Ita/569/2017 Of State Bank Of India v. The Joint Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 15 DAY OF JUNE 20271 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDAR BETWEEN: LT.A. NCO.569 OF 2017 STATE BANK OF INDIA(FORMERLY STATE BANK OF MYSORE)LOCAL HEAD OFFICECOMPLIANCE DEPARTMENT41TH FLOOR, 65, ST. MARKS ROADBENGALURU - 560001|REPRESENTED HEREIN BY ITSDGM & CFO LOCAL HEAD OFFICEBANGALORE ~MR. RAMESH CHANDRA GOKULAPALAN., (BY SRI. T. SURYANARAYANA, ADV.,) ... APPELLAN| AND* THE JOINT COMMISSIONER OF _INCOME TAX |LARGE TAXPAYER UNITSBENGALURU. ~. RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 24.03.2017 PASSEDIN ITA NO.1200/BANG/2014 FOR THE ASSESSMENT YEAR 2008-O09, PRAYING TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE,TRIBUNAL PASSED IN ITA NO.1200/BANG/2014 (ANNEXURE-C)FOR ASSESSMENT YEAR 2008-09, TO THE EXTENT QUESTIONEDHEREIN & ETC. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter|of the appeal pertains to the Assessment year 2008-09. The appeal was admitted by a bencn of this Court on thefollowing substantial questions of law: “(D)theTribunalWascorrectIn|upholding the validity of the re-assessmentproceedings concluded under Section 17 of.the Act although the necessary requirementsunder tne said provision were not satisfied?| (i1) Tne tribunal was correct in holding|that an ATM whicn performs tne functions ofa computer such as input, process andoutput, could not be considered as a ‘Computer’OF|‘ComputerSystem |OrComputer Terminal’ or ‘Computer PeripheralDevice’.fortheDUrDpOSeofClaimingdepreciation under the Act at 60%? (iii) The’ Tribunal was justified inplacing reliance on the decision rendered in-the context of ATM under the KernatakaSales Tax Act, 1952 ("KST Act’) from theperspective of classification of ATM under the.entry list provided in KST Act which tsinvoked In the event of ‘sale’ of such ATMwithout considering the aspect of usage ofATM as mandated under section 37 ofIncome Tax Act, 1961? (iv) the Tribunal, having regard to.nature of banking business and quantum oftransactions in relation to procurement ofcapital assets during the year, ought to haveconsidered furnishing of 73% of the invoices.in relation to capital assets acquired duringtheyearaS|furnishingofsubstantia]evidence relating to capital assets andtherefore ought to have allowed depreciationunder section 32 of the Act, on all the assets, 1.e., 100% of the assets acquiredduring the year?” 2? Facts leading to filing of this appeal brieflystated are that the assessee was formerly Known asState bank of Mysore and was a subsidiary of State Bankof India constituted under the State Bank of India'(Subsidiary Banks) Act, 1959. The assessee filed thereturn of Income for the Assessment Year 2008-09.declaring total income of Rs.446,01,43,740/-. |Automated Teller Machines (ATMs) at the rate of 60% byclassifying it to be computers. The return wasprocessedUnder|Section143(1)oftheAct on29.04.2009 and subsequently, a scrutiny assessmentwas concluded under Section 143(3) of the Act by anorder dated 07.12.2010 determining the taxable incomeof tne assessee at Rs.531,30,96,281/-. Tne JointCommissioner of Income Tax re-opened the assessmentfor the assessment in question under Section 147 of the Act and passed an order dated 17.02.2014 makingadditions on account of disallowance of depreciation atthe higher rate of 25% on ATMs, UPSs, Printers,Scanners and other electrical devices to the extent of non furnishing of the evidence. Act and passed an order dated 17.02.2014 makingadditions on account of disallowance of depreciation atthe higher rate of 25% on ATMs, UPSs, Printers,Scanners and other electrical devices to the extent of non furnishing of the evidence. 3The assessee filed an appeal before theCommissioner of Income Tax (Appeals) who by an orderdated 14.07.2014 upheld the action of the Assessing_Officer in re-opening of assessment under Section 147 ofthe Act as well as on the issue of depreciation. Theassessee thereupon filed an appeal before the IncomeTax Appellate Tribunal (hereinafter referred to as thetribunal for short). Tne tridDunal by an order dated24.03.2017 upheld the validity of re-opening of theassessment as well as disallowance of depreciation at60% on ATMs by relying on its decision in case of the.assessee for the Assessment Year 2007-08, the tribunalupheld the disaliowance of depreciation. The tridunalalso upneld the disallowance of depreciation claimed on assets to the extent invoices were not produced by theassessee. In the aforesaid factual background, thisappeal has been filed. 4Learned counsel for the assessee submitted|that re-opening of the assessment under Section 147 ofthe Act is invalid as necessary ingredients for re-openingthe assessment are not present. It is further submittedthat condition precedent for invoking Section 147 of the.Act viz., (i) there should be a new tangible materialwarranting re-opening of the assessment (ii) proposed.proceeding should not be on account of mere change ofopinion were not fulfilled. It is also argued that re-assessment proceeding cannot be initiated on account of‘borrowed satisfaction that income chargeable to tax hasescaped assessment. It is also urged that ATMs are.computers and are eligible for depreciation at the rate of60% and the substantial question of law Nos.3 and 4nave already been answered in favour of the assesseeDY a division bencn decision of this court in|"CIT VS. NCR|CORPORATION(P)|LTD.,(2020)TI1/TAXMANN.COM 252 (KAR).It is also Submitted that|tribunal as well as the Commissioner of Income Tax!