M/s. Zylog Systems Limited, CHENNAI V. ACIT, CHENNAI

ITA 27/CHNY/2011

• Counselvise Citation: 2721714 RSA 2011
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NOS. 26 & 27/MDS/2011 ASSESSMENT YEARS : 2006-07 & 2007-08 M/S. ZYLOG SYSTEMS LTD., NO. 155, THIRUVALLUVAR SALAI, KUMARAN NAGAR, CHENNAI-600 119. V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-III(3), CHERNNAI. (PAN: AAACZ1086G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.D. GOPAL RESPONDENT BY : SHRI SHAJI P. JACOB O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : ITA NO. 26/MDS/2011 IS AN APPEAL FILED BY THE ASSE SSEE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-III, CHENNAI IN ITA NO. 378/08-09/A.III DATED 29- 10-2010 FOR THE ASSESSMENT YEAR 2006-07. ITA NO. 2 7/MDS/2011 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEAR NED CIT(APPEALS)-III, CHENNAI IN ITA NO. 239/09-10/A.III DATED 29-10-2010 FOR THE ASSESSMENT YEAR 2007-08. I.T.A. NOS.26 & 27/MDS/2011 2 2. SHRI V.D. GOPAL, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHAL F OF THE REVENUE. 3. AS BOTH THE APPEALS RELATE TO THE SAME ASSESSEE AND INVOLVE IDENTICAL ISSUES, THEY ARE BEING DISPOSED OF BY THIS COMMON O RDER. 4. ITA NO. 26/MDS/2011: IN REGARD TO GROUNDS NO.2 AND 3 IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN EXCLUDING AN AMOUNT OF ` 9.49 CRORES AS NOT FORMING PART OF THE EXPORT TURNOVER. IT WAS THE SUBMISSION THAT THE SAID AMOU NT WAS AN EXPENDITURE INCURRED ON FOREIGN EXCHANGE WHICH WAS INCURRED FOR EARNING THE PROFITS AND GAINS ON THE ON SITE DEVELOPMENT OF COMPUTER SOFTWA RE INCLUDING THE SERVICES OF SOFTWARE OUTSIDE INDIA AT THE CLIENTS PLACE. IT W AS THE SUBMISSION THAT AS THE EXPENDITURE WAS INCURRED FOR THE EARNING OF THE EXP ORT INCOME THE SAME WAS LIABLE TO BE INCLUDED IN THE EXPORT TURNOVER. IT WA S THE SUBMISSION THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDI NATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 1138/MDS/2007 DA TED 2-11-2010. IT WAS THE FURTHER SUBMISSION THAT THE ISSUE WAS ALSO COVERED BY THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE, I.E. ZYLOG SYSTEMS LTD. V. ITO REPORTED IN 128 ITD 105 (SB). I.T.A. NOS.26 & 27/MDS/2011 3 5. IN REPLY, THE LEARNED DR VEHEMENTLY SUPPORTED TH E ORDERS OF THE LEARNED CIT(A) AND THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL AS ALSO THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ZYLOG SYSTEMS LTD., REFERRED TO SUPRA, RESPECTFULLY FOLLOWING THE SAID DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL, THE ASSESSING OFFICER IS DIRECTED TO INCL UDE THE SAID AMOUNT IN THE EXPORT TURNOVER WHILE COMPUTING THE DEDUCTION U/S. 10B. 7. IN REGARD TO GROUNDS NO. 4 & 5 IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE SAID GROUNDS WERE AGAINST T HE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF ACCELERATE D DEPRECIATION IN THE SUM OF ` 1.35 CRORES. IT WAS THE SUBMISSION THAT THE SAID A CCELERATED DEPRECIATION WAS THE DEPRECIATION AS CALCULATED AND PROVIDED AS PER SCHEDULE XIV OF THE COMPANIES ACT, 1956. IT WAS THE SUBMISSION THAT TH E ASSESSING OFFICER HAD HELD THAT THE DEPRECIATION WAS LIABLE TO BE ALLOWED ONLY AS PER THE INCOME TAX ACT, 1961. 8. IN REPLY THE LEARNED DR SUBMITTED THAT IN COMPUT ING THE TOTAL INCOME OF AN ASSESSEE DEPRECIATION IS ALLOWABLE ONLY AS PER T HE INCOME TAX ACT AND NOT AS PER THE COMPANIES ACT. HE VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A). I.T.A. NOS.26 & 27/MDS/2011 4 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ACCELERATED DEPRECIATI ON HAS BEEN CLAIMED BY THE ASSESSEE BY APPLYING THE METHOD AND RATE AND MANNER SPECIFIED IN SCHEDULE XIV OF THE COMPANIES ACT, 1956. WHEN COMPUTING THE TOT AL INCOME OF AN ASSESSEE UNDER THE INCOME TAX ACT, THE SAME IS DONE AS PER T HE PROVISIONS OF SEC. 5 AND WHEN THE INCOME IS UNDER THE HEAD BUSINESS INCOME THE PROVISIONS OF SECTIONS 28 TO 44 ARE TO APPLY. SEC. 32 RELATES TO DEPRECIA TION. SEC. 32 SPECIFICALLY PROVIDES FOR GRANTING DEPRECIATION AS PER THE SCHED ULE TO THE INCOME TAX ACT. SEC. 32 DOES NOT RECOGNIZE THE CLAIM OF DEPRECIATIO N AS PER SCHEDULE XIV TO THE COMPANIES ACT, 1956 AS AN ALLOWABLE DEPRECIATION IN COMPUTING THE TOTAL INCOME. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE O RDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) ON THIS ISSUE ARE LIABLE TO BE CONFIRMED AND WE DO SO. IN THE CIRCUMSTANCES, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 10. ITA NO. 27/MDS/2011: IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN EXCLUDING AN AMOUNT OF ` 9.74 CRORES AS NOT FORMING PART OF EXPORT TURNOVER . THIS ISSUE IS SQUARELY COVERED BY OUR DECISION IN T HE CASE OF THE ASSESSEE IN ITA NO. 26/MDS/2011, SUPRA, IN REGARD TO THE GROUNDS 2 AND 3. IN THE CIRCUMSTANCES, OUR FINDING IN REGARD TO THE GROUNDS NO. 2 AND 3 IN ITA NO. 26/MDS/2011 APPLY TO THESE GROUNDS ALSO. CONSEQUEN TLY, THE APPEAL OF THE ASSESSEE IN ITA NO. 27/MDS/2011 IS ALLOWED. I.T.A. NOS.26 & 27/MDS/2011 5 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO. 26/MDS/2011 IS PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE IN ITA NO. 2 7/MDS/2011 IS ALLOWED. 12. THE ORDER WAS PRONOUNCED IN THE COURT ON 25/03/ 2011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 25 TH MARCH, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE