HT Media Ltd., New Delhi V. ACIT, New Delhi

ITA 340/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87108 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 16-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Additional depreciation; Earning of tax free income
• Section: 14A; 115JB; 37; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA NOS.2508, 2507/DEL/2013 ASSESSMENT YEARS : 2006-07 & 2007-08 ITA NO.986/DEL/2012 ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE 12(1), NEW DELHI. VS. HT MEDIA LTD., 18-20, KG MARG, NEW DELHI. PAN: AABCH3165P ITA NOS.2203 & 2202/DEL/2013 ASSESSMENT YEARS: 2006-07 & 2007-08 ITA NO.340/DEL/2012 ASSESSMENT YEAR : 2008-09 HT MEDIA LTD., 18-20, KG MARG, NEW DELHI. PAN: AABCH3165P VS. ACIT, CIRCLE 12(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.P. GUPTA, ADVOCATE DEPARTMENT BY : SHRI RIS GILL, CIT, DR ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 2 DATE OF HEARING : 16.03.2015 DATE OF PRONOUNCEMENT : 18 .03.2015 ORDER PER BENCH: THESE SIX CROSS APPEALS THREE BY THE ASSESSEE AN D EQUAL NUMBER BY THE REVENUE RELATE TO THE ASSESSMENT YEARS 2006 -07, 2007-08 AND 2008-09. SINCE SOME COMMON ISSUES ARE RAISED IN TH ESE APPEALS, WE ARE, THEREFORE, DISPOSING OF THESE APPEALS BY THIS CONSO LIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR : 2006-07 2. THE ONLY ISSUE RAISED BY THE REVENUE THROUGH VAR IOUS GROUNDS IS AGAINST THE DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) . THE FIRST G RIEVANCE IN THIS REGARD THROUGH GROUND NUMBER 1 IS AGAINST THE HOLDING BY THE LD.CIT(A) THAT: PROPORTIONATE DISALLOWANCE OUT OF INTEREST IS NOT TO BE MADE BY IGNORING THE FACT THAT THOUGH INVESTMENTS WERE MADE IN THE I MMEDIATELY PRECEDING ASSESSMENT YEAR OUT OF INTEREST BEARING F UNDS. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 3 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED RETURN DECLARING DIVIDEND INCOME OF RS.1,68,07,438/- WHICH WAS CLAIMED AS EXEMPT. NO DISALLOWANCE WAS OFFERED U/S 14A. ON B EING CALLED UPON TO EXPLAIN AS TO WHY NO DISALLOWANCE WAS OFFERED UNDER THIS SECTION, THE ASSESSEE SUBMITTED THAT ITS MAIN SOURCE OF INCOME W AS ADVERTISEMENT REVENUE, SALE OF NEWSPAPERS AND PERIODICALS AND, HE NCE, NO SPECIFIC EXPENSES WERE INCURRED FOR EARNING THE EXEMPT DIVID END INCOME. THE AO REJECTED THE ASSESSEES CONTENTION. APPLYING RU LE 8D(2)(III), THE AO MADE DISALLOWANCE EQUAL TO % OF THE AVERAGE OF THE VALUE OF INVESTMENTS. THIS RESULTED INTO AN ADDITION OF RS. 41,32,830/-. THE LD. CIT(A) CAME TO HOLD THAT RULE 8D WAS NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION. CONSIDERING THE TRIBUNAL ORDER PASSED FOR THE IMMEDIATELY PRECEDING YEAR, THE LD. CIT(A) UPHELD T HE DISALLOWANCE TO THE TUNE OF RS.8,11,948/- BY CONSIDERING THE TOTAL EXPENDITURE OF RS.2.88 CRORE INCURRED IN THE CURRENT YEAR, BEING THE COST OF FINANCE DEPARTMENT AND REMUNERATION