TaxTMI 
TaxTMI 
2012 (8) TMI 488
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....e towards Capital Work In Progress (CWIP). AO during the assessment proceedings noted that the assessee had shown the Capital WIP of Rs. 3,59,98,525/- as on 31.3.2008. The assessee during the year had incurred expenditure of Rs. 66.16 lakhs on WIP and had capitalized assets worth Rs. 22.94 lakhs during the year. The assessee had also borrowed funds to the tune of Rs. 12.09 crores. The AO also noted that the assessee had both own funds as well as interest bearing funds which were mixed. The AO observed that it was not proved by the assessee that interest bearing funds were used only for the purpose of business and not utilized towards capital expenditure. The AO therefore did not accept the explanation of the assessee that borrowed funds ....
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....s was only to the tune of Rs. 3 crores. Further, the addition to capital WIP was only Rs. 43 lakhs which could be easily made by the internal accruals as profit during the year was Rs. 14 crores. It was also submitted that capital WIP included opening balance of Rs. 3.16 crores but in the earlier year no disallowance of interest was made. Therefore, no disallowance could be made in relation to the opening balance. It was further pointed out that interest paid by the assessee also included a sum of Rs. 26 lakhs on account of bank charges and there was also interest on vehicle loans which could not be considered towards capital WIP. In any case, it was submitted that own funds were sufficient to explain the addition to the capital WIP and the....
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....rve of the assessee had increased during the year of Rs.10 crores and increase in loans during the year was only of Rs. 3 crore. Moreover, the assessee during the year had earned profit of Rs. 14 crores. Therefore, in our view the capital addition during the year is easily explained out of own funds. We therefore see no reason for any disallowance on account of interest. The order of CIT (A) confirming the disallowance is therefore set aside and the claim of the assessee is allowed. 3. The second dispute is regarding disallowance of depreciation on UPS. The AO during the assessment proceedings noted that assessee had claimed depreciation @ 60% in respect of UPS total cost of which was Rs. 8,71,871/-, treating the same as computer. ....
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.... for working of computers. The assessee has claimed depreciation @ 60% treating the UPS as an integral part of computer. The authorities below have however allowed depreciation at the normal rate of 15%. The learned AR has argued that depreciation @ 60% should be allowed following the decision of Special Bench of Tribunal in case of DCIT vs. Datacraft India Ltd (supra) and judgment of Hon'ble High Court of Delhi in case of CIT vs. Orient Ceramics & Industries Ltd (56 DTR 396) . We have carefully perused the said decision of Tribunal in case of DCIT vs. Datacraft India Ltd (supra). In that case, the issue was allowability of depreciation @ 60% on routers and switches. The Special Bench noted that the function of a router was to receive data ....
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.... had been received from fixed deposits kept as margin money for LCs / Bank Guarantee and also as security deposit with Maharashtra State Electricity Board (MSEB). It was submitted that the interest income should be treated as business income. CIT (A) did not accept the claim of the assessee. It was observed by him that the interest income was not derived from business as held by Hon'ble Supreme Court in case of Pandian Chemicals ( 262 ITR 278). CIT (A) therefore treated interest income as income from other sources aggrieved by which the assessee is in appeal before Tribunal. 4.1. Before us, the learned AR for the assessee reiterated the submissions made before CIT (A) that interest income had arisen from FDRs kept as margin money for the....