(Appeals) and the Assessing Officer erred in not allowing.depreciation as claimed under the block ‘Computersincluding Computer Software’ despite the fact that theassessee had submitted invoices evidencing acquisition|to the extent of 66% of the assets acquired during the.year. It is also urged that books of accounts of theassessee are awaited by external auditors and the sameare subject to tax audit under Section 44AB of the Act.and insistence of the authority for production of 100%invoices negates the very purpose of tax audit and it isrendered as futile exercise. It is also argued thatassessee has 900 branches all over India and it Is not!practically possible to produce 100% invoices in supportof additions made to the fixed assets. It is also urged.that the tribunal ought to have appreciated that thestatutory audit reports were a material evidence and the Same should have been considered. In support ofaforesaid submissions, reliance has been placed ondecisions In|"CIT VS. KELVINATOR OF INDIA LTD.',(2002) 123 TAXMAN 433 (DELHI), ‘CITVS.KELVINATOR OF INDIA LTD.', (2010) 187 TAXMAN312 (SC), ‘BANKIPUR CLUB LTD VS. CIT’, (1971)82 ITR 831 (SC), ‘CIT VS. NCR CORPORATION (P.)LTD" supra,andACIT VS. JAY ENGINEERINGWORKS LTD, (1978) 113 ITR 389. 5.|On the other hand, learned counsel for therevenue submitted that assessment proceedings havebeen re-opened in accordance witn law and the samedoes not suffer from any infirmity. It is also urged thatDurden was on the assessee to snow tnat ne was tneowner of depreciable asset and that the amount hasbeen expended wholly for the purposes of business. It is”also pointed out that all the authorities under the Actnave held that assessee has failed to discharge tneaforesaid Durden as he had not produced the invoices. It 5.|On the other hand, learned counsel for therevenue submitted that assessment proceedings havebeen re-opened in accordance witn law and the samedoes not suffer from any infirmity. It is also urged thatDurden was on the assessee to snow tnat ne was tneowner of depreciable asset and that the amount hasbeen expended wholly for the purposes of business. It is”also pointed out that all the authorities under the Actnave held that assessee has failed to discharge tneaforesaid Durden as he had not produced the invoices. It is also urged that the decision in case ofJAYENGINEERING WORKSsupra is misconceived as in the|aforesaid case, the books of accounts were not available.as the same were destroyed in fire and therefore,statutory report was taken into account as secondaryevidence. It is urged that in the instant case theassessee is in possession of the invoices, however, he.has failed to produce the same. It is also urged that thefinding in this regard is in conformity with Section 37 ofthe Act. 6.|We have considered the submissions made bylearned counsel for the parties and nave perused therecord. Tne assessee filed tne return for the Assessment.Year JOO8-09 on 28.09.7008 and the assessment was!completed on 07.12.2010. A notice was issued to theassessee on 71.03.2013 under Section 148 of the Act!and thereafter, reasons for re-opening the assessmentWeTfeSUpDIIed|tOtneaSS@SSC2EON)07.05.2013.Tnerefore,there-openingofassessment.ISIn accordance with law and the same has been rightly held.to be so by the Assessing Officer, Commissioner ofIncome Tax (Appeals) and the tribunal. Therefore,substantial question of law No.1 is answered against theassessee and in favour of the revenue. JAdmittedly, the substantial question of lawNos.2 and 3 have been answered in favour of theassessee by a division bench of this court in)'CIT VS.NCR|CORPORATION(P)|LTD..,(2020)1/7TAXMANN.COM 252 (KAR)and therefore, for thereasons assigned in the aforesaid judgment, the ATMsare neld entitied for depreciation at the rate of 60% ascomputers. The substantial question of law Nos.2 and 3.are answered accordingly. 8.)Now we may advert to the substantialquestion of law No.4. The burden undoubtedly is on theassessee who Nas Claimed depreciation Dy producing theevidence on record viz., the invoices. In the instant case, the assessee had produced 66% of the invoices andtherefore, the depreciation to the extent of 66% hasbeen allowed by the Assessing Officer, Commissioner ofIncome Tax (Appeals) as well as by the tribunal. Theassessee has not admittedly produced the invoices inrespect of 34% of the claim of depreciation. It is not the|case of the assessee that he is not in possession of theinvoices. It is pertinent to note that in.JAY ENGINEERINGWORKSsupra, the pooks of accounts of the assesseewere burnt in fire and therefore, the statutory auditreport was accepted as secondary evidence. The lawdoes not provide for statutory presumption in favour of.the statutory audit report. The finding of fact on theaforesaid issue Nas been recorded by all the authoritiesviz., the Assessing Officer, Commissioner of Income Tax(Appeals) and the tribunal, which is in conformity withSection 37 of the Act. The aforesaid finding cannot be.termed as perverse. For the aforementioned reasons, the substantial question of law No.4 is answered against.the assessee and In favour of the revenue. In the result, the order dated 24.03.2017 passed by|the tribunal insofar as it pertains to Assessment Year2008-09 is quashed insofar as it pertains to findings on.substantial question of law Nos.2 and 3 and it is heldthat ATMs are held entitled for depreciation at the rate of60% as computers. In the result, appeal is disposed of. Sd/-JUDGE. Sd/-—JUDGE.