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TMI Blog2021 (4) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... ubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience. ITA No. 315/Chd/2020 A.Y. 2016-17 2. The brief facts of the case pertaining to the assessment year 2016-17 are that the assessee engaged in the business as Multi System Operators and digital cable, filed its return of income for the assessment year under consideration declaring total income of Rs. 60,79,98,8000/-. The case of the assessee was selected for scrutiny and the AO passed assessment order determining the total income at Rs. 133,03,80,120/- inter alia making addition of Rs. 90,91,34,741/- on account of disallowance of lease rental claimed by the assessee on set top boxes taken on lease, addition of Rs. (-) 5,52,39,403/- on account of depreciation calculated on equipments procured from CISCO on lease hold basis, addition of Rs. 9,89,077/- on account of disallowance of interest attributable to work in progress and addition of Rs. 1,83,17,325/- u/s. 14A read with Rule 8D of the Income Tax Rules. 3. The assessee challenged the Assessment order before the ld. CIT(A). The ld. CIT(A) after hearing the assessee partly allowed the appeal and deleted the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Chandigarh Bench of the ITAT rendered in assessee's own cases for the assessment years 2012-13 to 2015-16. 6. At the outset, the ld. Counsel for the assessee submitted before us that this issue is covered in favour of the assessee by the decision of the Chandigarh Bench of the Tribunal in assessee's appeals for the assessment years 2012-13, 2013-14, 2014-15 and 2015-16. The ld. Counsel further submitted that since the ld. CIT(A) has allowed the claim of the assessee by following the order dated 06.05.2020 passed by the ITAT Chandigarh in assessee's appeals for the aforesaid assessment years, there is no merit in this ground of the revenue's appeal, therefore this ground of appeal is liable to be dismissed. 7. On the other hand, the ld. Departmental Representative (DR) fairly admitted that the jurisdictional Tribunal has decided the identical issue in favour of the assessee in assessee's cases for the previous years, however, supported the action of the AO. 8. We have gone through the material on record including the decision of the coordinate Bench rendered in assessee's cases referred above. As pointed out by the ld. Counsel for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e life of STB is covered in 3 to 4 years." Further, the assessing officer has also placed reliance on TRAI notification No. 1-19/2012-B&CS dated 27.3.2013 as reproduced in the assessment order as under: Sl. Particulars Tariff 1. Rent per month per set top box for the first three years Rs. 32.93 (exclusive of taxes) 2. After three years from the date of installation No rent. The set top box shall become the property of the subscriber except 3. Security Deposit (Adjustable) Rs. 800/- 4. Amount of Security Deposit refunded on return of the Set Top Box As per attached Table- B 5. Installation Charges Nil 6. Activation charges Nil 7. Smart Card/Viewing Card Charges Nil 8. Repair and Maintenance Charges for three years from the date of installation Nil The Assessing Officer has observed that as per the above tariff plan adopted by the assessee with the consumers, at the end of 3 years from the date of installation of the STB in consumer's premises, the consumer becomes the owner of the property. The assessing officer in this respect has observed that if the assessee was not the owner of the equipment, how can it pass on the owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . When the assessee no more remains the owner of the equipment, how can it claim depreciation on the same, which is sine qua non for claim of depreciation. The entire cost incurred by the assessee on the equipment is required to be squared off at the time of sale of equipment. Hence, under the circumstances, the assessee will be entitled either to the deduction of the cost of the equipment either as revenue expenditure and if the same is to be treated as capital asset, then depreciation cannot be postponed beyond the actual life/ownership of the equipment and the assessee will be entitled to the deduction of the written down value of the equipment at the end of 3 years from the sale price received. However, the peculiar facts and circumstances of the case are that it is the own case of the department that the life of the equipment is 3 years and that the asset in the hands of the assessee is a capital asset, then we cannot understand, how can the department press an argument for the grant of depreciation at a lower rate which may be extended beyond the life of the asset. Under these circumstances also, the assessee, in our view, is entitled to the higher rate of depreciation which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue came up before the coordinate Bench in assessee's appeals for the assessment years 2012-13 to 2015-16 and the coordinate Bench decided the same in favour of the assessee holding as under: "54. We have heard the rival contentions. We find merit in the contention of the Ld. counsel for assessee. The Ld. Counsel has demonstrated that there were sufficient own funds available with the assessee company in the form of share capital and reserves to the tune of Rs. 105 crores and Rs. 107 crores respectively to meet the advance given of Rs. 3.20 crores. The issue is now squarely covered by the various decisions of the High Courts as well as of the apex court of the country including that of the Hon'ble Jurisdictional High Court in the case of 'Bright Enterprises Pvt. Ltd. Vs. CIT, Jalandhar' (supra), 'CIT Vs. Kapsons Associates' (2016) 381 ITR 204 (P&H) and the latest decision of the Coordinate Bench of the Tribunal in the case of 'ACIT Vs. Janak Global Resources Pvt. Ltd.' ITA No. 470/Chd/2018 order dated 16.10.2018, holding that if the assessee is possessed of sufficient own interest free funds to meet the investments/interest free advances, then, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. 