OF CFO AND DIRECTORS AND, THEREAFT ER, ALLOCATING IT IN ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 4 THE RATIO OF EXEMPT INCOME TO TAXABLE INCOME. THE REMAINING AMOUNT OF DISALLOWANCE WAS DELETED IN THE FIRST APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSM ENT YEAR UNDER CONSIDERATION IS 2006-07 AND, HENCE, RULE 8D CANNOT BE APPLIED FOR MAKING DISALLOWANCE U/S 14A OF THE ACT. OUR VIEW I S FORTIFIED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF MAXOPP INVESTMENT LTD. VS. CIT (2012) 347 ITR 272 (DEL. IT HAS BEEN LAID DOWN IN THIS JUDGMENT THAT THE PROVISIONS OF RULE 8D CAN APPLY ONLY FROM THE AY 2008-09 AND IN A PERIOD ANTERIOR TO THAT, THE DI SALLOWANCE IS TO BE MADE ON A REASONABLE AND ACCEPTABLE METHOD OF APPOR TIONMENT. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE AO PRINCIPALLY MADE DISALLOWANCE UNDER CLAUSE (III) OF RULE 8D(2) TOWARDS ADMINISTRATIVE AND OTHER EXPENSES INCURRED IN EARNI NG THE EXEMPT INCOME, BY PICKING UP RATE OF DISALLOWANCE AT 0.5% OF THE AVERAGE OF THE VALUE OF INVESTMENTS. THERE IS NO SPECIFIC DIS ALLOWANCE MADE BY THE AO ON ACCOUNT OF INTEREST EXPENDITURE. IT IS MANIF EST THAT THE LD. CIT(A) ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 5 HAS SUSTAINED DISALLOWANCE BY APPORTIONMENT OF TOTA L OF SUCH EXPENDITURE IN THE RATIO OF EXEMPT INCOME TO TAXABL E INCOME. IN VIEW OF THE FACT, THAT NEITHER THE AO MADE ANY DISALLOWANC E ON ACCOUNT OF INTEREST UNDER SECTION 14A NOR DID THE LD. CIT(A) G O INTO THIS ASPECT BY MAKING ANY ENHANCEMENT ETC., GROUND NO.1 RAISED B Y THE REVENUE FOR SUSTENANCE OF DISALLOWANCE TOWARDS INTEREST IS HELD TO BE NOT ARISING FROM THE IMPUGNED ORDER. 5. AS REGARDS GROUND NOS.DFGH2 AND 3, THE REVENUE I S AGGRIEVED AGAINST THE APPORTIONMENT OF COMMON EXPENSES OF RS. 2.88 CRORE BETWEEN EXEMPT INCOME AND TAXABLE INCOME AND, FURTH ER, THE FAILURE OF THE LD. CIT(A) TO CONSIDER PROPORTIONATE AMOUNT OF DEPRECIATION ATTRIBUTABLE TO FURNITURE, FIXTURE, VEHICLES, PRINT ERS AND FAX MACHINE AS A PART OF THE BASE AMOUNT DETERMINED AT RS.2.88 CRORE . 6. IT IS MANIFEST FROM THE IMPUGNED ORDER THAT THE ALLOCATION OF TOTAL EXPENSES HAS BEEN MADE IN THE RATIO OF EXEMPT INCOM E TO TAXABLE INCOME. THE REVENUE ARGUED BEFORE THE TRIBUNAL IN THE PRECEDING YEAR THAT THE DISALLOWANCE U/S 14A OUGHT TO HAVE BEEN MA DE ON THE BASIS OF ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 6 EXEMPT INCOME AND TAXABLE INCOME AND NOT THE EXEMPT INCOME AND GROSS SALES. THE VIEWPOINT OF THE REVENUE CANVASSE D FOR THE IMMEDIATELY PRECEDING YEAR SEEMS TO HAVE BEEN ACCEP TED BY THE LD. CIT(A) WHO CHOSE TO APPORTION TOTAL EXPENSES IN THE RATIO OF EXEMPT INCOME TO TAXABLE INCOME INSTEAD OF GROSS SALES. THE LD. DR COULD NOT POINT OUT ANY OTHER MORE SUITABLE BASIS FOR APPORTI ONING EXPENSES TOWARDS EXEMPT INCOME. WE, THEREFORE, APPROVE THE V IEW TAKEN BY THE LD. CIT(A) IN MAKING APPORTIONMENT OF TOTAL EXPENSE S IN THE RATIO OF EXEMPT INCOME TO TAXABLE INCOME. 