TaxTMI 
TaxTMI 
2010 (2) TMI 984
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....gent liability and the crystallisation of this liability was dependent on the decision of the appellate authorities. Hence unless the assessee accepts that the customs duty paid is an ascertained/crystallised liability, the same cannot be allowed to be capitalised being unascertained/contingent liability and the assessee's claim of depreciation cannot be allowed." The brief facts of the case are that the assessee-company is engaged in the manufacturing of glazed white, coloured and decorative ceramic wall/ floor tiles at Sikandrabad, District Bulandshahr, UP. The company made imports of certain equipment under the industrial pollution prevention project without payment of customs duty during the financial year 2001-02 relevant to the assessment year 2002-03. Subsequently, during the impugned year duty exemption certificate was disputed by the Customs Department and a show-cause notice was issued for payment of principal amount of customs duty of Rs. 4,25,34,027. In the books of account the assessee treated the said payment of customs duty as advance payment and by way of note to the accounts in the annual report has mentioned the same as contingent liability. However, for the purp....
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....assessee, disallowed the capitalisation of the payment of customs duty and accordingly made a disallowance of depreciation of Rs. 98,53,748 under section 32 of the Act. Before the learned Commissioner of Income-tax (Appeals), learned counsel for the assessee argued and submitted that there is no dispute to the fact that the payment of customs duty was in connection with acquiring of capital assets and therefore, the same constitutes capital expenditure. The said amount of customs duty has been paid at the behest of the customs authorities and not by the assessee on its own. Therefore, there is a liability incurred by the assessee. Moreover, it was submitted that there is no provision in the Customs Act for payment of any sum without incurring any liability and to that effect copies of summons issued under section 108 of the Customs Act and copies of challans for payment of such customs duty were placed before the learned Commissioner of Income-tax (Appeals). It was further submitted that the contention of the Assessing Officer would have been correct and justified if the assessee had capitalised the customs duty in the financial year 2001-02 relevant to the assessment year 2002-03 ....
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....hereas on the other hand, learned counsel for the assessee Shri Salil Aggarwal at the outset argued that mere entries in the books of account cannot be decisive of ascertaining of income. The accounting practice cannot over ride any provision of the Act. Whether a particular receipt is an income or not is a question of law which has to be decided by the court on the basis of the provisions of the Act. He relied upon the decisions of various courts of law which are as under : 1. CIT v. Shoorji Vallabhdas and Co. [1962] 46 ITR 144 (SC) ; 2. Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC) ; 3. Kedarnath Jute Manufacturing Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) ; 4. Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 (SC). Shri Salil Aggarwal further argued that even the liability does not become contingent because it is contested in appeal and the Excise Department raised the demand asking the assessee to pay the duty for earlier years. He relied upon the judgment in the case of CIT v. Bharat Carbon and Ribbon Mfg. Co. P. Ltd. [1991] 192 ITR 221 (Delhi) which has been affirmed by the hon'ble Supreme Court reported in CIT v. Bharat Carbon and Ribbon Mfg....
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....liability to pay the amount had accrued to the assessee during the year itself and the said liability cannot be said to be contingent and cannot be said to be an advance payment. The order of the learned Commissioner of Incometax (Appeals) is a reasoned order, who has rightly accepted the contention and explanation of the assessee and has rightly allowed the claim of the assessee for capitalisation of the payment of excise duty amounting to Rs.4,25,34,027 and has rightly directed the Assessing Officer to allow the depreciation on the said amount. We find no infirmity in the order of the learned Commissioner of Income-tax (Appeals). Thus ground No. 1 of the Revenue is dismissed. Ground No. 2 of the Revenue reads as under: "On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law and facts in deleting the addition of Rs. 25,13,065 holding that expenditure incurred on glow sign boards does not bring into existence an asset or advantage of enduring benefit, which is attributable to the capital. The learned Commissioner of Income-tax (Appeals) has ignored the fact that till the assessment year 2004-05, the assessee has itself....
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....assessee does not hold any merits hence the claim of expenditure incurred on glow sign boards of Rs. 30,52,794 as revenue expenditure is hereby rejected and the same is treated as capital expenditure. Out of this glow sign boards of value of Rs. 12,65,040 were put to use for more than 180 days and those of Rs. 17,87,754 were used for less than 180 days. Accordingly, admissible depreciation at the rate of 25 percent works out at Rs. 5,39,729 which is allowed and the remaining amount of Rs. 25,13,065 is added back to the total income of the year. The assessee-company has filed inaccurate particulars in this regard hence, I am also satisfied that the assessee-company has concealed the income by filing inaccurate particulars. Penalty proceedings under section 271(1)(c) of the Act are separately initiated." The learned Commissioner of Income-tax (Appeals) following the decision of the hon'ble Punjab and Haryana High Court in the case of CIT v. Liberty Group Marketing Division [2009] 315 ITR 125 where it has been held that the expenditure incurred by the assessee on glow sign boards does not bring into existence an asset or advantage for the enduring benefit of the business and allowed ....
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....ction 32 of the Income-tax Act, 1961, it can be termed as part of the block of asset, i.e., `computer'." The brief facts of the case as appearing in paragraph 4 of the Assessing Officer's order are as under : "During the year the assessee-company had shown purchase of UPS valuing Rs. 4,200 under the block of computers and claimed depreciation of Rs. 2,520 at the rate of 60 percent UPS is a device which is used for maintaining steady supply of current to any machine including computers. It is not an integral part of computer system and computer can function without the aid of UPS and UPS can also be used with some other appliances operated on supply of electricity. Therefore, it does not qualify as computers and therefore depreciation on UPS is allowed at the normal rate applicable to plants, i.e., at the rate of 25 percent in place of 60 percent claimed by the assessee. This result in disallowance of Rs. 1,470." The learned Commissioner of Income-tax (Appeals) at page 19 of his order relying upon the decision of the Income-tax Appellate Tribunal, Delhi Bench "F" in the case of Expeditors International (India) P. Ltd. v. Addl. CIT dated August 29, 2008 reported in [2010] 2 ITR (....