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TMI Blog2019 (2) TMI 1511X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout prejudice to the above, the learned CIT(A) has erred in not allowing the assessee the benefit of depreciation on the legal and professional fees, despite holding the said expenditure to be capital in nature." 4. The facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturer and supplier of sheet metal stampings and weldments of specific designs to Maruti Suzuki Ltd. It filed its return of income on 29.11.2011 declaring total income of Rs. 43,18,180/-. During the course of assessment proceedings the assessing officer observed that the assessee had paid legal and professional charges of Rs. 56,43,833/-to M/s. Accenture Services Private Limited for taking advise on cost reduction and increasing the profitability / efficiency of the existing business. The Assessing officer asked the assessee to justify this claim of expenditure. Rejecting the various explanation given by the assessee and observing that the payments are enduring in nature and has to be capitalized, therefore, the Assessing officer relying on various decisions added the entire amount of Rs. 56,43,833/- to the total income of the assessee. 5. In appeal the Ld. CIT(A) u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included 22 plants of Caparo Engineering (including three plants owned by the appellant). 6.1 From a perusal of the above, it is apparent that the consultancy project is in respect of restructuring of the entire business organization to increase its potential for earnings in future and, therefore, it is a project which would lead to an advantage to the Caparo Group of enduring nature. The expenditure is not related to the earning/ income of the year under appeal, even as per the matching principle of income and expenditure. Moreover, as held it is an expenditure is in the nature of capital expenditure. The appellant company is not even a signatory to the above agreement which has been signed by the Caparo Corporation Services, a unit of Caparo Engineering India Ltd. 6.2 In view of reasons given in para 6.1, group no.1 of the appeal and all is sub grounds (1.1, 1.2, 1.3 and 1.4) are dismissed." 6. Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal. 6.1 The Ld. Counsel for the assessee at the outset submitted that the assessee has incurred these charges in interest of its existing business. It is not the case of the revenue that the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 'Caparo Corporate Services' as it is signed by both the parties. It is his observation that the contracting party is not 'Caparo Maruti Ltd' but 'Caparo Corporate Services' which includes other business concerns of Caparo Group. Further the exercise for transformations of business is such that it would give an enduring benefit to the beneficiary and therefore, the expenditure is capital in nature. We find the Ld. CIT(A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Ld. Counsel for the assessee that if expenditure incurred for preparation of feasibility report of a new project, is in respect of same business which is already carried on by assessee, even if it is for expansion of business namely to start a new unit which is same as earlier business and there is unity of control and a common fund, then such expenditure is to be treated as revenue expenditure. We find merit in the above arguments of the ld. Counsel for the assessee. In the instant case the payment has not been made for creating a new line of business or distinct business and the payment has been made for expansion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew unit which is same as earlier business and there is unity of control and a common fund, then such an expense is to be treated as business expendi- ture. In such a case whether new business/asset comes into existence or not would become a relevant factor. If there is no creation of new asset, then the expenditure incurred would be of revenue nature. However, if the new asset comes into existence which is of enduring benefit, then such expenditure would be of capital nature. 11. When we keep in mind the aforesaid fine distinction, the conclusion on the facts of this case becomes obvious. The expenditure was incurred in respect of same business which is already carried on by the assessee. Two projects which were undertaken were for the expansion of same business, namely, one for taking over Savitri Cinema for conversion into multiplex and operation and management thereof and other for conversion of Priya Cinema into four-screen multiplex. Payments were made to the consultants for preparing feasibility reports in respect of both the projects. However, ultimately projects were not found to be financially and technically viable and were shelved. Thus, we find that no new asset came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative expenses of a project, despite the fact that the said expenditure incurred by the assessee is of revenue nature. 12. The Ld. Counsel for the assesee at the time hearing fairly conceded that this ground is decided against the asessee. In absence any objection from side of Ld. DR the above ground raised by the assessee is dismissed. 13. The Ground of appeal No.5 by the assessee reads as under :- 5. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the addition of Rs. 10,25,304/- made by the AO on account of disallowance of government fees paid towards sub-leasing. (ii) That the learned CIT(A) has erred in sustaining the above addition by holding that he said expenditure is capital in nature as the land allotted by HSIDC to the assessee was for a particular purpose, without considering the fact that the said expenditure incurred by the assesee is of revenue in nature. 14. The facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the miscellaneous expenditure includes an amount of Rs. 10,25,304/- paid to HSIDC as subleasing fees for sub letting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned expenses incurred by the assessee pertains to the earning of the income that has been offered to tax on account of leasing charges and therefore allowable under section 57 of the Act. He submitted that even the Ld. CIT(A) in his order at Para 11 page 10 has held that income from said property should be taxed as "income from other sources" and the lease rent paid should be allowed as deduction against the same. In view of the above facts, addition made by the Ld. AO and sustained by the Ld. CIT(A) is liable to be deleted as the said expenses incurred by the assessee are for the purpose of earning leasing income and accordingly allowable as deduction u/s 57 of the Act. 20. The Ld. DR on the other hand relied on the order of the CIT(A). 21. We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find the Assessing Officer disallowed the amount of Rs. 10,25,304/- being subleasing charges paid to HSIDC on the ground that the same is penal in nature. We find although the Ld. CIT(A) held that the amount so paid towards subleasing fees is not penal in nature, however, he held that the same is capital in nature. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60/-. The Assessing Officer observed that depreciation mentioned in Appendix-I Rule 5 of IT Rules applies only to computer and computers software, which alone are entitled for depreciation @ 60% and same rate cannot be applied for UPS. 16. The Id. CIT(A) has deleted the addition, following the judgment of Hon'ble Delhi High Court in the case of CIT vs. BSES Rajdhani Powers Ltd. in ITA 1266/2010, wherein computer accessories/peripherals like printers, scanners, server, UPS, etc., have been held to be integral part of computer system, and therefore, entitled to depreciation @60%. Accordingly, the Id. CIT (A) following the judgment of Hon'ble Delhi High Court and other decisions of the Tribunal allowed the assessee's claim @60%. 17. We do not find any infirmity in the order of the Id. CIT(A) as the issue, whether computer accessories/ peripherals like printers, scanners, server, UPS etc, the rate of depreciation allowable is @ 60% as held by the Hon'ble Jurisdictional High Court and catena of other judgments. Thus, ground no.3 raised by the Revenue is dismissed. 24. Respectfully following the decision of the Tribunal in the case of sister concern of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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