TaxTMI 
TaxTMI 
2021 (4) TMI 576
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....n both the cross objections, these were clubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience. ITA No. 315/Chd/2020 A.Y. 2016-17 2. The brief facts of the case pertaining to the assessment year 2016-17 are that the assessee engaged in the business as Multi System Operators and digital cable, filed its return of income for the assessment year under consideration declaring total income of Rs. 60,79,98,8000/-. The case of the assessee was selected for scrutiny and the AO passed assessment order determining the total income at Rs. 133,03,80,120/- inter alia making addition of Rs. 90,91,34,741/- on account of disallowance of lease rental claimed by the assessee on set top boxes taken on lease, addition of Rs. (-) 5,52,39,403/- on account of depreciation calculated on equipments procured from CISCO on lease hold basis, addition of Rs. 9,89,077/- on account of disallowance of interest attributable to work in progress and addition of Rs. 1,83,17,325/- u/s. 14A read with Rule 8D of the Income Tax Rules. 3. The assessee challenged the Assessment order before the ld. CIT(A). The ld. CIT(A) after hearing the assessee partly....
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....evenue has challenged the action of the Ld. CIT(A) in allowing depreciation @ 60% on STBs following the decision of the Chandigarh Bench of the ITAT rendered in assessee's own cases for the assessment years 2012-13 to 2015-16. 6. At the outset, the ld. Counsel for the assessee submitted before us that this issue is covered in favour of the assessee by the decision of the Chandigarh Bench of the Tribunal in assessee's appeals for the assessment years 2012-13, 2013-14, 2014-15 and 2015-16. The ld. Counsel further submitted that since the ld. CIT(A) has allowed the claim of the assessee by following the order dated 06.05.2020 passed by the ITAT Chandigarh in assessee's appeals for the aforesaid assessment years, there is no merit in this ground of the revenue's appeal, therefore this ground of appeal is liable to be dismissed. 7. On the other hand, the ld. Departmental Representative (DR) fairly admitted that the jurisdictional Tribunal has decided the identical issue in favour of the assessee in assessee's cases for the previous years, however, supported the action of the AO. 8. We have gone through the material on record including the decision of the coo....
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....7.82% (page 176 of DPB 1 on STB/Headends) in its books viz-a-viz. charging of depreciation on other assets @ 14%. Thus major part of the life of STB is covered in 3 to 4 years." Further, the assessing officer has also placed reliance on TRAI notification No. 1-19/2012-B&CS dated 27.3.2013 as reproduced in the assessment order as under: Sl. Particulars Tariff 1. Rent per month per set top box for the first three years Rs. 32.93 (exclusive of taxes) 2. After three years from the date of installation No rent. The set top box shall become the property of the subscriber except 3. Security Deposit (Adjustable) Rs. 800/- 4. Amount of Security Deposit refunded on return of the Set Top Box As per attached Table- B 5. Installation Charges Nil 6. Activation charges Nil 7. Smart Card/Viewing Card Charges Nil 8. Repair and Maintenance Charges for three years from the date of installation Nil The Assessing Officer has observed that as per the above tariff plan adopted by the assessee with the consumers, at the end of 3 years from the date of installation of the STB in consumer's premises, the c....
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.... the purchase of such equipment is required to be set off from the final receipt/sale price by whatever manner either as a deduction on account of depreciation or as revenue expenditure. When the assessee no more remains the owner of the equipment, how can it claim depreciation on the same, which is sine qua non for claim of depreciation. The entire cost incurred by the assessee on the equipment is required to be squared off at the time of sale of equipment. Hence, under the circumstances, the assessee will be entitled either to the deduction of the cost of the equipment either as revenue expenditure and if the same is to be treated as capital asset, then depreciation cannot be postponed beyond the actual life/ownership of the equipment and the assessee will be entitled to the deduction of the written down value of the equipment at the end of 3 years from the sale price received. However, the peculiar facts and circumstances of the case are that it is the own case of the department that the life of the equipment is 3 years and that the asset in the hands of the assessee is a capital asset, then we cannot understand, how can the department press an argument for the grant of deprecia....
