2015 (5) TMI 541 - AT - Income Tax

Disallowance of depreciation on computer accessories - assessee claimed depreciation @ 60%, which was restricted to 15% by the AO - CIT(A) deleted the disallowance - Held that - The issue in question is squarely covered by various decisions of different High Court including the decision of Hon ble Jurisdictional High Court of Delhi in the case of CIT Vs. BSES Rajdhani Powers Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT), allowing depreciation on computer accessories and peripherals @ 60%. - Decided in favour of assessee. Interest on payment of excise duty on supplementary bills disallowed - CIT(A) allowed the claim by holding that the impugned amount was not penal in nature - Held that - The interest represented the amount paid on account of excise duty on supplementary bills has not been disputed by the department. This was clearly compensatory in nature and could not be treated as penal in nature because the short fall in payment of excise duty was not qua the original bills but on account of raising of supplementary bills. We, therefore, do not find any reason to interfere with the order of ld. CIT(A).- Decided in favour of assessee. Disallowance of sales tax paid - CIT(A) deleted the disallowance - Held that - The deposit of the sales-tax was on account of non-submission of form C and VAT D1 and, therefore, this could not be held to be penal in nature. We concur with the finding of ld. CIT(A). - Decided in favour of assessee. Disallowance of Fine and Penalty - CIT(A) deleted the disallowance - Held that - AO has arbitrarily treated the above amount similar going by nomenclature of the head as fine & penalty and has disallowed the entire amount without looking into the details submitted by the assessee vide letter dated 26.11.2010 wherein the assessee has pointed out that the account constitutes sales Tax paid for Manesar pertaining to Financial Year 2003-2004 attributed to the Sales Tax payment raised on for non collection of Form -C, VA T C-4 etc. and the same be read as part of the explanation given in Grounds of Appeal No.4 above prayed to be deleted. Balance amount represents interest on supplementary bills on Excise Duty raised to its customer for unit 11/ Manesar plant. The amount was wrongly included under the head fine & penalty but should be a part of head Excise Duty and Sales Tax loss as contained in Grounds of Appeal NO.2 above - Decided in favour of assessee. Disallowance of expenses - CIT(A) deleted the disallowance - Held that - This being purely ad hoc disallowance made by AO without referring to any specific item of expenditure has been rightly deleted by the ld. CIT(A) Decided in favour of assessee. Disallowance u/s 14A - Held that - The main thrust of the assessee s submission is with regard to the computation of correct disallowance and, therefore, we admit the paper book filed by assessee and restore the matter to the file of AO for de novo adjudication in accordance with law. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Disallowance of depreciation on computer accessories.
2. Disallowance of excise duty and sales tax loss.
3. Disallowance of sales tax paid.
4. Disallowance of fine and penalty.
5. Ad hoc disallowance of various expenses.
6. Disallowance under section 14A.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Computer Accessories:
The Assessing Officer (AO) restricted the depreciation on computer peripherals, UPS, and cassettes to 15% instead of the claimed 60%. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's claim. The Tribunal found the issue covered by various High Court decisions, including the Delhi High Court in CIT Vs. BSES Rajdhani Powers Ltd., allowing 60% depreciation on computer accessories. Thus, the Tribunal upheld the CIT(A)'s order and dismissed the revenue's ground.

2. Disallowance of Excise Duty and Sales Tax Loss:
The AO disallowed Rs. 2,36,797/- debited as excise duty and sales tax loss, treating it as penal in nature. The CIT(A) allowed the claim, holding it as compensatory. The Tribunal found that the interest paid on supplementary bills was compensatory and not penal, as the shortfall was due to supplementary bills and not original bills. Thus, the Tribunal upheld the CIT(A)'s order and dismissed the revenue's ground.

3. Disallowance of Sales Tax Paid:
The AO added Rs. 9,78,958/- as penal in nature due to non-submission of relevant forms. The CIT(A) deleted the disallowance, stating it was compensatory for non-submission of Form-C and VAT D1, representing a commercial expediency. The Tribunal concurred with the CIT(A), noting the deposit was not penal but compensatory. Thus, the Tribunal upheld the CIT(A)'s order and dismissed the revenue's ground.

4. Disallowance of Fine and Penalty:
The AO disallowed Rs. 1,69,915/- debited as fine and penalty for violation of law. The CIT(A) deleted the penalty, following findings related to the excise duty and sales tax loss. The Tribunal noted the department did not dispute the assessee's submission that the amount included sales tax for non-collection of Form-C and interest on supplementary bills. Thus, the Tribunal upheld the CIT(A)'s order and dismissed the revenue's ground.

5. Ad Hoc Disallowance of Various Expenses:
The AO disallowed Rs. 5,00,000/- citing disproportionate expenses compared to the preceding year. The CIT(A) deleted the disallowance, noting the AO did not provide specific reasons and ignored the voluminous details submitted by the assessee. The Tribunal upheld the CIT(A)'s order, finding the disallowance purely ad hoc without specific reference to any expenditure item. Thus, the Tribunal dismissed the revenue's ground.

6. Disallowance under Section 14A:
The AO computed disallowance under section 14A at Rs. 1,05,29,574/-. The CIT(A) directed the AO to recompute the disallowance, excluding bill discounting charges and considering current liabilities for total assets. The Tribunal admitted additional evidence and restored the matter to the AO for de novo adjudication, considering the assessee's claims and relevant High Court decisions.

Revenue's Appeal for AY 2007-08:
The grounds raised were similar to those in AY 2008-09, involving sales tax addition, fabrication and general expenses, and interest on service tax and excise duty. The Tribunal found no change in facts and upheld the CIT(A)'s order for the same reasons as in AY 2008-09, dismissing the revenue's appeal.

Conclusion:
The Tribunal dismissed the revenue's appeals for AY 2007-08 and 2008-09 and allowed the assessee's appeal for AY 2008-09 for statistical purposes. The order was pronounced in open court on 22-04-2015.

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