DCIT Circle 6(1), C.R.Building, I.P. New Delhi Vs. Medsave Healthcare (TPA) Ltd. F- 701A, Lado Sarai, Room No. 413, Estate Mehrauli New Delhi
June, 02nd 2015
THE INCOME TAX APPELLATE TRIBUNAL IN
(DELHI BENCH "E" NEW DELHI)
BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER
SMT DIVA SINGH, JUDICIAL MEMBER
ITA NO. 5897 /DEL/2013
(Assessment Year: 2010-11)
DCIT Vs. Medsave Healthcare (TPA) Ltd.
Circle 6(1), Room No. 413, F- 701A, Lado Sarai,
C.R.Building, I.P.Estate Mehrauli I
New Delhi New Delhi
PAN : AABCS8148M
Pin : 110030
Appellant by : Sh. P.Dam Kanunjna, Sr. Dr
Respondent by : Sh. Sanjay Joshi, CA
Date of hearing : 27/05/2015
Date of pronouncement : 29 /05/2015
Per N.K.Saini, A. M. :
This appeal by the department is directed against the order
dated 22/08/2013 of CIT(A)- IX, New Delhi.
2 ITA No. 5897/ Del/2013
2. First issue in this appeal vide ground no. 1 relates to the deletion
of disallowance of Rs. 2,16,000/- made by the AO u/s 40(a) (ia) of the
Act . The facts related to this issue in brief are that the AO during the
course of assessment proceedings noticed that the assessee had
claimed Generator hire charges of Rs. 1,80,000/- and vehicle hire
charges of Rs. 90,000/- in the P & L Account but had not deducted
TDS on the said payments as per the provisions of Section 194 (I) of
the Income Tax Act, 1961 (hereinafter referred to as the Act). He
therefore made the disallowance of Rs. 2,16,000/- by invoking the
provisions of Section 40(a) (ia) of the Act.
3. Being aggrieved the assessee carried the matter to the Ld.
CIT(A) and submitted as under :-
"The provisions of Section 40 (a) (ia) of the Act has two
limbs, one is where, inter alia, assessee has to deduct tax
and second where after deducting tax, inter alia, the
assessee has to pay into Government Account. It is not the
case of the AO that tax has not been deposited after
deduction has been made and therefore the second limb of
the Section is not applicable in the present case. There is
nothing in the said section to treat, inter alia, the assessee
as defaulter where there is shortfall in deduction. Section
40(a) (ia) of the Act refers only to the duty to deduct tax
and pay to Government Account. If there is any shortfall
the assessee can be declared to be an assessee in default
u/s 201 of the Act and no disallowance can be made by
invoking the provisions of Section 40(a) (ia) of the Act. This
3 ITA No. 5897/ Del/2013
is covered by the decision of the Calcutta High Court in the
CIT, Kolkata XI, vs. M/s S.K. Tekriwal [ ITAT No. 183 of
2012 : GA No. 2069 of 2012] and by the decision of ITAT,
Delhi-Bench H in the case of UE Trade Corporation (India)
Ltd. vs. DCIT, Circle 18(1) in ITA No. 2303/Del/2011.
In case of the appellant for the A.Y. 2009-10, on similar
facts and grounds additions have been deleted by the Ld.
(CIT(A) IX in Appeal No. 44/11-12 Order dated
4. The Ld. C.I.T. (A) after considering the submissions of the
assessee deleted the addition by observing in para 4.2 of the
impugned order as under :-
"On the amount paid as the generator hire charges and
vehicle hire charges, the appellant made TDS at the rate of
2% + Education cess instead of 10% + Education cess.
According to AO, the deduction should have been at the rate
of 10% and the short deduction of TDS attracts the provision
of Section 40(a) (ia) and hence the expense is not allowable.
Against the same ground of appeal by the appellant in the
earlier year (2009-10) relying on the decision laid down in the
case as cited by appellant, my Ld. predecessor has decided
that "if there is any shortfall the assessee can be declared to
be an assessee in default u/s 201 of the Act and no
disallowance can be made by invoking the provisions of
Section 40(a) (ia) of the Act." I agree with the decision of my
Ld. predecessor and hence the addition of Rs. 2,16,000/- is
deleted. This ground of appeal is allowed."
5. Now, the department is in appeal, the Ld. DR supported the
order of the AO and reiterated the observations made in the
assessment order dated 14.12.2012. In his rival submissions, Ld.
4 ITA No. 5897/ Del/2013
Counsel for the assessee reiterated the submissions made before the
authorities below and further submitted that the issue under
consideration is squarely covered in favour of the assessee vide
order dated 9th January, 2015 of the ITAT, Delhi Bench B, New Delhi
in ITA No. 751/Del./2013for the assessment year 2009-10 in the case
of ADIT, International Taxation vs. Express Drilling Systems LLC.
