9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (2) TMI 984 - AT - Income TaxDepreciation - Payment of customs duty - whether customs duty paid is an ascertained/crystallised liability? - CIT(A) allowed claim of assessee - HELD THAT - Assessee has made the payment of customs duty only when the liability has accrued on it. Since the customs duty has been paid to acquire the plant and machinery and therefore, it has to be capitalised, moreover, there is no dispute to the fact that such expenditure cannot be capitalised as observed by the Assessing Officer - The obligation to pay the excise duty arose during the impugned year and therefore, the 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 CIT (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 - ground No. 1 of the Revenue is dismissed. Expenditure incurred on glow sign boards - capital or revenue in nature - Whether it does not bring into existence an asset or advantage of enduring benefit, which is attributable to the capital? - HELD THAT - As arguments made by assessee have been found to be convincing that the glow sign board requires frequent replacement and expenditure does not bring into existence an asset of enduring in nature. The judgment of Liberty Group Marketing Division 2008 (4) TMI 219 - PUNJAB AND HARYANA HIGH COURT supports such views that expenditure incurred on glow sign boards does not bring into existence any asset or advantage for the enduring benefit of the business and such asset is not of enduring nature and therefore, such expenditure has to be treated as revenue in nature Thus ground No. 2 of the Revenue is dismissed. Excess depreciation claim on UPS - @ 60% or 25% - whether UPS integral part of computer - HELD THAT - The learned CIT (A) has relied upon the decision in the case of Expeditors International (India) P. Ltd. v. Addl. CIT 2008 (8) TMI 399 - ITAT DELHI-F , wherein it has been held that the UPS is an integral part of the computer and is eligible for depreciation. Therefore depreciation at the rate of 60 percent is allowed to the assessee. No infirmity in the order of the learned CIT (A) and moreover, no contrary decision has been brought on record by the learned Departmental representative. Thus, ground No. 3 of the Revenue is dismissed.
Issues Involved:
1. Deletion of addition of depreciation on customs duty. 2. Deletion of addition related to expenditure on glow sign boards. 3. Deletion of addition for excess depreciation claimed on UPS. Issue-wise Detailed Analysis: 1. Deletion of Addition of Depreciation on Customs Duty: The Revenue challenged the deletion of an addition of depreciation amounting to Rs. 98,53,749, arguing that the customs duty paid by the assessee was contingent and unascertained, and thus could not be capitalized for depreciation purposes. The assessee, engaged in manufacturing ceramic tiles, had imported equipment without paying customs duty, which was later disputed by the Customs Department. The assessee treated this duty as an advance payment in its books but capitalized it for tax purposes, claiming depreciation under section 32 of the Income-tax Act. The Assessing Officer (AO) disallowed the depreciation claim, stating that the liability was not accepted by the assessee and was shown as contingent. The AO also rejected the alternate claim of treating the duty as revenue expenditure under section 43B(a) of the Act. The Commissioner of Income-tax (Appeals) (CIT(A)) accepted the assessee's contention that the payment was made under the Customs Department's direction, and thus the liability had accrued, allowing the depreciation claim. Upon review, the Tribunal upheld the CIT(A)'s decision, stating that mere book entries are not decisive of income and that the customs duty payment, made under the Customs Department's direction, constituted an accrued liability. The Tribunal found no infirmity in the CIT(A)'s order, dismissing the Revenue's ground. 2. Deletion of Addition Related to Expenditure on Glow Sign Boards: The Revenue contested the deletion of an addition of Rs. 25,13,065, arguing that the expenditure on glow sign boards should be capitalized as it brought into existence an asset of enduring benefit. The assessee had changed its accounting policy, treating the expenditure as revenue instead of capital. The AO disallowed the claim, treating the expenditure as capital and allowing depreciation accordingly. The CIT(A), following the Punjab and Haryana High Court's decision in CIT v. Liberty Group Marketing Division, held that the expenditure on glow sign boards did not create an enduring asset and allowed the claim as revenue expenditure. The Tribunal agreed with the CIT(A), noting that glow sign boards have a short lifespan and require frequent replacement, thus not creating an enduring asset. The Tribunal dismissed the Revenue's ground, finding no infirmity in the CIT(A)'s order. 3. Deletion of Addition for Excess Depreciation Claimed on UPS: The Revenue challenged the deletion of an addition of Rs. 1,470, arguing that UPS should not be treated as part of the computer block for depreciation purposes. The AO allowed depreciation on UPS at the rate applicable to plant and machinery (25%) instead of the rate for computers (60%). The CIT(A), relying on the ITAT Delhi Bench's decision in Expeditors International (India) P. Ltd. v. Addl. CIT, held that UPS is an integral part of the computer and allowed depreciation at 60%. The Tribunal upheld the CIT(A)'s decision, finding no infirmity and noting the absence of any contrary decision brought by the Revenue. Conclusion: The Tribunal dismissed both appeals by the Revenue, upholding the CIT(A)'s decisions on all grounds. The Tribunal found that the customs duty payment constituted an accrued liability, the expenditure on glow sign boards was of a revenue nature, and UPS was integral to computers, warranting higher depreciation. The judgments were pronounced in the open court on February 11, 2010.
|