7. AS REGARDS THE THIRD GROUND, IT IS APPARENT THAT WHILE TAKING THE EXPENDITURE OF RS.2.88 CRORE LIABLE TO BE BIFURCATE D BETWEEN EXEMPT INCOME AND TAXABLE INCOME, THE LD. CIT(A) DID NOT C ONSIDER THE PROPORTIONATE AMOUNT OF DEPRECIATION, WHICH IS OTHE RWISE REQUIRED TO BE CONSIDERED. THE LD. DR ARGUED THAT SUCH PROPORTION ATE AMOUNT OF DEPRECIATION TO BE INCLUDED IN THE AMOUNT OF DISALL OWANCE WORKED OUT BY THE LD. CIT(A) AT RS.8,11,948/-, SHOULD NOT BE LESS THAN RS.50,000/-. THE LD. AR DID NOT RAISE ANY OBJECTION TO THIS. AS SUC H, ACCEPTING THE VIEW ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 7 POINT OF THE LD. DR, WE INCREASE THE DISALLOWANCE U /S 14A TO RS.8,61,948. WHEREAS GROUND NO.2 IS NOT ALLOWED, G ROUND NO.3 IS PARTLY ALLOWED. 8. GROUND NO. 4 IS AGAINST THE ADDITION OF DISALLOW ANCE OF RS.8,11,948 IN THE COMPUTATION OF INCOME U/S 115JB. THE LD. AR DID NOT AGITATE THIS ISSUE AND FAIRLY CONCEDED THAT THE AMOUNT DISALLOWA BLE U/S 14A SHOULD BE PROPERLY CONSIDERED WHILE COMPUTING INCOME U/S 1 15JB. WE, THEREFORE, DIRECT THAT THE AMOUNT OF DISALLOWANCE U /S 14A AT RS.8,61,948/- SHOULD BE ADDED WHILE COMPUTING BOOK PROFIT U/S 115JB. IT IS BUT NATURAL THAT ONLY SUCH AMOUNT IN THIS REG ARD CAN BE ADDED IN THE COMPUTATION U/S 115JB, WHICH IS EXEMPT U/S 14A. NOT HING OVER AND ABOVE THAT CALLS FOR FURTHER ADDITION ON THIS SCORE . 9. THE ONLY GROUND TAKEN BY THE ASSESSEE IN THIS AP PEAL ABOUT THE SUSTENANCE OF DISALLOWANCE OF DEPRECIATION AMOUNTIN G TO RS.68,000/- ON MOTOR VEHICLE WAS NOT PRESSED BY THE LD. AR. THE S AME IS, THEREFORE, DISMISSED. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 8 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND THAT OF THE ASSESSEE IS DISMISSED. ASSESSMENT YEAR : 2007-08 11. THE FIRST GROUND OF THE ASSESSEES APPEAL WAS N OT PRESSED. THE SAME IS, THEREFORE, DISMISSED. 12. THE ONLY OTHER GROUND WHICH SURVIVES IN THIS AP PEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF CLUB EXPENSES OF RS .5,37,384/-. 13. BRIEFLY STATED, THE FACTS APROPOS THIS GROUND A RE THAT THE ASSESSEE CLAIMED DEDUCTION FOR CLUB EXPENSES AMOUNTING TO RS .5,37,384/- WHICH WAS NOT ALLOWED BY THE AO. THE LD. CIT(A) SUSTAINE D THE DISALLOWANCE. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RECORD, WE FIND THAT THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. UNITED GLASS MANUFACTURING COMPANY LTD. 2012-TIOL-102-SC-IT, IN WHICH IT HAS BEEN HELD THAT THE CLUB MEMBERSHIP FEE FOR EMPLOYEE S INCURRED BY THE ASSESSEE IS BUSINESS EXPENDITURE ALLOWABLE U/S 37 O F THE ACT. THE FACTS ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 9 OF THE INSTANT CASE ARE ON ALL FOURS WITH THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THIS CASE. WE, THEREFORE, ALLOW THIS GROUND OF APPEAL. 