6. We have considered the submissions both the parties and
carefully gone through the material available on the record. In the
present case, it is an admitted fact that the Ld. CIT(A) deleted this
addition by following the judgment of the Hon'ble Kolkata High Court
in the case of M/s. S.K.Tekriwal in ITA No. 183 of 2012 and also on
this basis that his predecessors has deleted the addition in the
preceding year vide order dated 08.03.2013. The Ld. Counsel for the
assessee stated at the bar that the said order dated 08.03.2013 was
not challenged by the department. Therefore, on the basis of principle
of consistency the issue may be decided in favour of the assessee.
The said contention of the assessee was not controverted by the ld.
D.R. It is also noticed that the identical issue has been decided in
favour of the assessee vide order dated 9th January, 2015 in the case
of ADIT International Taxation vs. Express Drilling Systems LLC
5 ITA No. 5897/ Del/2013
(Supra) where in relevant findings has been given in para 6 and 6.1 is
reads as under :-
"6. We find that deletion of disallowance is challenged
before us on the ground that TDS is not made at the correct
rate as per the S. 194J. This issue is no more res integra.
This Bench of the Tribunal in its order in ITA no.
2429/Del/2011 for AY 2008-09 in the case of M/s Solutions
Inforsystems Pvt. Ltd. vide order dt. 12.12.2013, at para 9
has held as "9. In ground no. 2 the issue is whether deduction
u/s 40 (a) (ia) can be made when tax has been deducted at
source u/s 194C instead of 194J. This Bench of the Tribunal
in the case of Hero MotorCorp followed the decision of
Hon'ble Calcutta High Court and eld as follows.
The Hon'ble Calcutta High Court in the case of CIT vs.
S.K.Tekriwal (ITA no. 183 of 2012 has held as follows :
"We are of the view that the provisions of section 40(a) (ia) of
the Act has two limbs one is where, inter alia, assessee has
to deduct tax and the second where after deducting tax, inter
alia, the assessee has to pay into Government Account.
There is nothing in the said section to treat, inter alia, the
assessee as defaulter where there is a short fall in deduction.
With regard to the short fall, it cannot be assumed that there
is a default as the deduction is not as required by or under
the Act, but the facts is that this expression, `on which tax is
deductible at source under Chapter XVII-B and such tax has
not been deducted or, after deduction has not been paid on
or before the due date specified in sub section (a) of
section139. This section 40(a) (ia) of the Act refers only to the
duty to deduct tax and pay to government account. If there is
any shortfall due to any difference of opinion as to the
taxability of any item or the nature of payments falling under
various TDS provisions, the assessee can be declared to be
an assessee in default u/s 201 of the Act and no
disallowance can be made by invoking the provisions of
section 40(a) (ia) of the Act.
Accordingly, we confirm the order of CIT(A) allowing the
claim of assessee and this issue of revenue's appeal is
6 ITA No. 5897/ Del/2013
We find no substantial question of law is involved in this case
and therefore, we refuse to admit the appeal. Accordingly, the
appeal is dismissed."
The assessee further relied on the following decisions:
DCIT vs. Chandabhoy & Jossobhoy (ITA no. 20/Mum/2010
UE Trade Corporation (India) Ltd. v. DCIT 28 Taxmann.com
77 (Del.) and other cases.
As this is not a case of non-deduction of tax but a case where
tax has been deducted at a lower rate that too under the
bona fide belief that deduction was properly made, we accept
the contention of the assessee. Respectfully following the
judgment of the Hon'ble Calcutta High Court in the case of
S.K. Tekrisal (supra) this ground is allowed deleting the
disallowance made u/s 40(a) (ia).
9.1. Respectfully following we allow ground no. 2."
6.1. Respectfully following the same we uphold the order of
the First appellate Authority and dismiss this ground of the
7. Since the facts of the present case are similar to the facts
involved in the aforesaid referred to case of M/s Express Drilling
Systems LLC, therefore, by following the said order dated 9th
January, 2015. We do not see any infirmity in the order of the Ld.
CIT(A) on this issue.
8. The next issue vide ground no. 2 relates to the deletion of
disallowance of Rs. 15,83,875/- made by the AO on account of
9. The facts related to this issue in brief are that the AO during the
course of assessment proceedings noticed that the assessee
7 ITA No. 5897/ Del/2013
purchased Printers , scanners & UPS and had claimed depreciation
@ 60% as against 15% allowable. The AO disallowed a sum of Rs.
15,83,875/- and added the same in the income of the assessee.
