TMI Blog2011 (7) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses claimed in the profit and loss account is a debatable matter and, therefore, it does not come within the purview of sec. 154 - Decided in favour of assessee. Excess depreciation claimed on computers and computer related items - Held that:- As decided in the case of Containers Corp. Ltd. (2009 (2) TMI 499 - ITAT DELHI) printers, scanners and other peripherals are part and parcel of computer and are entitled for depreciation @ 60% - The Hon'ble Delhi High Court has also upheld the order of the Tribunal allowing depreciation @ 60% on computer accessories and peripherals in the case of CIT vs. BSES Rajdhani Powers Ltd [2010 (8) TMI 58 - DELHI HIGH COURT]- The question as to whether the computer accessories and peripherals are allowable for depreciation at higher rate of 60% is a subject matter of debate and deliberation and cannot be said to be an error apparent on record so as to rectify the matter u/s 154 of the Act - Decided in favour of assesseee. - ITA Nos. 1154 and 1605/Del/2011 - - - Dated:- 22-7-2011 - C.L. Sethi, K.G. Bansal, JJ. Harbhajan Singh, JGM (Taxation). for the Respondent ORDER C.L. Sethi: These two appeals, filed by the revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of appellate proceedings, the assessee submitted before the learned CIT(A) that there was no mistake apparent from the record either in the original assessment order dated 6.03.2006 made u/s 143(3) of the Act or the order passed u/s 250 dated 2.02.2007 and therefore, the AO was not justified in passing an order u/s 154 of the Act for the purpose of disallowing prior period expenditure and depreciation on computer items. The assessee relied upon the following decisions to contend that the matter of disallowance of prior period expenses and disallowance of depreciation on computer items cannot be a subject matter of rectification u/s 154 of the Act:- (i) T.S. Balaram vs. ITO, 82 ITR 50(SC). (ii) Hotz Hotels Pvt. Ltd. vs. CIT (2001) 248 ITR 647 (Del). (iii) CIT vs. TTK Prestige Ltd., 322 ITR 390 (Kar.) (iv) CIT vs. Jindal Stainless Ltd. (ITA No.1500/2010) 10. One more contention was also raised by the assessee before the learned CIT(A) that the order of rectification u/s 154 of the Act by the AO was passed on 31.03.2010, which is after a gap of more than 2 years from the date of notice of rectification issued by the AO on 10.02.2008 and therefore, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant that there was no mistake in the order rectified by the Assessing Officer. The appellant is before me on the issue of inapplicability of provisions of section 154 to the subject matter of the rectification done by the Assessing Officer and not on the merits of liability of prior period expenses/depreciation on computer @ 60%. Therefore it has to be seen whether the issue is incontrovertible and not capable of two views. I am abundantly clear that the following two issues do not come within the ambit of section 154. (i) whether expenses that crystallized during a particular year had to be allowed in the same year if termed as prior period expenses or not; (ii) whether depreciation on computer peripherals has to be given @ 60% or 25% which of course depends upon the understanding of the definition of computer/computer peripherals. (8) Since the above two issues have been argued at the level of ITAT as well as High Court and have been duly considered by the Assessing Officer during the course of assessment proceedings, I cannot categorized the same as mistakes apparent from record. Therefore, the issues rectified by the Assessing Officer under section 154 cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been crystallized and ascertained. Therefore, in order to disallow prior period expenses debited in the profit and loss account, the AO has to examine and verify the nature of these expenses and then to ascertain as to when the assessee's liability to pay these expenses has actually been crystallized so as to allow the same as deduction in case where the assessee follows mercantile system of accounting. In other words, the issue regarding allowability or otherwise of prior period expenses can only be decided by making full investigation and examination of the nature of expenses and then it can be decided only after a due process of reasoning given by any authority. In this view of the matter, the allowability of prior period expenses or otherwise, cannot be a subject matter of a mistake apparent from the record, which is rectifiable u/s 154 of the Act. 15. The question is as to whether the assessee is entitled for deduction on account of prior period expenses debited in the Profit and Loss Account or not, is a matter to be decided on the merits after examining and verifying the nature of expenses and after ascertaining when the expenses were actually crystallized or when the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reason at all to interfere with the order of the CIT(A) in holding that the issues rectified by the AO u/s 154 of the Act in the present case, cannot be the subject matter of rectification under sec. 154 of the Act. The learned CIT(A) has, therefore, rightly deleted the additions made by the AO by passing an order under sec. 154 of the Act. Thus, the order of the learned CIT(A) is upheld. 20. Now, we come to the appeal pertaining to the Assessment Year 2004- 05. 21. In this year also after passing the regular assessment order u/s 143(3) of the Act, the AO vide order dated 12.10.2010 u/s 154 of the Act, has disallowed the assessee's claim of prior period expenses amounting to Rs.1,27,85,121/- debited in the profit and loss account and also disallowed depreciation on computer accessories and peripherals claimed @ 60% by the assessee. 22. These two items rectified by the AO u/s 154 of the Act are identical to the items rectified u/s 154 of the Act in the Assessment Year 2003-04. The learned CIT(A) has decided the issue in favour of the assessee by following his order passed in the Assessment Year 2003-04 as it was found by him that facts of the case in this Assessment Ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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