15. THE FIRST ISSUE RAISED BY THE DEPARTMENT IN ITS APPEAL THROUGH SOME GROUNDS IS AGAINST THE REDUCTION IN THE AMOUNT OF D ISALLOWANCE U/S 14A. 16. BRIEFLY STATED, THE FACTS OF THE GROUND ARE THA T THE ASSESSEE MADE INVESTMENT DURING THE YEAR UNDER CONSIDERATION IN T HE SECURITIES YIELDING EXEMPT INCOME AND EARNED DIVIDEND OF RS.2,37,38,831 /-, WHICH WAS CLAIMED AS EXEMPT. NO DISALLOWANCE WAS OFFERED U/S 14A. THE REASONS ADVANCED DURING THE COURSE OF THE ASSESSMENT PROCEE DINGS FOR NOT OFFERING ANY DISALLOWANCE UNDER THIS SECTION WERE R EJECTED BY THE AO VIDE PARA 3.3 OF THE ASSESSMENT ORDER. THEREAFTER , THE AO INVOKED RULE 8D FOR MAKING DISALLOWANCE U/S 14A. THE FIRST DISA LLOWANCE WAS MADE AT RS.1,04,89,137/- TOWARDS INTEREST AND THE SECOND DISALLOWANCE OF RS.1,09,34,433/-, BEING % OF THE AVERAGE VALUE OF INVESTMENT AS PER RULE 8D. THE TOTAL DISALLOWANCE WAS MADE U/S 14A A T RS.2,14,23,570/-. THE LD. CIT(A), FOLLOWING THE VIEW TAKEN BY HIM IN APPORTIONING THE ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 10 TOTAL EXPENSES IN THE RATIO OF EXEMPT INCOME TO TAX ABLE INCOME, SUSTAINED DISALLOWANCE TOWARDS ADMINISTRATIVE AND O THER EXPENSES AT RS.8,39,534/-. THE OTHER PART DISALLOWED BY THE AO TOWARDS INTEREST WAS DELETED BY NOTING IN THE LAST PARA ON PAGE 5 OF THE IMPUGNED ORDER THAT NO BORROWED FUNDS WERE UTILIZED BY THE COMPANY IN I NVESTMENTS MADE BY IT AND SUCH INVESTMENTS WERE MADE OUT OF OWN FU NDS OF THE COMPANY. ACCORDINGLY, NO INTEREST WAS DISALLOWED. THE REVENUE IS AGGRIEVED AGAINST THE REDUCTION IN THE ADDITION. 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE DISALLOWANCE U /S 14A MADE BY THE AO IN THIS YEAR HAS TWO COMPONENTS VIZ., INTEREST A ND OTHER EXPENSES. IN SO FAR AS INTEREST ASPECT IS CONCERNED, THE AO MADE DISALLOWANCE OF INTEREST AMOUNTING TO RS.1,04,89,137/- BY APPLYING RULE 8D(2)(II), WHICH THE LD. CIT(A) DELETED BY OBSERVING THAT THE ASSESSEE HAD ITS OWN CAPITAL TO FINANCE THE INVESTMENT IN SECURITIES FET CHING EXEMPT INCOME. THE FINDING RECORDED BY THE LD. CIT(A) THAT INVESTM ENT IN SECURITIES YIELDING EXEMPT INCOME WAS MADE OUT OF OWN CAPITAL OF THE ASSESSEE AND ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 11 NO INTEREST BEARING FUNDS WERE UTILIZED, HAVE NOT B EEN CONTROVERTED BY THE LD. DR WITH ANY COGENT MATERIAL OR EVIDENCE. TH E QUESTION ARISES, AS TO WHETHER ANY DISALLOWANCE TOWARDS INTEREST CAN BE MADE U/S 14A IN THE ABSENCE OF ANY INVESTMENT HAVING BEEN MADE IN SUCH SECURITIES OUT OF INTEREST BEARING FUNDS. 18. RECENTLY, THE HON'BLE BOMBAY HIGH COURT IN CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 (BOM) HAS HELD THAT NO DISALLOWANCE OF INTEREST CAN BE MADE U/S 14A IF THE ASSESSEE'S OWN CAPITAL I S MORE THAN THE INVESTMENTS FETCHING EXEMPT INCOME. SIMILAR VIEW HA S BEEN TAKEN BY THE HON'BLE GUJARAT HIGH COURT IN CIT VS. SUZLON ENERGY LTD. (2013) 354 ITR 630 (GUJ) . IN VIEW OF THESE PRECEDENTS, IT BECOMES OSTENSIBL E THAT THERE CAN BE NO QUESTION OF DISALLOWANCE OF INTERES T U/S 14A IN THIS CASE BECAUSE THE AMOUNT OF SHARE-HOLDERS FUND IS MUCH HI GHER THAN THE AMOUNT OF INVESTMENTS YIELDING EXEMPT INCOME. AS SU CH, WE UPHOLD THE VIEW TAKEN BY THE LD. CIT(A) IN DELETING DISALLOWAN CE U/S 14A ON ACCOUNT OF INTEREST. