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TMI Blog2012 (8) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... as only of Rs. 3 crore. Moreover, the assessee during the year had earned profit of Rs. 14 crores. Therefore, capital addition during the year is easily explained out of own funds. Dis-allowance deleted Depreciation on UPS - Revenue contending 15% whereas assessee contended 15% - Held that:- Depreciation @ 60% has to be allowed in case of UPS. See CIT vs BSES Rajdhani Powers Limited (2010 (8) TMI 58 - DELHI HIGH COURT) Interest income received from fixed deposits kept as margin money for LCs / Bank Guarantee and also as security deposit with Maharashtra State Electricity Board (MSEB) - Business Income or Income from other sources - Held that:- Interest income has to be considered as incidental business income. See CIT Vs Indo Swiss Je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85.86 lakhs on loan funds of Rs. 12.09 crores giving the average interest rate of 7% per annum. He therefore attributed the interest towards capital WIP @ 7% of closing WIP of Rs. 3,38,20,296/- which came to Rs. 23,67,420/-. The AO accordingly disallowed the claim of interest to the extent of Rs. 23,67,420/. 2.1. The assessee disputed the decision of AO and submitted before the CIT (A) that the assessee had sufficient capital from internal accruals and therefore no borrowed funds were utilised for capital expenditure. It was also submitted that the interest also include bank charges and interest on vehicle loans which could not be considered towards capital WIP. The CIT (A) did not accept the contention raised. It was observed by him that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance on the findings given in the respective orders. 2.3. We have perused the record and considered the rival contentions accordingly. The dispute is regarding attribution of the part of interest expenditure of Rs. 85.86 lakhs towards the capital WIP. The assessee had borrowings as well as own funds which were mixed and therefore it was not possible to pin point as to which funds were utilised towards capital WIP. The lower authorities therefore attributed interest at the average rate of interest of 7% to the average WIP which included opening balance of Rs. 3.16 crores and thus made disallowance of Rs. 23,67,420/-. CIT (A) has confirmed the disallowance. It has been argued by the assessee that it had sufficient funds to explain the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an integral part of computer for which depreciation was allowable @ 60%. AO however did not accept the claim of the assessee. It was observed by him that UPS was an apparatus used for the purpose of backup of electric power to the electrical equipments, machines, computers etc. Its use was that of inverter which is an electrical equipment and not computer. He therefore allowed depreciation only @ 15%. The excess claim of Rs. 3,91,947/- was disallowed. In appeal, the assessee reiterated earlier submissions that UPS was purchased specifically for computers and was thus integral part of computer system which was required for smooth functioning of the computers and therefore depreciation @ 60% should be allowed. The assessee placed reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m network to computer. The Special Bench also noted that switches were shorter version of routers which perform similar functions within a limited sphere. The Special Bench therefore held that routers and switches could be classified as computer hardware when they are used along with the computer and accordingly held that depreciation has to be allowed @ 60%. The decision of Special Bench is therefore distinguishable and not applicable to the facts of the present case. However, Hon ble High Court of Delhi in case of CIT vs. Orient Ceramics Industries Ltd (supra) following the earlier judgment in case of CIT vs. BSES Yamuna Powers Ltd dated 31st August, 2010 in ITA No. 1267 have taken the view that depreciation @ 60% has to be allowed in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned DR on the other hand placed reliance on the orders of authorities below. 4.2. We have perused the records and considered the rival contentions carefully. The dispute is regarding the nature of interest income received by assessee from FDRs and other deposits. The authorities below treated the interest income as income from other sources following the judgment of Hon ble Supreme Court in case of Pandian Chemicals (supra). The said judgment in our view is distinguishable as the same is applicable to the cases where the income had to be considered as derived from a particular activity. The present case is not on the issue whether the interest income is derived from business. The issue is whether the interest can be considered as b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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