17. We have gone through the material available on record including the order passed by the coordinate Bench in assessee's appeal referred above. As pointed out by the ld. CIT(A) the assessee had no exempt income, during the previous year, however, the AO computed the disallowance of Rs. 1,83,17,325/- u/s. 14A read with rule 8D of the Income Tax Rules. The Ld. CIT(A) by following the decision of the Tribunal in assessee's appeals referred above, deleted the addition. We notice that this issue came up before the coordinate Bench for consideration in assessee's appeals for the assessment years 2014-15 and 2015-16 and the Bench deleted the addition made u/s. 14A of the Act holding as under: "76. Ground No. 11: Vide ground No. 11 the assessee has agitated the confirmation of disallowance made by the AO u/s. 14A of the Act in respect of the expenditure incurred for earning of tax-exempt income. The Ld. Counsel for the assessee has submitted that the assessee did not earn any tax exempt income during the year. Hence, no disallowance u/s. 14A was warranted. 1. We find that the issue is now squarely covered by the various decisions of the High Courts in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring assets from CISCO. The AO observing that since the assessee has claimed depreciation it cannot claim deduction u/s. 37 of the Act for the amount of lease rent paid to CISCO. The ld. CIT(A) confirmed the action of the AO by following the decision of the coordinate Bench in assessee's appeals for the assessment years 2012-13 to 2015-16. The findings of the coordinate Bench read as under:- "27. Considering the above clauses of the lease deed in question and in the light of proposition settled through various decisions of the higher courts and highest court of the country that when the terms of the contract looked into with the relevant circumstances that are determinative of the nature of the such contracts, we have no hesitation to hold that the transaction in the present case is that of a loan/Finance. After going through the various terms of the deed, we find that the only role of the lessor in the present arrangement is to finance the transaction of purchase of equipment, with the lessee selecting the equipment to be supplied by the dealer, using it for its expected economic life, paying back the entire cost of the equipment over the lease tenure and exercising all rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the assessee was eligible on the leased assets and the question regarding entitlement of claim of depreciation was never before it. Therefore, it cannot be said that the ITAT had decided the allowability of claim of CISCO of being owner of the asset. Even otherwise, if the CISCO has retained some ownership rights over the assets for the purpose of security of the loan amount and therefore, assuming, for the sake of arguments that the assets are not fully owned by the assessee, even then the provisions of section 32 will be attracted as it provides for claim of depreciation on assets owned fully or partly by an assessee. The contention of the Ld. Counsel that the Ld. CIT(A) himself has mentioned, "there is no doubt about the genuineness of the lease agreement", in our view, is of no help to the assessee. The impugned order is to be read as a whole, and a single line or word cannot be chosen to interpret a different meaning. What the Ld. CIT(A) has conveyed is that though the execution of the lease deed is not doubted but the real intention behind the deed is to be gathered from the various clauses of the deed and facts and circumstances of the case. Thus, we have no hesit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) are in accordance with the decision of the coordinate Bench rendered in assessee's appeals for the assessment years 2012-13 to 2015-16, we do not find any reason to interfere with the findings of the ld. CIT(A). Hence, we uphold the findings of the ld. CIT(A) and dismiss the Cross Objection filed by the assessee. ITA No. 316/Chd/2020 for A.Y. 2017-18 Ground No. 1 to 4 of this appeal are identical to Ground No. 1 to 5 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2016-17. Since there is no material change in the facts of the present case except the addition made by the AO, we do not find any reason to take a different view. Hence, consistent with our findings in Revenue's appeal for the AY 2016-17 we dismiss ground No. 1 to 4 of the present appeal for the same reasons. 2. Similarly, Ground No. 5 this appeal is identical to Ground No. 6 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2015-16. Since there is no change in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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