2014 (6) TMI 570 - AT - Income Tax

Tribunal allows higher depreciation rates & excludes foreign investments from exempt assets, partially upholding Revenue's appeal.

Deputy Commissioner of Income Tax Versus M/s. Eicher Motor Limited

The Tribunal upheld the deletion of an addition for excess depreciation on computer peripherals, citing a precedent allowing higher depreciation rates. ... Deletion of excess depreciation on computer peripherals – Held that:- Following CIT Vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] - the assessee is entitled to higher rate of depreciation, i.e., at the rate of 60% on computer accessories and peripherals instead of the normal rate of 25% - Decided against Revenue. Deletion made u/s 14A r.w Rule 8D of the Rules – Held that:- For the purpose of the clause, only the assets, income from which does not or shall not form part of total income, is to be considered – thus, the investment in the shares in the company whose dividend income is taxable cannot be considered as investment – thus, the matter is remitted back to the AO for examination of the assessee’s contention and exclude the assets, income from which is taxable – Decided in favour of Revenue. Issues:1. Excess depreciation on computer peripherals2. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962Excess Depreciation on Computer Peripherals:The appeal by the Revenue challenged the deletion of an addition made on account of excess depreciation on computer peripherals. The Tribunal noted that the issue was covered by a decision of the Jurisdictional High Court, which allowed a higher rate of depreciation on computer accessories and peripherals. Following this precedent, the Tribunal upheld the order of the CIT(A) and rejected the Revenue's appeal regarding this issue.Disallowance under Section 14A read with Rule 8D:The second ground of appeal concerned the deletion of an addition made under Section 14A read with Rule 8D of the Income Tax Rules. The assessee acknowledged that Rule 8D was applicable for the relevant assessment year and pointed out errors in the computation of the disallowance. The Assessing Officer had already modified the disallowance amount based on the assessee's application under Section 154. The Tribunal noted that the investment in shares included both Indian and foreign companies, with only the dividend from Indian companies being exempt. Therefore, the Tribunal agreed with the CIT(A) that the investment in foreign companies should be excluded while computing the average investment in exempt assets. The Tribunal directed the Assessing Officer to verify this aspect and exclude taxable assets while allowing the assessee an opportunity to be heard. Consequently, the appeal of the Revenue was partly allowed on this issue.In conclusion, the Tribunal's judgment addressed the issues of excess depreciation on computer peripherals and the disallowance under Section 14A read with Rule 8D of the Income Tax Rules. The decision provided detailed reasoning based on legal precedents and factual considerations, ultimately partially allowing the Revenue's appeal on the matter of disallowance.