2021 (3) TMI 1429 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - sole objection raised by assessee is that rule 8D(2) of the Rules to section 14A of the Act has no application for the assessment year under consideration i.e. 2015-16 but the AO has wrongly applied - CIT(A) confirmed addition - HELD THAT - We find that the order passed by the Ld. CIT(A) needs to consider afresh. Thus we set aside the order passed by the Ld. CIT(A) and we remit the matter back to the AO for examination whether rule 8D(2) of the Rules applies to the present assessment year under consideration or not and decide the issue in accordance with law. Hence the first ground of appeal allowed for statistical purpose. Disallowance of depreciation on Printers UPS scanners and Router - @15% OR 60% - According to the AO the depreciation is only allowable at 15% - HELD THAT - As the computer accessories and peripherals cannot be used without computer as they are part of the computer system they are entitled to depreciation at a higher rate of 60%. We therefore respectfully following the decisions M/s. Cholamandalam MS General Insurance Company Ltd. 2019 (2) TMI 1075 - MADRAS HIGH COURT and BSES Yamuna Powers Ltd. held that the assessee is entitled for depreciation @ 60% - Decided in favour of assessee.

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Disallowance of depreciation claimed by the assessee.

Issue 1: Disallowance under section 14A of the Income Tax Act, 1961:
The appeal pertains to the disallowance under section 14A of the Income Tax Act, 1961, concerning the earning of exempted dividend income. The Assessing Officer (AO) observed that the assessee had earned dividend income, including income from overseas subsidiaries, and made investments in equity shares. The AO directed the assessee to explain why disallowance should not be made under section 14A of the Act. The assessee contended that no expenditure was incurred in earning the exempted dividend income. The AO disallowed an amount under section 14A, which was confirmed by the Ld. CIT(A). The appellant argued that Rule 8D(2) of the Rules, which was applied by the AO, was not applicable for the assessment year 2015-16. The Tribunal found merit in this argument and remitted the matter back to the AO for fresh consideration.

Issue 2: Disallowance of depreciation claimed by the assessee:
The second ground of appeal involved the disallowance of depreciation claimed by the assessee at 60% on Printers, UPS, scanners, and Router, which the AO restricted to 15%. The Ld. CIT(A) upheld the AO's decision. The appellant contended that the issue was covered by decisions of the Hon’ble Jurisdictional High Court and the Hon’ble Delhi High Court, which allowed higher depreciation rates for computer accessories and peripherals. The Tribunal, following the decisions of the High Courts, held that the assessee was entitled to depreciation at 60% for the mentioned assets. Consequently, this ground of appeal was allowed, resulting in a partial allowance of the assessee's appeal.

In conclusion, the Tribunal's judgment addressed the issues of disallowance under section 14A of the Income Tax Act, 1961, and the disallowance of depreciation claimed by the assessee. The Tribunal remitted the first issue back to the AO for fresh consideration due to the incorrect application of Rule 8D(2) of the Rules. On the second issue, the Tribunal allowed the appeal in part, granting the assessee the right to claim depreciation at a higher rate for specified assets based on relevant High Court decisions.