TMI Blog2021 (8) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... coordinate Bench of the Tribunal in assessee s own case for AYs 2006-07 to 2011-12 and decision rendered by Hon ble Delhi High Court in assessee s own case for AYs 2009-10 2010-11, we are of the considered view that ld. CIT (A) has rightly deleted the addition, hence finding no infirmity or illegality in the impugned findings. Depreciation @ 15% on the principal portion of the lease rental - HELD THAT:- In the registration certificate, assessee company is referred as the lessee and Orix Auto is referred as the lessor. Merely mentioning the name of the assessee company as the lessee does not construe ownership in favour of the assessee as has been held in case of ICDS Ltd. [ 2013 (1) TMI 344 - SUPREME COURT] . It is a basic principle of law that only lessor is the owner of the leased property in case of finances and depreciation is allowable to the lessor only and not the lessee. Lease agreement entered into between the assessee company and lessor of the vehicles itself provides that ownership of the vehicles will not be transferred to the lessee during the subsistence of the lease as is evident from Lease Agreement.We are of the considered view that ld. CIT (A) has rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource ( TDS ) amounting to ₹ 27,75,487, on the ground that the same pertained to deferred revenue, not offered to tax in entirety by the Appellant in the subject assessment year. 2.1 Without prejudice, that on the facts and circumstances of the case and in law, the CIT(A) erred in disallowing credit of entire amount of TDS amounting to ₹ 27,75,487 relating to deferred revenue and in not allowing credit of TDS on proportionate basis, as specified under Rule 3'7BA(3)(ii) of the Income-tax Rules, 1962. 3. Appellant, M/s. HCL Comnet Systems Services Ltd. Limited (hereinafter referred to as the assessee ) by filing the presents appeal sought to set aside the impugned orders both dated 12.10.2017 passed by the Commissioner of Income-tax (Appeals)-35, New Delhi qua the assessment years 2013-14 2014-15 on the identical grounds except the difference of amount of addition/disallowance inter alia that :- ITA NOS.136/DEL/2018 137/DEL/2018 (AYs 2013-14 2014-15) (ASSESSEE S APPEALS) 1. That on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) [ CIT(A) ] erred in not allowing credit of tax deducted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,12,136/- made by the assessee on the ground that exempt income has been earned but disallowance has not been made correctly in ITA No.135/Del/2018 for AY 2013-14 in case of HCL Comnet Ltd. 6. AO also disallowed credit of tax deducted at source amounting to ₹ 27,75,487/-, ₹ 2,00,000/- ₹ 2,14,814/- on the ground that the same pertained to deferred revenue and was liable to tax in entirety in ITA No.135/Del/2018 for AY 2013-14 in case of HCL Comnet Ltd., in ITA No.136/Del/2018 for AY 2013-14 in ITA No.137/Del/2018 for AY 2014-15 in case of HCL Comnet Systems Services Ltd. respectively. 7. AO also made addition of ₹ 3,14,11,091/- ₹ 3,50,95,924/- by way of disallowance on account of licence fee paid to the Department of Telecommunication (DOT) in ITA Nos.385/Del/2018 100/Del/2018 for AYs 2013-14 2014-15 respectively in case of HCL Comnet Systems Services Ltd.. 8. AO also made disallowance of ₹ 2,20,383/- on account of principal portion of lease obligation in ITA No.100/Del/2018 for AY 2014-15 in case of HCL Comnet Systems Services Ltd.. 9. AO thereby framed the assessment u/s 143(3) of the Act at the total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Amount to be disallowed 38,48,497 13. Undisputedly, the assessee has earned exempt dividend income of ₹ 4,23,49,389/- from investment made in debt oriented mutual fund during the year under assessment and made suo motu disallowance of ₹ 1,12,136/- by allocating proportionate expenses and has given complete computation allocating proportionate expenses in the ratio of exempt income to the taxable income, available at page 34 of the paper book. 14. Ld. AR for the assessee challenging the impugned disallowance contended that AO without recording his satisfaction as to why suo motu disallowance made by the assessee is not justified, mechanically applied Rule 8D of the Rules and section 14(2) of the Act. 15. We have perused the computation made by the assessee for the purpose of disallowance, available at page 34 of the paper book, which is by way of allocating proportionate expenses in the ratio of exempt income to taxable income received from fixed deposits and income from other group companies. However, ld. AO has mechanically invoked the provisions contained under Rule 8D of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 8D 3 @ 0.5% of average value of investment. 8. Hon ble Delhi High Court in the identical situation in the case of HT Media Ltd. vs. Pr. CIT 199 ITR 576 (Del.) held that recording of satisfaction by the AO before invoking provisions contained under section 14A read with Rule 8D is a sine qua non. Operative part of the aforesaid judgment is extracted for ready proposal as under :- 30. Rule 8 D (1) states more or less what Section 14 A (2) of the Act states. It requires the AO to first examine the accounts of the Assessee and then record that he is not satisfied with (a) the correctness of the Assessee's claim of expenditure or (b) the claim made by the assessee that no expenditure has been incurred. Unless this stage is crossed i.e. the stage of the AO recording that he is not satisfied with the clam of the Assessee in the manner indicated i.e. after examining the Assessee's accounts, the question of applying the formula under Rule 8D (2) does not arise. That this is a mandatory pre-requisite for applying Rule 8D (2) is fairly well-settled. 9. Hon ble Supreme Court in case of Maxopp Investment Ltd. vs. CIT 347 ITR 272 also held that satisfactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re determined in its favour. GROUNDS NO.2 2.1 OF ITA NO.135/DEL/2018 For AY 2013-14 (ASSESSEE S APPEAL HCL COMNET LTD.) GROUNDS NO.1 1.1 OF ITA NO.136/DEL/2018 For AY 2013-14 ITA NO.137/DEL/2018 For AY 2014-15 (ASSESSEE S APPEAL HCL COMNET SYSTEMS SERVICES LTD.) 19. Assessee company being engaged in the business of trading of networking equipment, installation and maintenance of such equipments and creation, maintenance operation of networks has deferred some part of its revenue to the subsequent financials years and revenue being deferred in earlier financial years is booked as revenue in the relevant financial year for the purpose of Annual Maintenance Contracts (AMCs) on percentage completion method. Customers of the assessee deducted and deposited tax at source on the entire amount of AMCs in the first year itself for which the assessee has also claimed credit of the entire amount of TDS in the first year also and corresponding income is offered to tax over the period of the AMCs for 3 4years. 20. However, AO/CIT (A) have not allowed the credit of TDS amount to the tune of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company claimed to have paid licence fee of ₹ 6.36 crores ₹ 3,50,95,924/- for AYs 2013-14 2014-15 respectively to the Department of Telecommunication (DOT) for grant of licence to operate and provide services which has been disallowed by the AO on the ground that the said licence fee paid by the assessee during the years is to be amortized in accordance with section 35ABB of the Act and after amortization disallowed an amount of ₹ 3,14,11,091/- ₹ 3,50,95,924/- in AYs 2013-14 2014-15 respectively. 25. However, ld. CIT (A) by relying upon the decision rendered by the Tribunal in AYs 2006-07 to 2008-09 passed in assessee s own case deleted the disallowance, which is under challenge before the Tribunal. 26. We have perused the orders passed by the coordinate Bench of the Tribunal in assessee s own case for AYs 2006-07 to 2011- 12 wherein identical issue has been consistently decided in favour of the assessee by directing the AO to delete the addition made on account of capitalization of licence fee paid to the DOT. 27. It is also brought on record by the ld. AR for the assessee that the appeal filed by the Revenue for AYs 2009-10 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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