2018 (4) TMI 127 - AT - Income Tax

Rate of depreciation on UPS, Cash Dispenser and ATM Switch - Held that - We find that the issue in dispute squarely covered by the decision of the coordinate bench in AY 2013-14 wherein held the assessee is eligible for depreciation @ 60% on ATM and other related accessories. As regards depreciation @ 60% on UPS is concerned, we find that though the UPS can independently function without the assistance or integration with a computer and is an alternate mode of supply of power and does not depend on any assistance from a computer, the computer can function only on a power supply and when there is no power supply, it is connected to UPS so that it can work uninterruptedly and without losing the unsaved data when the power goes off. Therefore, UPS also can be considered as a computer if it is connected to the ATM Machine or a Computer and depreciation thereon is allowable at 60%. AO is directed to verify if the UPS are used for the functioning of the ATM and allow depreciation accordingly. Addition on account of interest receivable on NPAs - Held that - As the issue under consideration is identical to AY 2013-14, following the decision of the coordinate bench in the said year, we direct the AO to consider the interest on NPAs as income only in the year of receipt. Accordingly, the addition made on this count is hereby deleted and ground of assessee is allowed.

Summary

Issues:
1. Disallowance of depreciation on certain assets
2. Addition of interest not received on Non-Performing Assets (NPAs)
3. Disallowance of expenditure on Repairs and Maintenance as 'Capital Expenditure'

Issue 1: Disallowance of depreciation on certain assets
The appeal was filed against the CIT(A)'s order partially allowing the additions and disallowances made by the Assessing Officer (AO). The dispute revolved around the depreciation claimed on various assets by the assessee, a cooperative society engaged in banking. The CIT(A) allowed 60% depreciation on printers and scanners but upheld the AO's decision of 15% depreciation on Cash Dispenser, ATM Switch, MICR security printer, and UPS. The AR cited a previous decision by the ITAT Hyderabad in the assessee's case for AY 2013-14, supporting the claim for 60% depreciation on certain assets. The tribunal, following the precedent, directed the AO to decide in line with the directions given for AY 2013-14, allowing the appeal for statistical purposes.

Issue 2: Addition of interest not received on NPAs
The AO added the interest not received on NPAs to the taxable income of the assessee, a cooperative bank. The CIT(A) upheld the AO's decision based on section 43D of the Income Tax Act, stating that interest on NPAs should be recognized on an accrual basis. The AR referred to the ITAT Hyderabad's decision for AY 2013-14 in the assessee's case, supporting the non-taxability of interest on NPAs until received. Citing relevant case law and RBI guidelines, the tribunal held that interest on NPAs should only be recognized as income in the year of receipt, directing the AO to delete the addition and allowing the appeal for statistical purposes.

Issue 3: Disallowance of expenditure on Repairs and Maintenance
The ground related to the disallowance of expenditure on Repairs and Maintenance as 'Capital Expenditure' was dismissed as not pressed since the AR did not argue about it during the proceedings. Consequently, the tribunal dismissed this ground and allowed the appeal partly for statistical purposes. The judgment was pronounced on 28th March 2018 by the ITAT Hyderabad.