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 12 19. THE SECOND COMPONENT OF THE DISALLOWANCE IS O UT OF THE ADMINISTRATIVE AND OTHER EXPENSES, MADE BY THE AO A T % OF THE AVERAGE VALUE OF INVESTMENTS AND REDUCED BY THE LD. CIT(A) TO RS.8,93,534/-. IN THIS REGARD, WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE SAME YARDSTICK OF APPORTIONING TOTAL EXPENDITUR E IN THE RATIO OF EXEMPT INCOME : TAXABLE INCOME, WHICH HAS BEEN UPHE LD BY US FOR THE EARLIER YEAR. WE, THEREFORE, APPROVE THE APPORTION MENT OF EXPENSES IN THE RATIO OF EXEMPT INCOME TO TAXABLE INCOME. HOWE VER, AS REGARDS THE NON-CONSIDERATION OF DEPRECIATION ON FURNITURE, FIX TURE, VEHICLE, ETC., WE INCREASE THE AMOUNT OF DISALLOWANCE BY RS.1 LAC TO RS.9,39,534/-. THIS DISPOSES OF GROUND NOS.1 TO 3 TAKEN BY THE REVENUE. 20. AS REGARDS, THE FIFTH GROUND, THE LD. AR DID NO T AGITATE THE ADDITION OF RS.9,39,534/- IN THE COMPUTATION OF BOOK PROFIT U/S 115JB RELATABLE TO EXEMPT DIVIDEND INCOME. THIS GROUND IS DISPOSED OF ACCORDINGLY. 21. THE FOURTH GROUND OF THE REVENUES APPEAL IS AG AINST THE DIRECTION OF THE LD. CIT(A) TO EXCLUDE THE FRINGE BENEFIT TAX OF RS.3.65 CRORE FROM THE NET PROFIT WHILE COMPUTING BOOK PROFIT U/S 115J B OF THE ACT. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 13 22. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE TH AT THE ASSESSEE DEDUCTED AMOUNT OF FRINGE BENEFIT TAX AMOUNTING TO RS.3.65 CRORE IN THE COMPUTATION OF BOOK PROFIT FOR THE PURPOSES OF SECT ION 115JB OF THE ACT. THE AO DID NOT APPROVE THE ACTION OF THE ASSESSEE. HOWEVER, THE LD. CIT(A), RELYING ON CBDT CIRCULAR 08/2005 DATED 29. 8.2005, ACCEPTED THE ASSESSEES CLAIM. 23. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE DECISI ON TAKEN BY THE LD. CIT(A) ACCORDS WITH THE MANDATE OF CIRCULAR ISSUED BY THE CBDT. THE LD. DR WAS FAIR ENOUGH TO CONCEDE THIS POSITION. T HIS GROUND IS, THEREFORE, NOT ALLOWED. 24. GROUND NO. 6 IS AGAINST THE DELETION OF DISALLO WANCE OF TRAINING EXPENSES AMOUNTING TO RS.2,08,90,762/-. THE AO MAD E THE DISALLOWANCE OF TRAINING EXPENSES AMOUNTING TO RS.2 .08 CRORE INCURRED BY THE ASSESSEE, BY TREATING IT AS A CAPITAL EXPEN DITURE. THE LD. CIT(A), HOWEVER, DIRECTED TO CONSIDER IT AS REVENUE EXPENDI TURE. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 14 25. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE VIEW TAKEN BY THE LD. CIT(A) ACCORDS WITH THE JUDGMENT DATED 27.4.2010 OF THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SOLUS PHARMACEUTICALS LTD ., IN WHICH IT HAS BEEN HELD THAT THE TRAINING EXPENSES ARE TO BE ALLO WED AS REVENUE EXPENSES. WE, THEREFORE, UPHOLD THE VIEW TAKEN BY THE LD. CIT(A). THIS GROUND FAILS. 