2013 (6) TMI 829 - AT - Income Tax

Depreciation u/s 32(1)(i) 32(1)(ii) - Disallowances u/s 40(a)(ia) - Revene filed an appeal against the order of Ld. CIT(A) for deleting three disallowances regarding computer software, peripherals to computers and non-verifiability of various expenses incurred by assessee. - HELD THAT - Assessing officer did not bring on record any material to justify the disallowance of various expenses incurred. Also, relying on Delhi High Court judgement disallowances of depreciation was deleted by Ld. CIT(A). Thus, there is no infirmity in the orders of Ld. CIT(A). Departmental appeal dismissed

Summary

Issues:
1. Disallowance of expenses on non-verifiability basis.
2. Disallowance of depreciation on computer peripherals.
3. Disallowance of depreciation on computer software.

Issue 1 - Disallowance of expenses on non-verifiability basis:
The assessing officer disallowed Rs. 2 lakhs of expenses on an estimated basis due to non-verifiability. However, the CIT(A) deleted this disallowance, stating it was illegal. The ITAT upheld the CIT(A)'s decision, noting that the AO failed to provide specific instances of non-verifiability and lacked justification for the disallowance. The ITAT cited various legal precedents to support their decision, ultimately dismissing the department's appeal.

Issue 2 - Disallowance of depreciation on computer peripherals:
The AO disallowed Rs. 3,04,397 of depreciation claimed by the assessee on computer peripherals, arguing they were intrinsic parts of plant and machinery eligible for a lower depreciation rate. The CIT(A) overturned this disallowance based on precedents from the Delhi Tribunal. The ITAT concurred, referencing decisions from the Delhi High Court that established computer peripherals as integral to computer systems, warranting a higher depreciation rate of 60%. Consequently, the ITAT dismissed the department's appeal on this ground.

Issue 3 - Disallowance of depreciation on computer software:
The AO disallowed depreciation on computer software at 60%, insisting it should be at 15%. The ITAT upheld the CIT(A)'s decision to allow 60% depreciation, citing the integral nature of computer software to computer systems and specific provisions in the Income-tax Act. Consequently, the ITAT dismissed the department's appeal on this issue.

In conclusion, the ITAT upheld the CIT(A)'s decision to delete all disallowances made by the AO, emphasizing the legal precedents and specific provisions governing depreciation rates for computer peripherals and software. The department's appeal was dismissed, and the order was pronounced on 28.06.2013.