2018 (3) TMI 1875 - AT - Income Tax

Depreciation on uninterrupted power supply (UPS) - rate of 60% OR 15% allowed AO - HELD THAT - As on date there are number of decisions in favour of the assessee holding that UPS is to be granted the same rate of depreciation as that of a computer. In such circumstances we do not find any reason to interfere with the order CIT(Appeals). Appeal of the Revenue stands dismissed. See SUNDARAM ASSET MANAGEMENT CO. LTD. 2014 (2) TMI 224 - ITAT CHENNAI - Ground of appeal of the assessee is allowed and the assessee is entitled to claim depreciation @60% on UPS. Disallowance u/s.14A - HELD THAT - There is no doubt in our mind that the dissatisfaction expressed by the ld. Assessing Officer on the suo-motu disallowance made by the assessee was objective. No doubt in the judgment of Hon ble Apex Court in the case of Godrej and Boyce Manufacturing Company Ltd 2017 (5) TMI 403 - SUPREME COURT had held that ld. AO has to generate requisite satisfaction with regard to the correctness of the claim of the assessee on its admission of expenditure against exempt income before invoking Section 14A of the Act. Here in our opinion ld. AO had done so. The disallowance made was at 0.5% of average value of investment under Rule 8D(2) (iii) and as per the formula under Rule 8D(2) (ii). We do not find any reason to interfere with the disallowance made by the ld. AO. No reason to interfere with the disallowance made by the ld. Assessing Officer. - Decided against assessee.

Summary

Issues:
1. Depreciation rate on uninterrupted power supply (UPS).
2. Disallowance under section 14A of the Income Tax Act, 1961.

Depreciation Rate on UPS:
The appeal and cross objection were directed against an order by the Commissioner of Income Tax (Appeals) regarding the depreciation rate on UPS. The Revenue's grievance was that the Commissioner allowed depreciation at 60% on UPS, whereas the Assessing Officer had allowed only 15%. The Departmental Representative argued that UPS should be considered an accessory to a computer, not eligible for the same depreciation as a computer. However, the Authorised Representative cited a Tribunal decision stating that UPS is an integral part of a computer and should be depreciated at 60%. The Tribunal upheld the Commissioner's decision, allowing depreciation at 60% on UPS, based on previous decisions favoring the assessee. The Revenue's appeal was dismissed.

Disallowance under Section 14A:
The Assessee's cross objection pertained to disallowance under section 14A of the Income Tax Act, 1961. The Assessee had suo-motu disallowed a certain amount, but the Assessing Officer made a higher disallowance without expressing dissatisfaction with the Assessee's initial disallowance. The Authorised Representative argued that the application of section 14A was not automatic and referenced a Supreme Court judgment requiring the Assessing Officer to be satisfied with the correctness of the claim before applying section 14A. The Departmental Representative supported the lower authorities. The Tribunal noted the significant investments and exempt dividend income of the Assessee. The working sheet provided by the Authorised Representative was scrutinized, revealing inconsistencies in estimating time spent and salary costs. The Assessing Officer's rejection of the Assessee's claim was based on the lack of satisfaction with the working provided. The Tribunal found the dissatisfaction expressed by the Assessing Officer to be objective and in compliance with the Supreme Court judgment. Consequently, the disallowance made by the Assessing Officer was upheld, and both the Revenue's appeal and the Assessee's cross objection were dismissed.

In conclusion, the Tribunal upheld the decision regarding the depreciation rate on UPS and the disallowance under section 14A of the Income Tax Act, 1961. The judgment was pronounced on March 20, 2018, at Chennai.