26. THE ONLY OTHER GROUND WHICH SURVIVES FOR OUR CO NSIDERATION IS AGAINST THE ALLOWING OF DEPRECIATION ON COMPUTER PE RIPHERALS AT 60%. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESS EE CLAIMED DEPRECIATION ON COMPUTER PERIPHERALS @ 60% WHICH WAS RESTRICTED BY THE AO TO 15%. THE LD. CIT(A), FOLLOWING THE JUDGMENT OF THE HONB LE JURISDICTIONAL HIGH COURT IN CIT VS. BSES YAMUNA POWERS LTD. 2010-TIOL-636-HC- DEL-IT , ACCEPTED THE ASSESSEES CLAIM. 28. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE LD. CIT(A) HAS TAKEN AN APPROPRIATE ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 15 DECISION ON THIS ISSUE BY DRAWING STRENGTH FROM THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT WHICH IS BINDING ON ALL T HE AUTHORITIES UNDER ITS JURISDICTION. THE HONBLE DELHI HIGH COURT IN THE CASE OF BSES YAMUNA POWERS LTD .(SUPRA), HAS HELD THAT DEPRECIATION ON COMPUTER PE RIPHERALS SHOULD BE ALLOWED AT 60% INSTEAD OF 15%. WE, THER EFORE, UPHOLD THE VIEW TAKEN BY THE LD.CIT(A) ON THIS ISSUE. 29. IN THE RESULT, THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE PARTLY ALLOWED. ASSESSMENT YEAR 2008-09 30. GROUND NO.1 OF THE REVENUES APPEAL AND GROUND NO.1 OF THE ASSESSEES APPEAL IS AGAINST DISALLOWANCE U/S 14A. 31. BRIEFLY STATED, THE FACTS OF THESE GROUNDS ARE THAT THE ASSESSEE EARNED INCOME FROM MUTUAL FUND INVESTMENTS AMOUNTIN G TO RS.2,94,38,025/- WHICH WAS CLAIMED AS EXEMPT. THE ASSESSEE OFFERED DISALLOWANCE AT RS.3 LAC IN THE RETURN OF INCOME ON ACCOUNT OF EXPENSES DISALLOWABLE U/S 14A. THE AO, DURING THE COURSE OF ASSESSMENT ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 16 PROCEEDINGS, REQUIRED THE ASSESSEE TO SHOW CAUSE A S TO WHY DISALLOWANCE BE NOT COMPUTED AS PER RULE 8D. IN RE SPONSE TO THAT, THE ASSESSEE SUBMITTED THAT NO EXPENDITURE WAS INCURRED FOR EARNING DIVIDEND INCOME. THE AO OBSERVED THAT SEVERAL EXPE NSES WERE INCURRED BY THE ASSESSEE IN RELATION TO THE EXEMPT INCOME WH ICH WERE NOT OFFERED FOR DISALLOWANCE. REJECTING THE ASSESSEES CONTENT ION, THE AO COMPUTED DISALLOWANCE AS PER RULE 8D AMOUNTING TO RS.8,97,49 ,579/- CONSISTING OF THREE AMOUNTS, NAMELY, RS.3 LAC, BEING THE AMOUNT O F EXPENDITURE DIRECTLY INCURRED RELATING TO EXEMPT INCOME UNDER C LAUSE (I) OF RULE 8D (2); RS.6,86,27,884/-, BEING THE INTEREST EXPENDITU RE INCURRED UNDER CLAUSE (II) OF RULE 8D(2); AND RS.2,08,21,695/-, B EING THE AMOUNT EQUAL TO 0.5% OF THE AVERAGE VALUE OF INVESTMENTS UNDER C LAUSE (III) OF RULE 8D(2). WHEN THE MATTER CAME UP BEFORE THE LD. CIT(A ), HE HELD THAT RULE 8D IS APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSI DERATION. HE UPHELD THE DISALLOWANCE AT 0.5% AMOUNTING TO RS.2,08,21,69 5/- AS PER CLAUSE (III) OF RULE 8D(2). THE OTHER ADDITIONS WERE DELE TED. BOTH THE SIDES ARE IN APPEAL ON THEIR RESPECTIVE STANDS. