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2016 (3) TMI 872 - AT - Income TaxDisallowance of excess depreciation claimed on Iris Cameras - Held that:- The Iris recognition system, the software to be used for the purpose and the grabber card are supplied by the Government for the use of Iris recognition system to be used only for the purpose of issue of various types of ration cards. The assessee categorically stated that this camera cannot be used in normal course of business and it can be used only for the specified purpose of capturing Iris. The assessee taken this contract for the first time and after completion of the project he did not enter into any other contract of similar type. The cameras become obsolete once the work is over. We find force in the argument of the assessee for the reason that on perusal of details, we find that the assessee has used this cameras supplied by the principals for the specified purpose of execution of its work contract. As per the agreement, the software used for capturing Iris should be returned to the principals. Therefore, we are of the opinion that the Iris camera without the aid of software is obsolete and it cannot be used in the normal course of business. The assessee has rightly claimed 50% depreciation over a period of two years. Hence, we direct the A.O. to allow the depreciation as claimed by the assessee. - Decided in favour of assessee TDS u/s 194J - disallowance of franchisee fees u/s 40(a)(ia) on non TDS - A.O. was of the opinion that the payment of franchisee fees is in the nature of technical fees - CIT(A) held that the assessee was right in not deducting TDS as the payment was not made during the relevant financial year, however, held that the amount is not allowable u/s 37 of the Act, as the subject payment was not pertaining to the financial year under consideration - Held that:- The assessee filed a paper book containing the copy of agreement entered into with the Software echnology Group of India Limited, wherein find that the agreement was entered on 18.4.1999 and ended on 17.4.2005. As per clause 3.9 of the agreement, it was specifically mentioned that the date of termination of the agreement is 17.4.2005. We further noticed that the clause 7 of agreement provides for termination of agreement. As per clause 8 of the agreement, it was specifically mentioned that the date of termination of the agreement is as per clause 3.9 of the agreement i.e. on 17.4.2005. Therefore, we are of the opinion that the CIT(A) was recorded incorrect findings of the facts to state that the agreement was terminated on 17.4.2006 and hence the impugned amount was not eligible for deduction for the year under consideration. the fact clearly shows that the assessee debited the impugned amount during the previous year relevant to assessment year 2006-07. Though the subject payment was made in the financial year 1999-2000, the assessee charged the amount to the P&L account during the financial year 2006-07, since the agreement was terminated and business was closed during the financial year 2005-06 relevant to assessment year 2006-07. Though, the expenditure has been paid in earlier years and considered as prior period expenditure, still it can be claimed as expenditure deductible for the year under consideration as long as it was incurred for business purpose. When the prior period expenditure/liability claimed as business expenditure for the relevant assessment year, the point to be considered is whether the claim was ascertained and crystallized during the year under consideration or not. In the present case on hand, the assessee proved that the subject agreement was terminated during the financial year 2005-06 and he has not claimed the expenditure in earlier years. Therefore, we are of the opinion that the CIT(A) was not correct in disallowed the franchisee fees u/s 37 of the Act. - Decided in favour of assessee
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