2018 (3) TMI 1875 - AT - Income Tax

Tribunal upholds 60% depreciation on UPS, disallows expenses under section 14A. Revenue appeal dismissed.

The Deputy Commissioner of Income Tax, Corporate Circle 2 (1) Chennai Versus M/s. FL Smidth Pvt Ltd

The Deputy Commissioner of Income Tax, Corporate Circle 2 (1) Chennai Versus M/s. FL Smidth Pvt Ltd - TMI Issues:1. Depreciation rate on uninterrupted power supply (UPS).2. Disallowance under section 14A of the Income Tax Act, 1961.Depreciation Rate on UPS:The appeal and cross objection were directed against an order by the Commissioner of Income Tax (Appeals) regarding the depreciation rate on UPS. The Revenue's grievance was that the Commissioner allowed depreciation at 60% on UPS, whereas the Assessing Officer had allowed only 15%. The Departmental Representative argued that UPS should be considered an accessory to a computer, not eligible for the same depreciation as a computer. However, the Authorised Representative cited a Tribunal decision stating that UPS is an integral part of a computer and should be depreciated at 60%. The Tribunal upheld the Commissioner's decision, allowing depreciation at 60% on UPS, based on previous decisions favoring the assessee. The Revenue's appeal was dismissed.Disallowance under Section 14A:The Assessee's cross objection pertained to disallowance under section 14A of the Income Tax Act, 1961. The Assessee had suo-motu disallowed a certain amount, but the Assessing Officer made a higher disallowance without expressing dissatisfaction with the Assessee's initial disallowance. The Authorised Representative argued that the application of section 14A was not automatic and referenced a Supreme Court judgment requiring the Assessing Officer to be satisfied with the correctness of the claim before applying section 14A. The Departmental Representative supported the lower authorities. The Tribunal noted the significant investments and exempt dividend income of the Assessee. The working sheet provided by the Authorised Representative was scrutinized, revealing inconsistencies in estimating time spent and salary costs. The Assessing Officer's rejection of the Assessee's claim was based on the lack of satisfaction with the working provided. The Tribunal found the dissatisfaction expressed by the Assessing Officer to be objective and in compliance with the Supreme Court judgment. Consequently, the disallowance made by the Assessing Officer was upheld, and both the Revenue's appeal and the Assessee's cross objection were dismissed.In conclusion, the Tribunal upheld the decision regarding the depreciation rate on UPS and the disallowance under section 14A of the Income Tax Act, 1961. The judgment was pronounced on March 20, 2018, at Chennai.