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2019 (7) TMI 789 - ITAT COCHINDepreciation on Set Top Boxes (STB) - @80% OR 15% - assessee has also raised an alternative contention that expenditure incurred on purchase of STB should be allowed as a revenue expenditure - STB’s are energy saving devices OR electrical equipment - HELD THAT:- In our opinion, it transpires that the expenditure incurred for acquisition of set top boxes and not for trading it. In other words, it was incurred for securing tangible asset on which the assessee collected annual maintenance charges. The acquisition brought into existence a new asset and the assessee obtained a new advantage. It is to be noted that not only advantage flowed from such acquisition and the investment is in the capital field but the expenditure has also effected the fixed capital of the assessee. In our opinion, expenditure was incurred in connection with the profit earning apparatus which generated permanent source of income for the assessee by way of annual service maintenance charges. Thus, we are of the opinion that the expenditure incurred by the assessee was capital in nature and it cannot be said that it is revenue expenditure. Accordingly, the assessee is entitled for depreciation on the same. As per TRAI regulations dated 01.04.2015, the depreciation on the price of customer premises equipment (which included Set Top Box and remote control for Set Top Box) shall be calculated using straight line method at the rate not exceeding 1.7% for every completed calendar month or part thereof. Therefore, the rate of depreciation at the rate of 15% allowed by the AO treating the same as Plant and Machinery is in tune with TRAI regulations. Set Top Box is a device connected to a TV and which allows a subscriber to receive in unencrypted and descrambled form subscribed channels through an addressable system and unless assessee proves that STB’s comes within Rule 8(ix)(E)(k), it cannot claim higher depreciation of 80%. We uphold the order of the lower authorities and direct the AO to allow depreciation on STB at 15% only. - Decided in favour of revenue.
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