribunal, Madras “A” Bench, Chennai. Madras “A” Bench, Chennai. 3.The Commissioner of Income-tax (Appeals)-III, Chennai. Chennai. 4.The Assistant Commissioner of Income Tax, Company Circle -I, (3) Chennai. Company Circle -I, (3) Chennai. +1cc to Mr.R.Sivaraman, Advocate SR.No.28824+1cc to Mr.T.Ravi Kumar, Advocate SR.No.28211 T.C.(Appeal) Nos.921 & 922 of 2008 VGII(CO)GN(17/05/2018)