2015 (12) TMI 381 - AT - Income Tax

Addition on account of interest of delayed payment of license fee - CIT(A) deleted the addition - Held that - There is a difference in the telecom policy which was upto July 1999 and new policy came into picture with effect from01/08/1999. The present licence fee is for financial year 2003-04, which is post July, 1999, therefore, the basic licence fee is allowable. It is also noted that for earlier year, even the Assessing Officer allowed the same as revenue expenditure. The allotment was under the old policy was allowed as revenue deduction and book entry was amortized as revenue fees. Even otherwise, the ratio laid down in CIT vs Bharti Hexacom Ltd. (2013 (12) TMI 1115 - DELHI HIGH COURT) supports the case of the assessee, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals), more specifically when, no contrary decision was brought to our notice. - Decided in favour of assessee. Addition on account of excess claim of depreciation on printers, UPS and other accessories - CIT(A) deleted the addition - Held that - Peripherals such as printers, scanners, NT server etc, are integral part of computer, therefore, eligible for depreciation at higher rate. See DCIT vs Datacraft India Ltd. (2010 (7) TMI 642 - ITAT, MUMBAI), DCIT vs BTA Cellcom Ltd. (2011 (9) TMI 127 - ITAT, New Delhi), M/s Weizmann Ltd. vs DCIT (2013 (12) TMI 779 - ITAT MUMBAI)& Expeditors International (India) Pvt. Ltd. vs Addl. CIT (2008 (8) TMI 399 - ITAT DELHI-F ). - Decided in favour of assessee.

Summary

Issues involved:
1. Addition of interest on delayed payment of license fee
2. Excess claim of depreciation on printers, UPS, and other accessories

Issue 1: Addition of interest on delayed payment of license fee

The Revenue challenged the deletion of an addition of Rs. 69,79,000 on account of interest of delayed payment of license fee. The Revenue argued that the expenditure incurred is of capital nature and therefore inadmissible under section 37(1) of the Income Tax Act, 1961. The Assessee defended the deletion by citing relevant case law, including ACIT vs Fascel Ltd. and Bharti Airtel Ltd. vs ACIT. The First Appellate Authority had allowed the claim based on the decision of the Hon'ble ITAT in the case of ACIT vs Fascel Ltd., which held that interest on overdue payments of license fee is allowable as revenue expenditure even if the license fee is treated as capital expenditure. The Tribunal upheld the decision, noting that the interest payment relates to the business of the assessee and is not capital expenditure. The Tribunal also considered the telecom policy changes and previous assessments supporting the allowance of license fee as revenue expenditure. The Tribunal dismissed the Revenue's ground, finding no infirmity in the Commissioner of Income Tax (Appeals)'s conclusion.

Issue 2: Excess claim of depreciation on printers, UPS, and other accessories

The second ground involved the deletion of an addition of Rs. 15,01,908 on account of an excess claim of depreciation on printers, UPS, and other accessories. The Revenue contended that these accessories were part of the power supply system and not entitled to a higher rate of depreciation. The Assessee argued that these items were integral parts of the computer system and depreciation should be allowed at the same rate as computers. The Commissioner of Income Tax (Appeals) supported the Assessee's view, citing various decisions that recognized peripherals like printers and UPS as integral parts of a computer system eligible for higher depreciation rates. The Tribunal found this issue to be squarely covered in favor of the Assessee by previous judgments, including DCIT vs Datacraft India Ltd. and Expeditors International (India) Pvt. Ltd. vs Addl. CIT. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner of Income Tax (Appeals)'s decision.

In conclusion, the Appellate Tribunal ITAT Mumbai ruled in favor of the Assessee on both issues, upholding the deletion of the additions related to interest on delayed payment of license fee and excess claim of depreciation on accessories. The Tribunal's detailed analysis considered relevant legal precedents and the specific circumstances of each issue, leading to the dismissal of the Revenue's appeal in both instances.