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....ssee by the order of the Tribunal, however, supported the findings of the AO. 13. We have carefully perused the material on record in the light of the submissions made by the ld. Counsel. We notice that this issue came up before the coordinate Bench in assessee's appeals for the assessment years 2012-13 to 2015-16 and the coordinate Bench decided the same in favour of the assessee holding as under: "54. We have heard the rival contentions. We find merit in the contention of the Ld. counsel for assessee. The Ld. Counsel has demonstrated that there were sufficient own funds available with the assessee company in the form of share capital and reserves to the tune of Rs. 105 crores and Rs. 107 crores respectively to meet the advance given of Rs. 3.20 crores. The issue is now squarely covered by the various decisions of the High Courts as well as of the apex court of the country including that of the Hon'ble Jurisdictional High Court in the case of 'Bright Enterprises Pvt. Ltd. Vs. CIT, Jalandhar' (supra), 'CIT Vs. Kapsons Associates' (2016) 381 ITR 204 (P&H) and the latest decision of the Coordinate Bench of the Tribunal in the case of 'ACIT Vs. ....
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.... no merit in the contention of the Revenue. 16. On the other hand, the ld. DR admitted that the Tribunal has decided this issue in favour of the assessee in assessee's appeals. However, the ld. DR supported the findings of the AO. 17. We have gone through the material available on record including the order passed by the coordinate Bench in assessee's appeal referred above. As pointed out by the ld. CIT(A) the assessee had no exempt income, during the previous year, however, the AO computed the disallowance of Rs. 1,83,17,325/- u/s. 14A read with rule 8D of the Income Tax Rules. The Ld. CIT(A) by following the decision of the Tribunal in assessee's appeals referred above, deleted the addition. We notice that this issue came up before the coordinate Bench for consideration in assessee's appeals for the assessment years 2014-15 and 2015-16 and the Bench deleted the addition made u/s. 14A of the Act holding as under: "76. Ground No. 11: Vide ground No. 11 the assessee has agitated the confirmation of disallowance made by the AO u/s. 14A of the Act in respect of the expenditure incurred for earning of tax-exempt income. The Ld. Counsel for the as....
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....st the assessee in assessee's own appeals for the earlier years. 3. We have gone through the material on record including the order of the coordinate Bench. The assessee had claimed depreciation on the custom duty component and all incidental costs for acquiring assets from CISCO. The AO observing that since the assessee has claimed depreciation it cannot claim deduction u/s. 37 of the Act for the amount of lease rent paid to CISCO. The ld. CIT(A) confirmed the action of the AO by following the decision of the coordinate Bench in assessee's appeals for the assessment years 2012-13 to 2015-16. The findings of the coordinate Bench read as under:- "27. Considering the above clauses of the lease deed in question and in the light of proposition settled through various decisions of the higher courts and highest court of the country that when the terms of the contract looked into with the relevant circumstances that are determinative of the nature of the such contracts, we have no hesitation to hold that the transaction in the present case is that of a loan/Finance. After going through the various terms of the deed, we find that the only role of the lessor in the prese....
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....ement was entered into on 07-12-2011, relating to A.Y. 2012-13 which is a subsequent assessment year. Even otherwise on going through the orders of the ITAT in the case of CISCO it is revealed that the issue before the Co-ordinate Bench of the ITAT related only to the rate of depreciation to which the assessee was eligible on the leased assets and the question regarding entitlement of claim of depreciation was never before it. Therefore, it cannot be said that the ITAT had decided the allowability of claim of CISCO of being owner of the asset. Even otherwise, if the CISCO has retained some ownership rights over the assets for the purpose of security of the loan amount and therefore, assuming, for the sake of arguments that the assets are not fully owned by the assessee, even then the provisions of section 32 will be attracted as it provides for claim of depreciation on assets owned fully or partly by an assessee. The contention of the Ld. Counsel that the Ld. CIT(A) himself has mentioned, "there is no doubt about the genuineness of the lease agreement", in our view, is of no help to the assessee. The impugned order is to be read as a whole, and a single line or wo....
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....in view of the discussion made above, is not entitled to claim the principal component of alleged lease rent paid as 'revenue expenditure' u/s. 37(1) of the Act. However, the assessee is also entitled to claim depreciation on the said assets purchased from borrowed capital." 4. Since, the findings of the ld. CIT(A) are in accordance with the decision of the coordinate Bench rendered in assessee's appeals for the assessment years 2012-13 to 2015-16, we do not find any reason to interfere with the findings of the ld. CIT(A). Hence, we uphold the findings of the ld. CIT(A) and dismiss the Cross Objection filed by the assessee. ITA No. 316/Chd/2020 for A.Y. 2017-18 Ground No. 1 to 4 of this appeal are identical to Ground No. 1 to 5 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2016-17. Since there is no material change in the facts of the present case except the addition made by the AO, we do not find any reason to take a different view. Hence, consistent with our findings in Revenue's appeal for the AY 2016-17 we dismiss ground No. 1 to 4....