2014 (11) TMI 1088 - AT - Income Tax

Tribunal Confirms Deductions for Scrap Sales, Employee Loans & Computer Peripherals

DCIT (LTU) New Delhi Versus EXLService. Com India (P) Ltd.

The Tribunal upheld the CIT(A)'s decisions on both issues. It confirmed the eligibility of deductions u/s 10A/10B for income from the sale of scrap and ... Deduction u/s 10A/10B - income from sale of scrap and interest income on loans to employees - Held that:- Bangalore Bench of the Tribunal in the case of Wipro Ltd. [2005 (6) TMI 210 - ITAT BANGALORE-B]considered an identical issue and held income received from the sale of scrap is eligible for deduction u/s 10A. As regards interest income received on loan advances to the employees the issue is covered by the judgment in the case of CIT vs. Motorola India Electronics (P) Ltd. [2014 (1) TMI 1235 - KARNATAKA HIGH COURT] to hold interest income on account of loans advances to the employees is eligible for deduction u/s 10A/10B of the Act. Entitlement for depreciation on computer peripherals @ 60% - Held that:- Jurisdictional High Court in the case of CIT vs. BSES Rajdhani Power Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT) had held that the computer accessories such as printers scanners and server etc. form an integral part of computer and was entitled to depreciation @ 60%. Issues:1. Deduction u/s 10A/10B for income from sale of scrap and interest income on loans to employees.2. Depreciation rate on computer peripherals.Issue 1: Deduction u/s 10A/10BThe appellant contested the CIT(A)'s decision allowing deduction u/s 10A/10B for income from the sale of scrap and interest income on loans to employees. The CIT(A) relied on precedents like Wipro Ltd., Kirloskar Ebara Pumps Ltd., and Shipping Corporation of India Ltd. to support the allowance of these deductions. The CIT(A) emphasized that the income from the sale of scrap and interest income on loans to employees were integrally linked to the eligible business, thus qualifying for deduction u/s 10A/10B. The revenue challenged this decision, but the Tribunal upheld the CIT(A)'s ruling. The Tribunal referenced similar cases from Bangalore and Amritsar Benches, supporting the eligibility of income from the sale of scrap for deduction u/s 10A. Additionally, the Tribunal cited the judgment of the Hon'ble Karnataka High Court regarding interest income on loans to employees, affirming its eligibility for deduction u/s 10A/10B. The Tribunal concluded that both income from the sale of scrap and interest income on loans to employees were eligible for deduction u/s 10A/10B.Issue 2: Depreciation Rate on Computer PeripheralsThe second issue revolved around the depreciation rate applicable to computer peripherals claimed by the assessee. The AO allowed depreciation at a rate of 15% for computer peripherals, considering them part of plant and machinery. However, the CIT(A) ruled in favor of the assessee, permitting depreciation at a rate of 60% for computer peripherals. The CIT(A) based this decision on various judicial pronouncements, including a judgment of the Hon'ble Delhi High Court. The revenue appealed against this decision, but the Tribunal upheld the CIT(A)'s ruling. The Tribunal referred to the judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. BSES Rajdhani Power Ltd., which supported the view that computer peripherals such as printers, scanners, and servers were integral parts of a computer system and thus eligible for depreciation at a rate of 60%. Consequently, the Tribunal affirmed the CIT(A)'s decision, allowing depreciation at a rate of 60% for computer peripherals.In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions regarding both the deduction u/s 10A/10B for income from the sale of scrap and interest income on loans to employees, as well as the depreciation rate of 60% for computer peripherals.