10. Being aggrieved the assessee carried the matter to the Ld.
CIT(A) and submitted as under :-
"a. A computer system per se consists of multiple parts
and devices such, desktop, CPU, UPS, storage device,
printers, scanners, keyboards, printers, visual display units,
disk drives, magnetic tape drives etc. A computer as an
electronic data processing device is capable of receiving
input, storing sets of instructions for solving problems and
generating output with high speed and accuracy, Printers,
scanners, NT Server, etc., form an integral part of the
computer and the same, therefore, should be placed under
the computer basket. Also it is pertinent to note that UPS is
an integral part of desktops. UPS by the uninterrupted power
supply prevents loss of data due to power failure as well as
unables the system to function at high speed and accuracy.
Had it not been for computers, UPS would have never been
purchased. Their use is confined to a computer system. Such
installation therefore remains a part of computer only.
Further, UPS are connected to LAN, PCS, Servers etc. hence
they form an integral part of the computer system.
Considering that they are connected to the computer system
and are not used for any other purpose and the further fact
that the computers could not have functioned properly without
support from UPS, they are considered as integral part of
computer. As in a laptop a battery form its integral part, the
same is the position with UPS. The difference being that one
is internally fitted whereas the other is an external device. A
UPS serves as a support function to the computer for its
efficient working and cannot be construed to have its
individual identity other than that of computers. Thus
computer peripherals printers, scanners, NT server, UPS etc.
only serving the purpose of computers can only be
8 ITA No. 5897/ Del/2013
considered to be part of computers and no other item of
b. The Kolkata Bench in Income Tax Officer vs. Samiran
Majumdar (2006) 280 ITR 74 in dealing with the definition of
computer also relying on the decision of the Apex Court in
Karnataka Power Corporation (supra) held that printer and
scanner could not be used without the computer so that it
held that the two would form an integral part of the computer
system. In the like manner an uninterrupted Power Systems
are also to be used only with a computer hence they are to
be treated as computer for the purpose of allowing higher
rate of depreciation @ 60% only. This decision has been
followed by the Delhi Bench in Container Corporation of India
Ltd. vs. Asstt. CIT in ITA no.s 2851 & 3680/Del/2007.
c. The Delhi High Court in CIT vs. Orient Ceramics &
Industries Ltd. (2011) 56DTR397 held that UPS would form
part of computer peripherals and accessories and accordingly
will depreciate at 60%rate. The previous decision in CIT vs.
BSES Yamuna Power Ltd. in ITA no. 1267 dated 31.08.2010
did lend favour here where there was reference to use of the
terms computer peripherals and accessories viz. printers,
scanners, server etc.
The Court went by the reasoning that computer accessories
and peripherals cannot be used without the computer hence
these would form part of computer only. Likewise UPS use is
confined to a computer system hence such installation too
therefore remain a part of computer only as held by Delhi
d. The Delhi Bench in ACIT, New Delhi vs. HCL Comnet
Ltd., ITA Nos. 322 and 2583, ITA No. 2239 wherein it has
been observed that this issue has been discussed and
decided in a number of case by the jurisdictional ITAT as well
as Delhi High Court, where it has been held that the
computer accessories and peripherals, printers and scanner,
UPS etc. are entitled to higher rate depreciation @ 60% on
the ground that such accessories and peripheral form an
essential part of the computer system and the same cannot
be used without the computer. The AO was therefore directed
to allow depreciation on UPS, printer and scanner etc @ 60%
as claimed by the appellant.
9 ITA No. 5897/ Del/2013
e. The impugned order disallowing the claim of the
appellant for depreciation @60% on printers, scanners and
UPS thus is bad in law and needs to be struck down."
11. The Ld. CIT(A) after considering the submissions of the assessee
and by following the ratio laid down by the Hon'ble Jurisdictional High
Court in the aforesaid referred to cases i.e. CIT vs. Ceramics &
Industries Ltd. etc. directed the A.O. to allow the claim of the
assessee. Now the department is in appeal.
12. The Ld. DR supported the order of the AO and the Ld. Counsel
for the assessee, in his rival submissions reiterated the submissions
made before the Ld. CIT(A) and strongly supported the impugned
13. We have considered the submissions of both the parties and
carefully gone through the material available on the record. It is
noticed that the Hon'ble Jurisdictional High Court in the case of CIT vs.
Ceramics & Industries Ltd. (Supra) held that UPS is a part of the
computer peripherals & accessories and accordingly depreciated @
60%. Since the identical issue has been decided by the Hon'ble
Jurisdictional High Court in the aforesaid referred to case by holding
that the assessee is entitled to higher rate of depreciation @ 60% and
the Ld. CIT has followed the ratio laid down by the Hon'ble
10 ITA No. 5897/ Del/2013
Jurisdictional High Court, therefore, we do not see any merit in the
appeal of the department on this issue.
In the result, appeal of the department is dismissed.
(Order pronounced in open court on 29th May, 2015.)
(Diva Singh) (N.K.Saini)
Judicial Member Accountant Member
Dated 29th May, 2015
Copy forwarded to
4. CIT (A)
5. CIT (ITAT), New Delhi.
11 ITA No. 5897/ Del/2013