2014 (5) TMI 993 - AT - Income Tax

Deletion of extra depreciation on computer peripherals Held that - Following Container Corporation of India Ltd. Versus Assistant Commissioner of Income-tax, Circle 3(1), New Delhi 2009 (2) TMI 499 - ITAT DELHI - CIT(A) has rightly allowed the depreciation claimed by the assessee @ 60% - The accessories and peripherals of computers provide input processing, storage and various output devices - The output devices such as printer, scanner, etc. are computer peripherals and form essential parts of PC - These output devices cannot work in isolation and also working on computer system without an output device such as printer would be futile the order of the CIT(A) is upheld Decided against Revenue. Deletion of non-deduction of TDS Payment made to NSE Held that - Following Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam 2012 (4) TMI 290 - ITAT VISAKHAPATNAM and in assessee s own case for the previous assessment year, it has been held by the CIT(A) that no material has been brought on record to show that the payments on account of transaction charges, V-SAT charges, lease line charges and misc. Charges were made in Pursuance of a contract - The payments were made to NSE in the normal course of business and these payments do not fall within the scope of section 194C of the Act - the provision of section 40(a)(ia) cannot be invoked with respect to the payments which are actually paid during the financial year, but it can be invoked only with respect to the payments not actually made - all the payments were made during the year and nothing was payable at the end of the year, no disallowance is called for - the order of the CIT (A) is upheld Decided against Revenue. Rebate u/s 88E of the Act Computation of book profits u/s 115JB of the Act Held that - The AO has computed the taxable income of the assessee company under the normal provisions of the Act as well as under the special provisions of section 115JB of the Act - While computing the book profit u/s 115 JB, the AO has not allowed the rebate on account of STT u/s 88E of the Act from the book profit of the assessee company Relying upon M/s Horizon Capital Limited, the ITAT Bangalore 2011 (10) TMI 489 - KARNATAKA HIGH COURT - tax rebate in respect of STT u/s 88E is available even against tax liability u/s 115JB the order of the CIT(A) is upheld Decided against Revenue. Disallowance u/s 14A read with Rule 8D of the Act Held that - Following Maxopp Investment Ltd. Vs. Commissioner of Income-tax (2012) 2011 (11) TMI 267 - Delhi High Court the AO if not satisfied with the correctness of the claim of the assessee, the AO gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act in accordance with the prescribed method - when there is no amount of expenditure is incurred directly relating to the exempt income which does not form part of the total income, Rule 8D(ii) & (iii) cannot be applied when the shares are held as stock-in-trade and no notional expenditure could be deducted from the income - the dividend income is incidental to its business of sale of shares which remained unsold by the assessee - expenditure estimated invoking rule 8D above are set aside Decided in favour of Assessee.

Summary

Issues Involved:
1. Deletion of addition on account of extra depreciation claimed on computer peripherals.
2. Deletion of addition on account of non-deduction of TDS on payment made to NSE.
3. Rebate under Section 88E while computing book profit under Section 115JB.
4. Disallowance under Section 14A read with Rule 8D.

Detailed Analysis:

1. Deletion of Addition on Account of Extra Depreciation Claimed on Computer Peripherals:
The revenue contended that the Assessing Officer (AO) correctly restricted the depreciation on computer peripherals to 15% instead of the claimed 60%. The CIT(A) allowed the assessee's claim based on prior Tribunal and High Court decisions, which held that peripherals like printers and scanners are integral parts of a computer system and eligible for 60% depreciation. The Tribunal upheld the CIT(A)'s decision, referencing the case of Container Corporation of India Ltd. and CIT Vs. BSES Rajdhani Powers Ltd., affirming that computer peripherals qualify for higher depreciation.

2. Deletion of Addition on Account of Non-Deduction of TDS on Payment Made to NSE:
The AO disallowed Rs. 47,41,042/- paid to NSE for transaction charges, V-Sat charges, lease rent, and miscellaneous charges due to non-deduction of TDS. The CIT(A) deleted this addition, and the Tribunal upheld this decision, referencing the Special Bench ruling in Merilyn Shipping & Transports Vs. Addl. CIT, which stated that Section 40(a)(ia) applies only to amounts payable and not to amounts already paid. The Tribunal noted that the payments were made during the financial year and thus, no disallowance was warranted.

3. Rebate Under Section 88E While Computing Book Profit Under Section 115JB:
The AO restricted the rebate under Section 88E to Rs. 2,03,13,403/- against the claimed Rs. 2,14,46,337/-. The CIT(A) directed the AO to verify and allow the correct rebate. The revenue argued that Section 115JB, being a special provision, overrides Section 88E. However, the Tribunal upheld the CIT(A)'s decision, referencing the Karnataka High Court ruling in CIT Vs. Horizon Capital Ltd., which allowed the rebate under Section 88E against tax liability under Section 115JB. The Tribunal found no legal infirmity in the CIT(A)'s order and dismissed the revenue's appeal.

4. Disallowance Under Section 14A Read with Rule 8D:
The AO disallowed Rs. 9,27,981/- under Section 14A read with Rule 8D, attributing this expenditure to earning exempt dividend income. The assessee argued that no specific expenditure was incurred for earning the dividend, and the shares were held as stock-in-trade, not investments. The Tribunal referenced the Delhi High Court's decision in Maxopp Investment Ltd. and the Karnataka High Court's decision in CCI Ltd., which held that if shares are held as stock-in-trade, Rule 8D's provisions for indirect expenses do not apply. The Tribunal concluded that no disallowance should be made under Rule 8D for shares held as stock-in-trade and allowed the assessee's cross-objection.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection, ensuring the correct application of depreciation rates, non-deduction of TDS provisions, rebate under Section 88E, and disallowance under Section 14A read with Rule 8D.