IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 49 of 2012 For Approval and Signature:
HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= COMMISSIONER OF INCOME TAX-II - Appellant(s) Versus INTERACTIVE FINANCIAL SERVICES LTD - Opponent(s) ========================================================= Appearance :
MRS MAUNA M BHATT for Appellant(s) : 1, None for Opponent(s) : 1, =========================================================
CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI
and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 05/07/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA)
1. The present Tax Appeal filed by the Revenue is directed against the order dated 29.08.2011 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench `D' in Income Tax Appeal No.1174/Ahd/2008.
2. Following question is raised in the appeal proposing it as a substantial question of law:-
“Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance of depreciation of Rs.54,30,000/- on software purchased from M/s. System Dynamic (Software) Pvt. Ltd.?”
3. We have heard learned advocate Ms. Mauna Bhatt appearing on behalf of the appellant. We have gone through the material on record and the impugned order.
4. The issue relates to disallowance of depreciation of Rs.54,30,000/- claimed by the assessee in the return of income filed for the assessment year 2004-05 in respect of the software purchased from one M/s.System Dynamics Private Limited. The case was selected for scrutiny assessment and the Assessing Officer doubted the genuineness of the transaction as well as the actual cost of the software, as he noticed that the address of the assessee and the above named company was the same and further that the assessee had never done any business of computers with that company. The Assessing Officer disallowed the depreciation holding that the transaction was sham.
5. Upon the appeal preferred by the assessee before the CIT(A), the Appellate Commissioner held in favour of the assessee by observing, “... the A.O. has viewed the transactions in isolation without considering the transactions of last four years between SDSPL and Ashok Vithlani. Considering the fact that the appellant has sold software in the subsequent year for Rs.6.47 crores after making further development and the appellant has realized more income from operations in the year under consideration being of Rs.51.81 lakhs as compared to income of Rs.31.63 lakhs and the purchase of software has been reflected in the schedule-E to the Balance sheet and the accounts are audited and there is no intention of tax evasion as there is no tax liability for this year in the case of the appellant and also there is no tax liability in the subsequent year, I am of the view that the genuineness of the purchase of software can not be doubted and therefore, the disallowance of depreciation is held to be not justified. Accordingly the A.O. Is directed to allow depreciation on the software as claimed by the appellant. This ground is thus allowed.”
6. The Tribunal confirmed the decision of the CIT(A) and held as under:
“... Since the assessee sold the software in the subsequent year of Rs.6.47 crores after making further development and there was no intention of tax evasion, the ld. CIT(A) concluded that the genuineness of the purchase of software could not be doubted and therefore, the disallowance of depreciation was not justified. The ld. DR did not place any material before us so as to enable us to take a different view in the matter nor controverted the aforesaid findings of facts recorded by the ld. CIT(A).”
7. The Tribunal thus confirmed the findings and the decision of the Commissioner. The transaction of purchase of software has been found to be genuine one and not a circular transaction as viewed by the Assessing Officer. The finding is a finding of fact and is arrived at by considering the factum of transactions of the assessee during the last four years. Thus, it is seen that the decision is based on appreciation of evidence. As the findings are properly arrived at and no perversity is demonstrated therein, no interference is called for in the impugned order. No substantial question of law arises for consideration.
8. Accordingly, the appeal is dismissed.
(V.M. SAHAI, J.) (N.V. ANJARIA, J.) (SN DEVU PPS)