2009 (1) TMI 869 - AT - Income Tax

Tribunal Revises Exempt Income Disallowance, Upholds 60% Depreciation on Computer Peripherals for 2005-06 Tax Year.

The ITAT DELHI addressed an appeal by the revenue challenging the CIT (Appeals) decision for the assessment year 2005-06. On the first issue, the Tribunal ... Disallowance of proportionate expenses u/s 14A - Disallowance on account of excess claim of depreciation on computer peripherals. Disallowance of proportionate expenses u/s 14A - 'Computer'- CIT(A) deleted the addition out of total addition made by A.O - ignoring the provisions of section 14A(1) inserted with retrospective effect from 01.04.62, which empowers the A.O. to disallow the expenditure attributable to exempt income by using appropriate method in the absence of any prescribed method - HELD THAT:- We find that the matter now stands covered in the case of Dega Capital Management (P) Limited [2008 (10) TMI 383 - ITAT MUMBAI] wherein also the matter has been set aside to the file of the AO to compute the disallowance in accordance with the-amended provisions and the rules thereunder as held to be applicable with retrospective effect. Accordingly, we restore the matter to the file of AO. Disallowance on account of excess claim of depreciation on computer peripherals - HELD THAT:- We find that the matter stands covered in favour of the assessee by the decision in the case of ITO vs. Samiran Majumdar [2005 (8) TMI 293 - ITAT CALCUTTA-B] held that the term 'computer' has not been defined under the Act, yet Explanation (a) to clause (xi) of section 36(1), defined the term 'computer system' - Further, the ICAI in its study material defined the term 'computer' as an electronic data processing device capable of receiving input, storing sets of instructions for solving problems and generating output with high speed and accuracy; that the printer and scanner could not be used without the computer, that is, they were part of the computer system - Thus, the printer and scanner were an integral part of the computer system and they are to be treated as computer for the purpose of allowing higher rate of depreciation. We accordingly uphold the order of the CIT(A) in granting higher deprecation @ 60% on computer peripherals as against 25% allowed by AO. In the result, the appeal of the assessee is partly allowed for statistical purposes. The Appellate Tribunal ITAT DELHI, consisting of R.P. Garg, Vice President, and George Mathan, Judicial Member, heard an appeal filed by the revenue against an order of the CIT (Appeals) for the assessment year 2005-06. The appeal raised two grounds: first, the deletion of an addition of Rs. 28,60,005 out of a total addition of Rs. 29,10,005 made by the Assessing Officer (AO) under section 14A(1), and second, the deletion of an addition of Rs. 75,790 made by the AO for depreciation on computer peripherals.Regarding the first ground, the assessee earned dividend income of Rs. 71,67,534 not chargeable to tax under section 10(34) of the Act. The AO disallowed a sum of Rs. 29,10,005 as expenses attributable to earning dividend income. The CIT (Appeals) estimated the expenditure at Rs. 50,000 and deleted the disallowance of the balance amount. The Tribunal vacated the order of the CIT (Appeals) and restored the matter to the file of the AO to compute the disallowance in accordance with amended provisions.Regarding the second ground, the Tribunal upheld the order of the CIT (Appeals) in granting higher depreciation at 60% on computer peripherals, as they were considered an integral part of the computer system. The appeal of the assessee was partly allowed for statistical purposes. This judgment clarifies the treatment of expenses related to exempt income and the rate of depreciation on computer peripherals under the Income-tax Act, 1961.