Tribunal upholds depreciation on UPS as part of computers, rejects Revenue's appeals.

The Tribunal dismissed all three appeals by the Revenue. It upheld the CIT (A)'s decision to allow depreciation at 60% on UPS as part of computers. Additionally, it supported the CIT (A)'s rulings on the disallowance of payments for communication expenses and sales affairs expenditure outside India, emphasizing they were not taxable income but recoveries of actual expenses. The Tribunal referenced relevant case law and the Supreme Court's decision to support its findings, ultimately confirming the deletion of the disallowances.

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Issues:
- Disallowance of excess depreciation claimed on UPS
- Applicability of Sec.40(a)(i) of the Act on reimbursement of communication expenses and expenditure on managing sales affairs outside India

Analysis:

Issue 1: Disallowance of excess depreciation on UPS
The Revenue challenged the allowance of depreciation at 60% on UPS treated as part of computers for the assessment years 2007-08 and 2008-09. The Assessing Officer disallowed the excess claim of depreciation, but the CIT (A) deleted the addition, citing precedents where UPS was considered an integral part of computers. The Tribunal upheld the CIT (A)'s decision, emphasizing that UPS should be treated as part of the computer, allowing depreciation at 60%.

Issue 2: Applicability of Sec.40(a)(i) on reimbursement of communication expenses and sales affairs expenditure
- *Reimbursement of communication expenses:* The Assessing Officer disallowed payments made for utilizing leased lines and backup servers outside India, treating them as royalty under Sec.9(1)(vi). However, the CIT (A) deleted the disallowance based on the Tribunal's decision in the assessee's case for the assessment year 2005-06. The Tribunal upheld the CIT (A)'s decision, noting that the reimbursement was not taxable income but a recovery of actual expenses.
- *Expenditure on managing sales affairs outside India:* The Assessing Officer disallowed expenditures on managing sales affairs outside India for non-compliance with Sec.195. The CIT (A) deleted the disallowance, citing relevant case law and the Supreme Court's decision in GE India Technology Center Pvt Ltd Vs. CIT. The Tribunal agreed with the CIT (A) that the case was identical to previous rulings, confirming the deletion of the disallowance.

In conclusion, all three appeals by the Revenue were dismissed, with the Tribunal upholding the decisions of the CIT (A) on all issues, providing detailed analysis and legal references to support their findings.

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