2012 (9) TMI 281 - ITAT DELHI

Sales-tax subsidy – capital or revenue - object of the incentive is to fund a part of the cost of the setting up of the factory in the notified backward area – Held that:- Sales-tax incentive allowed to it during the previous year in terms of the relevant Govt. order constituted capital receipt and was not to be taken into account in computation of total income - since object of subsidy under scheme impugned therein was to set up a new unit in a backward area to generate employment, said subsidy was clearly on capital account - Revenue failed to distinguish and make out a markable difference in basic purpose of subsidy received by assessee and subsidy received in case of Reliance Industries – subsidy received by assessee in instant case was to be held as capital receipt

Depreciation on computer peripherals - disallowance of depreciation on account of computer accessories - Held that:- Peripherals such as printers, scanners, NT server etc. form integral part of the computer and, therefore, are eligible for deduction of depreciation @ 60% as applicable to the computers

Ad hoc disallowance for interest and administrative expenses attributable to the earning of dividend income – Held that:- Tax-free investments had been made out of the assessee's own funds, this did not mean that there was no expenditure incurred to earn tax-free income. Even though Rule 8D did not apply to AY 02-03, the AO had to consider whether disallowance could be made u/s 14A (1) - principle of consistency would not apply as s. 14A had introduced a material change in the law - matter remanded to the file of Assessing Officer

Deduction of additional depreciation- Assessee purchased new assets during preceding previous year which were put to use for less than 180 days - Since assets were put to use for less than 180 days, in preceding assessment year assessee claimed only 50 per cent of 15 per cent - Balance additional depreciation was claimed by assessee in instant assessment year – Held that:- Assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50% when the new plant and machinery were acquired and use for less than 180 days - restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year - The extra depreciation allowable u/s 32(1)(iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year - in favour of assessee

Foreign exchange fluctuation loss - Held that:- Loss suffered by assessee on account of fluctuation in rate of foreign exchange as on date of balance sheet is an item of expenditure under section 37(1) – in favour of assessee