2012 (10) TMI 392 - AT - Income Tax

Tribunal Upholds Disallowance of Expenditure & Deletion of Claim, Allows Depreciation

The Tribunal dismissed the appeal, upholding the disallowance of expenditure under section 14A to Rs.1,00,000, based on precedents and ruling Rule 8D as ... Dis-allowance u/s 14A - assessee submitted that they have already offered an amount of Rs.1 lac for dis-allowance in pursuance of earlier ITAT’s orders - AO not accepting submissions of the assessee, disallowed Rs.18,41,918/- in terms of Rule 8D - Held that:- Indisputably, Rule 8D is not applicable in the year under consideration in view of the decision in Maxopp Investment Ltd (2011 (11) TMI 267 - DELHI HIGH COURT). Moreover in the assessee’s own case for the AYs 2001-02 and 2003-04, 2004-05, co-ordinate bench upheld the disallowance of Rs.1 lac. In the light of consistent view taken in these decisions in identical circumstances, and nothing contrary being brought on record by Revenue, dis-allowance of only Rs 1 lac is upheld. Dis-allowance of claim u/s 35D - expenses incurred on issue of shares and increase in authorized capital - denial on ground that benefit of S35D could be availed for a period of 10 successive years beginning with the previous year in which the business commences which have been lapsed - Held that:- Indisputably expenditure was incurred in the FY 1999-2000 and 2000-01, for issuing the shares. The assessee claimed 1/10th of these expenses since then and no disallowance has been made in any of the earlier years. There is no dispute that the entire expenditure is revenue in nature and was allowable in the year when it was incurred. Instead of claiming the entire expenditure in that year, the assessee deferred the amount, claiming only 1/10th in each of the subsequent 10 years. Hence, expenditure does not fall within the ambit of section 35D and needs to be allowed as revenue expenditure. Depreciation on computer peripherals - UPS - Held that:- Since it is part of the computer system, hence entitled to depreciation at the higher rate of 60 per cent. See BSES Rajdhani Powers Ltd (2010 (8) TMI 58 - DELHI HIGH COURT ) - Decided against Revenue Issues:1. Disallowance of expenditure under section 14A of the Income-tax Act.2. Disallowance of claim under section 35D of the Income-tax Act.3. Disallowance of depreciation on computer peripherals.Issue 1: Disallowance of expenditure under section 14A of the Income-tax Act:The Assessing Officer disallowed an amount under Rule 8D of the Income Tax Rules, 1962, while the CIT(A) restricted the disallowance to Rs.1,00,000 based on previous decisions. The Tribunal held that Rule 8D was not applicable for the year under consideration, citing the decision in Maxopp Investment Ltd. vs. CIT. The Tribunal also referred to previous decisions in the assessee's case and upheld the disallowance of Rs.1 lac. As the Revenue failed to provide any material for a different view, the Tribunal dismissed ground no.1 in the appeal.Issue 2: Disallowance of claim under section 35D of the Income-tax Act:The AO disallowed a claim under section 35D, which the CIT(A) deleted. The Tribunal noted that the expenses were incurred in previous financial years, and the assessee had claimed 1/10th of the expenses each year without any disallowance. As the Revenue did not provide any material to challenge the findings, the Tribunal dismissed ground no.2 in the appeal.Issue 3: Disallowance of depreciation on computer peripherals:The AO disallowed depreciation on UPS purchased, stating it did not fall within the definition of computer peripherals. The CIT(A) allowed the claim, relying on precedents. The Tribunal cited decisions where computer accessories and peripherals were considered integral parts of the computer system, thus entitled to depreciation at a higher rate. As the Revenue did not present any contrary decision or material, the Tribunal upheld the findings of the CIT(A) and dismissed ground no.3 in the appeal.The Tribunal also dismissed any additional ground raised in the appeal. Overall, the appeal was dismissed, and no new arguments were presented during the proceedings.