Tribunal Upholds Deletion of Deferred Expenditure & Extra Depreciation

The Tribunal dismissed the Department's appeals against the orders of the ld. CIT(A) for A.Y. 2007-08 and A.Y. 2008-09. The deletion of deferred revenue expenditure and extra depreciation claimed on computer peripherals was upheld. The Tribunal emphasized that the expenses were incurred to improve existing machinery, not create new assets, and were consistently claimed over the expected launch period of the product. The nature of the expenses and the method of claiming them supported the decision to dismiss the Department's appeals.

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Issues:
- Appeal against two separate orders of ld. CIT(A)-VI, New Delhi for A.Y. 2007-08 and A.Y. 2008-09.
- Deletion of deferred revenue expenditure and extra depreciation claimed on computer peripherals.

Analysis:
*For A.Y. 2007-08:*
1. The assessee company was engaged in manufacturing and selling Harvester Combines. The AO disallowed deferred revenue expenditure of &8377; 1,98,68,372 and depreciation on computer peripherals of &8377; 1,35,807. The ld. CIT(A) allowed the appeal on both counts.
2. The Department appealed against the deletion of these additions. The AO contended that the expenditure was capital in nature and should be disallowed. However, the assessee argued that the expenditure was incurred on improving existing machinery, not creating new assets. The ld. CIT(A) upheld the assessee's contentions, noting a consistent method of claiming the expenditure over the expected launch period of the product.
3. The Tribunal agreed with the ld. CIT(A), emphasizing that the expenditure did not result in a new profit-earning apparatus but only improved existing machinery. The consistent method of claiming the expenditure and the nature of the expenses supported the decision to allow the appeal. The ground related to deferred revenue expenditure was dismissed.

*For A.Y. 2008-09:*
4. The issues raised for this assessment year were identical to those for A.Y. 2007-08. The Tribunal, following the reasoning and decision given for the earlier year, dismissed the Department's appeal regarding the deletion of deferred revenue expenditure and extra depreciation claimed on computer peripherals.
5. The Tribunal found no reason to interfere with the ld. CIT(A)'s orders, especially considering the decision of the Hon'ble Delhi High Court regarding depreciation on computer accessories and peripherals. Both grounds raised by the Department were dismissed for A.Y. 2008-09 as well.

In conclusion, the appeals filed by the Department against the orders of ld. CIT(A) for both A.Y. 2007-08 and A.Y. 2008-09 were dismissed by the Tribunal, upholding the deletion of deferred revenue expenditure and extra depreciation claimed on computer peripherals based on the nature of the expenses and the consistent method of claiming them.

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