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 17 32. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSMENT YEAR UNDER CONS IDERATION IS 2008-09. AS PER THE JUDGMENT OF THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF MAXOPP INVESTMENT (SUPRA), RULE 8D IS APPLICABLE FROM THIS ASSESSMENT YEAR ONWARDS. AS SUCH, THE DISALLOWANCE , IF ANY, U/S 14A IS REQUIRED TO BE COMPUTED AS PER RULE 8D. 33. THE LD.AR ARGUED THAT THE AO DID NOT RECORD ANY SATISFACTION ABOUT THE ASSESSEE NOT PROPERLY OFFERING EXPENDITURE INCU RRED IN RELATION TO THE EXEMPT INCOME AT RS.3 LAC AND, HENCE, THE ENTIRE AD DITION BE DELETED. WE ARE NOT CONVINCED WITH THE SUBMISSION ADVANCED O N BEHALF OF THE ASSESSEE. IT IS OBVIOUS FROM PARA 3.3.1 OF THE ASS ESSMENT ORDER THAT THE AO RECORDED A PROPER SATISFACTION ABOUT THE ASSESSE E INCURRING EXPENSES IN RELATION TO THE EXEMPT INCOME AND NOT OFFERING T HEM FOR DISALLOWANCE. AT THIS STAGE, IT WOULD BE APPOSITE TO REPRODUCE TH E CONTENTS OF PARA 3.3.1 OF THE ASSESSMENT ORDER, AS UNDER:- 3.3.1 IT IS FURTHER OBSERVED THAT THE EARNING OF E XEMPT INCOME IS NOT IN NATURE OF PASSIVE ACTIVITY HAVING NO INPUT. IN ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 18 FACT IN PRESENT SITUATION MAKING OF INVESTMENT, MAI NTAINING OR CONTINUING INVESTMENT AND TIME OF EXIT FROM INVESTM ENT ARE WELL INFORMED AND WELL COORDINATED MANAGEMENT DECIS IONS INVOLVING NOT ONLY INPUTS FROM VARIOUS SOURCE BUT A LSO ACUMEN OF SENIOR MANAGEMENT FUNCTIONARIES. THEREFO RE, COST IS INBUILT INTO EVEN SO CALLED PASSIVE INVESTMENT . THERE ARE INCIDENTAL EXPENDITURES OF COLLECTION, TELEPHONE, F OLLOW UP, RESEARCH, ETC. THEREFORE EXPENSES IN RELATION TO E ARNING OF INCOME ARE EMBEDDED IN INDIRECT EXPENSES. THE INVESTMENT MADE, BEING A CONSCIOUS DECISION AND HAVING DEPLOYMENT OF FUNDS CLEARLY BRINGS INTO PICTURE EXP ENDITURE BY WAY OF COST OF FUNDS INVESTED. COMPOSITE FUND HAVING COST NEEDS TO BE SPREAD SO AS TO APPORTION APPROPRIATE COST OF FU NDS INVESTED IN THE ACTIVITY LENDING TO CARRYING OF EXEMPT INCOME. 34. IT CAN BE FURTHER NOTICED THAT THE AO ALSO CONT INUED WITH HIS RECORDING OF SATISFACTION IN PARA 3.6, READING AS UNDER:- 3.6 IN VIEW OF THE FACTS AND CIRCUMSTANCES AND LEGAL POSITION ON THE ISSUE AS DISCUSSED ABOVE, I AM SATI SFIED THAT ASSESSEE HAS INCURRED EXPENSES TO MANAGE ITS INVEST MENTS WHICH MAY YIELD EXEMPT INCOME, AND ASSESSEE GROSSLY FAILED ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 19 TO CALCULATE SUCH EXPENSES IN A REASONABLE MANNER T O ASCERTAIN THE TRUE AND CORRECT PICTURE OF ITS INCOM E AND EXPENSES. THEREFORE, UNDERSIGNED IS LEFT WITH NO O PTION EXCEPT TO COMPUTE SUCH EXPENSES AS PER THE PROVISIO NS OF STATUTE. ACCORDINGLY, DISALLOWANCE IS DONE WHILE A PPLYING SECTION 14-A R.W. RULE 8D AS UNDER:- 35. IN VIEW OF THE ABOVE CATEGORICAL