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2015 (3) TMI 932 - AT - Income TaxDisallowance of depreciation on de-capitalised assets as directed by DRP - Held that:- The assessee is engaged in the business of trading of Xerographic Equipments, Printers, Scanners, Faxes, Multi Functional Devices and consumables parts thereof. The assessee leased out the equipments to the customers on an operating lease basis and these equipments are capitalised and depreciation is claimed for tax purposes in accordance with the provisions of the Act. These operating leased assets were returned to the assessee either on the termination of the lease or otherwise after a period of six months, then the assessee is following a practice to convert these assets into stock-in-trade at a nominal value of ₹ 1/- as these used assets are not having any readymade market for further leasing. This nominal value is reduced from the block of assets. In some of the cases, these assets are again leased out then they are recapitalized in the block of assets at the nominal value at which these were decapitalised. However, certain used assets remained in stock-in-trade and whenever these are sold, the profit is offered for taxation. This method of accounting is being followed consistently by the assessee. When the assets are recapitalized at the nominal value at which it is decapitalised then there is no effect on the taxability of the assessee. Similarly, whenever these used assets are converted into stock-in-trade and sold subsequently and the surplus on the sale is offered for taxation then there is no harm to the revenue. Considering all these facts, we allow this ground of assessee’s appeal. - Decided in favour of assessee. Disallowance of depreciation on the fixed assets which has been written off in the books of account and where the assets ceased to exist - Held that:- This issue is covered in favour of the assessee by the decision of Hon’ble Delhi High Court in assessee’s own case in assessment year 2008-09 to held that tax authorities were not justified in working out the depreciation on block of assets by reducing the value of assets which have either to be discarded or destroyed or sold or written off. - Decided in favour of assessee. Addition on changing the accounting policy - recognising the sale on completion of installation and acceptance by the customers as against on delivery followed in earlier years - Held that:- Assessee has adopted this accounting policy as per Standard 9 of Institute of Chartered Accountants of India. It has been constantly followed thereafter. Revenue is recognised on installation and acceptance of goods at the premises of the customers. In view of this factual matrix, we hold that this issue is covered in favour of the assessee by the decision of Hon’ble Supreme Court in CIT vs. M/s. Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] wherein held that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party from whom the income becomes due to pay that amount. Hon’ble Supreme Court has also held that income accrued when it becomes due but it must also be accompanied by a corresponding liability of other party to pay the amount, only then can it be said that for the purpose of liability that the income is not hypothetical and really accrued to the assessee. - Decided in favour of assessee.
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