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2016 (5) TMI 1518 - ITAT CHENNAIAllowability of 60% depreciation on V-sat equipment - AO has restricted the claim of depreciation of 60% on V-sat equipments to 25% - HELD THAT:- An identical facts on similar issue, in the case of Anagram Capital Ltd. v. ACIT [2011 (2) TMI 1575 - ITAT AHMEDABAD] since the facts are identical as has been considered in the earlier year in which it was held that the VSAT equipments cannot be categorized as computer software, there is no material on record to dispute the findings of the authorities below. Nothing is brought to our notice on facts to distinguish the facts considered in earlier year as noted above. - Decided against assessee Disallowance of ROC fees paid to Registrar of Companies for increasing the share capital - revenue expenditure or capital expenditure - HELD THAT:- As perused the order of the Hon’ble Supreme Court in the case of Punjab State Industrial Development Corporation Limited v. CIT [1996 (12) TMI 6 - SUPREME COURT] wherein, held that “the fee paid to the Registrar for expansion of the capital base of the company was directly related to capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of capital expenditure since the expenditure was directly related to the expansion of capital base of the company and thus it was not an expense in the nature of revenue” - Decided in favour of revenue. Disallowance of lease rentals - main argument of the AR is that the lease rental was crystallized during the assessment year 2005-06 and 2006-07 and the same was claimed in these years - ssessee is following mercantile system of accounting - HELD THAT:- The expenditure relating one assessment year cannot be claimed in another assessment year since each assessment year is an independent assessable unit. The assessee was following mercantile system of accounting and the expenses not recorded in relevant assessment year, the same cannot be allowed as deduction because remedy does not lie on the next assessment year. Considering the facts and circumstances of the case, we are of the opinion that it would be appropriate to remit the issue back to the Assessing Officer with regard to lease rentals paid to NELCO to allow rental accrued in the relevant assessment year only. AO shall exclude prior period of lease rentals while considering the same. With these observations, we set aside the order of the ld. CIT(A) and remit the matter back to the Assessing Officer to work out the allowable deduction in accordance with law. Thus, the ground raised by the Revenue is allowed for statistical purposes. Lease transactions with HCL Comnet Ltd. - CIT(A) has observed that the advance payments were down payments towards lease rentals for both the assessment years - HELD THAT:- It is a fact that a mere down payment does not make the transaction a sale nor the amount can be treated as refundable deposit without any basis. Therefore, these expenditures should be considered as revenue expenditure. Further, the Assessing Officer has not given any finding to disallow the band width charges for 256 KBPS and lease rental charges paid to various franchisees as well as v-sat shifting charges. Though both the items are not provided in the books of accounts, but the assessee has made the claim in the computation of income statements, which is found to be in order in view of the judgement of CIT v. Pruthvi Brokers and Shareholders P. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] . Therefore, the ld. CIT(A) has rightly held that both the charges would be treated as revenue items and eligible for deduction. Thus, we find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue is dismissed. Allowability of depreciation on office equipments - at 15% or10% - HELD THAT:- CIT(A) was of the opinion that the claim of the assessee seems to be in order. He also observed that as per Appendix-I to Rule 5 of Income Tax Rules, 1962, Block III(i), the depreciation rate is 15% for office equipments. Depreciation rate of 10% is applicable for Furniture and Fittings falling in Block II to the above Appendix-I. Office equipments obviously and apparently falling under Block III are entitled to 15% depreciation rate. Accordingly, he directed the Assessing Officer to allow the depreciation @ 15% on Office Equipments. In view of the above findings of the ld. CIT(A), we find no reason to interfere with the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the Revenue is dismissed. Allowability of depreciation on printers and scanners - assessee has claimed depreciation at 60% on printers and scanners under the head ‘Computers’ - AO has restricted the depreciation to 15% and the excess depreciation was added back to the total income of the assessee - HELD THAT:- We find that the Hon’ble Delhi High Court in the case of BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] has held that computer accessories and peripherals such as printers, scanners and server etc. formed an internal part of the computer system and, in fact, the computer accessories and peripherals cannot be used without the computer. The Hon'ble High Court thus held that they are the part of the computer system and are entitled to depreciation at the higher rate of 60%. In view of the above, we find no infirmity in the order passed by the ld. CIT(A) and thus, the ground raised by the Revenue is dismissed. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- In the argument advanced by the assessee. However, we are of the opinion that the investments would definitely involve certain administrative and establishment cost since the decision to make investments, track investments, sale of such investments and follow-up of the receipt of income, sale proceeds etc have to be undertaken which entails definite costs. It is for this purposes that Rule 8D(2)(iii) provides that one half percent of the average value of the investments will be deemed to be expenditure incurred for the same. When the Act has specified a definite formula for working out the expenditure to be disallowed, the Assessing Officer should have disallowed ½ % of average value of the investments as per Rule 8D(2)(iii) as expenditure incurred for earning of exempt income. Accordingly, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to disallow under Rule 8D(2)(iii) alone. Thus, the ground raised by the assessee is allowed for statistical purposes.
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