TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 537
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....acts pertaining to the Assessment Year 2003- 04. 5. In this year, the original assessment was completed under sec. 143(3) of the Act on 6.03.2006 determining the total income at Rs.771,28,23,100/- which was revised to Rs.756,11,13,245/- in pursuance to the order passed under sec. 250 of the Act. Thereafter, the AO perused the records and found that as per the 3CD report, the assessee had claimed prior period expenditure amounting to Rs.721.15 lakh in the Profit and Loss Account. The AO then observed that the assessee was following the mercantile system of accounting, and where the assessee follows mercantile system of accounts, the annual profits are worked out on due or accrual basis. The AO therefore, stated that only such expenses are allowable as deduction from a previous year income as are relevant to that year and, therefore, prior period expenses should have been disallowed. The AO therefore, taken a view that the prior period expenses amounting to Rs.721.15 lakh were wrongly allowed to the assessee. 6. The AO further observed that the assessee had claimed depreciation @ 60% on the computer accessories i.e. printers, scanners, UPS, Camera, Projector, Switches....
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....in ITA No.2851 and 3680/Del/2007, the depreciation @ 60% on printers, scanners and other peripherals was justified. 11. After considering the order of rectification carried out by the AO and assessee's submissions, the learned CIT(A) deleted the additions by holding that the matter considered by the AO in the rectification order passed u/s 154 of the Act, cannot be categorized as a mistake apparent from record. The order of the CIT(A) runs as under:- "7. I have considered the basis of rectification carried out by the Assessing Officer and the arguments of the appellant in support of his claim that the issues involved cannot be termed as mistakes apparent from record. The Authorized Representative has highlighted various judicial pronouncements in support of his claim that the expenses claimed under the head prior period expenses had actually crystallized in the year under consideration and according to the method of accounting regularly followed by the society, the same are allowable in the Assessment Year 2003-04. Further the correct rate of depreciation applicable on computer parts/accessories has also been debated at different levels and the Authorized Representative ha....
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....3) of the Act, which was revised in pursuance to the order passed under sec. 250 of the Act. Section 154 provides that with a view to rectifying any mistake apparent from the record an Income-tax authority referred to in section 116 may amend any order passed by it under the provisions of this Act. So, as could be seen from the provisions of sec. 154 of the Act, it is only in case if a mistake has crept into the order, which is apparent from the record, that the AO has got the authority to amend the order passed by him under the provisions of sec. 154 of the Act. It is well settled that in order to invoke the provisions of sec. 154 of the Act to rectify the mistakes, the subject matter must be beyond doubt or debate and in such circumstances, only the mistake committed could be amended. In other words, a debatable matter does not come within the purview of sec. 154 of the Act. 14. In the present case, the assessee debited a sum of Rs.721.15 lakhs in the profit and loss account under the head "Prior period expenditure". Whether prior period expenditure claimed in the profit and loss account is allowable in the year in which it is debited in the Profit and Loss Account, it is....
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....nt of that previous year. If any liability, though relating to the earlier year, depends upon making a payment and its acceptance by the assessee and such liability has been actually claimed and paid in the later years, it cannot be disallowed as a deduction merely on the basis the accounts are maintained on mercantile basis and is related to a transaction of the earlier year. 17. In these circumstances, we, therefore, hold that allowability or otherwise of prior period expenses claimed in the profit and loss account is a debatable matter and, therefore, it does not come within the purview of sec. 154 of Act. 18. With regard to the assessee's claim of depreciation @ 60% on computer items, we find that it is also a debatable matter inasmuch as to whether the UPS, printers and other peripherals of computer are a part of a computer or not, is also a matter of debate. However, the ITAT, Delhi Bench 'B' New Delhi in the case of Containers Corp. Ltd. (supra) held that printers, scanners and other peripherals are part and parcel of computer and are entitled for depreciation @ 60%. The Hon'ble Delhi High Court has also upheld the order of the Tribunal allowing depreciation @ 60% o....