2003 (7) TMI 293 - AT - Income Tax

Depreciation - disallowance of office service charges - Year in which deductible - HELD THAT - The learned CIT(A) had observed that the assessee had received bill in respect of office service charges for the first time for a period of 19 months @ 1,000 and the payment was made by the assessee during this accounting year. Since the assessee had received bill in respect of office service charges and had made payment this year it was fairly an allowable deduction. We find that the liability has arisen during the year under appeal on receipt of bill. Therefore, we decline to interfere with the order of the learned CIT(A). Depreciation - The learned CIT(A) had rightly held that items mentioned at the assessment order fall under the category of plant and machinery and since each item was costing less than Rs. 5,000 the AO was directed to allow 100 per cent depreciation in respect of these items. We are of the opinion that the items mentioned at p. 3 of the assessment order fall under the category of plant and machinery and the learned CIT(A) has rightly taken recourse to first proviso to s. 32(1) of the IT Act which says provided that where actual cost of any machinery or plant does not exceed five thousand rupees, the actual cost thereof shall be allowed as a deduction in respect of the previous year in which such machinery or plant is first put to use by the assessee for the purposes of business or profession . We, therefore, decline to interfere with the order of the learned CIT(A). In the result, the appeal of the Department is dismissed whereas the cross- objection of the assessee is allowed in part.

Issues involved:
The judgment involves the deletion of disallowance of office service charges, relief granted on telephone expenses, depreciation on wooden partition and tin shed, direction to allow 100% depreciation on certain assets, depreciation on automatic voltage controller and UPS, disallowance of conveyance and vehicle maintenance expenses, partial relief on general expenses, and charging of interest under section 234B.

Deletion of disallowance of office service charges:
The CIT(A) observed that the liability arose during the year under appeal on receipt of the bill for office service charges, making it an allowable deduction. The Tribunal declined to interfere with the CIT(A)'s order.

Relief granted on telephone expenses:
The AO disallowed a portion of telephone expenses, which the CIT(A) further restricted. The Tribunal, considering the facts and circumstances, declined to interfere with the CIT(A)'s decision.

Depreciation on wooden partition and tin shed:
The CIT(A) directed the AO to allow 100% depreciation on tin shed and wooden structure, citing relevant IT Rules and a previous ITAT decision. The Tribunal upheld the CIT(A)'s order.

Direction to allow 100% depreciation on certain assets:
The CIT(A) correctly categorized the items mentioned in the assessment order as 'plant and machinery,' directing the AO to allow 100% depreciation as per the IT Act. The Tribunal agreed with this decision.

Depreciation on automatic voltage controller and UPS:
The CIT(A) allowed 100% depreciation on these items, considering them as energy-saving devices under the category of electrical equipment. The Tribunal upheld the CIT(A)'s decision.

Disallowance of conveyance and vehicle maintenance expenses:
The Tribunal found the disallowance made by the AO and sustained by the CIT(A) to be somewhat excessive, deciding to disallow only 1/6th of the total claim.

Partial relief on general expenses:
The Tribunal deleted the disallowance sustained by the CIT(A) on general expenses, as specific disallowable items were not pointed out by the AO or the CIT(A).

Charging of interest under section 234B:
Citing relevant court judgments, the Tribunal directed the deletion of interest under section 234B as there was no specific order by the AO to charge interest.

In conclusion, the Department's appeal was dismissed, while the cross-objection of the assessee was allowed in part.

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