SATISFACTION R ECORDED BY THE AO, THERE CAN BE NO SCOPE FOR ACCEPTING THE ASSESSEES CONTENTION THAT THE ADDITION SO MADE U/S 14A READ WITH RULE 8D BE DELET ED FOR WANT OF RECORDING OF PROPER SATISFACTION BY THE AO. 36. THE LD. AR ARGUED THAT THE LD. CIT(A) FAILED IN SUSTAINING THE DISALLOWANCE AT 0.5% OF THE AVERAGE VALUE OF INVEST MENT TOWARDS ADMINISTRATIVE AND OTHER EXPENSES. WE ARE NOT CONV INCED WITH THE SUBMISSION ADVANCED BY THE LD. AR ON THIS SCORE. T HE OBVIOUS REASON IS THAT WHEN RULE 8D HAS COME INTO THE PICTURE AND HAS BECOME APPLICABLE, THE DISALLOWANCE IS REQUIRED TO BE COMPUTED WITH RE FERENCE TO THE MANDATE GIVEN IN RULE 8D, IF THE ASSESSEES COMPUTA TION OF DISALLOWANCE TURNS OUT TO BE INCORRECT, AS HAS HAPPENED IN THIS CASE. IT IS ONLY TO GET ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 20 RID OF THE RIGOROUS EXERCISE OF IDENTIFYING THE AMO UNTS INCURRED IN RELATION TO THE EXEMPT INCOME THAT THE DELEGATED LE GISLATURE HAS PRESCRIBED THE MANNER OF COMPUTATION OF DISALLOWANC E AS PER RULE 8D. SINCE THE LD. CIT(A) HAS SUSTAINED DISALLOWANCE UND ER CLAUSE (III) OF RULE 8D(2) AT 0.5% OF THE AVERAGE VALUE OF INVESTMENT, W HICH AMOUNT IS OBVIOUSLY MUCH LESS THAN THE ACTUAL EXPENDITURE INC URRED AND CLAIMED AS DEDUCTION BY THE ASSESSEE, WE FAIL TO APPRECIATE TH E CONTENTION FOR REDUCING THE AMOUNT OF SUCH DISALLOWANCE TO A LOWER LEVEL ON AN AD HOCISM . WE UPHOLD THE DISALLOWANCE UNDER CLAUSE (III) OF RULE 8D(2) AT RS.2,08,21,695/-. 37. AS REGARDS THE REVENUES CONTENTION ABOUT THE D ELETION OF DISALLOWANCE OF INTEREST UNDER CLAUSE (II) OF RULE 8D(2), WE FIND THAT THE AO COMPUTED DISALLOWANCE AT RS.6.86 CRORE, WHICH WA S DELETED BY THE LD. CIT(A), IMPLIEDLY ON THE PREMISE OF THE ASSESS EES OWN CAPITAL AND INTEREST BEARING FUNDS WERE MORE THAN THE INVESTMEN T IN THE SECURITIES YIELDING EXEMPT INCOME. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 21 38. RECENTLY, THE HONBLE DELHI HIGH COURT IN CIT VS. TAIKISHA ENGINEERING INDIA LTD. HAS LAID DOWN VIDE ITS JUDGMENT DATED 25.11.2014 THAT IF RULE 8D APPLIES THEN THE ASSESS EES CLAIM THAT INTEREST IS NOT DISALLOWABLE ON THE GROUND OF OWN FUNDS, IS NOT ACCEPTABLE. IT HAS BEEN LAID DOWN BY THEIR LORDSHIPS THAT : ` THE DECISIONS RELIED UPON BY THE TRIBUNAL IN THE CASE OF TIN BOX CO. 260 ITR 637 (DEL), RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOM.), SUZLON ENERGY LTD. 354 ITR 630 (GUJ) AND EAST INDIA PHARMACEUTICAL WORKS L TD. 224 ITR 624 (SC) COULD NOT BE NOW APPLICABLE, IF WE APPLY AND C OMPUTE THE DISALLOWANCE UNDER RULE 8D OF THE RULES. THE SAID RULE IN SUB RULE (2) SPECIFICALLY PRESCRIBES THE MODE AND METHOD FOR COM PUTING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THUS, THE INTERPRETATION OF CLAUSE (II) TO SUB RULE (2) TO RULE 8D OF THE RULES BY THE CIT(A) AND THE TRIBUNAL IS NOT SUSTAINABLE. THE SAID CLAUSE EXPRES SLY STATES THAT WHERE THE ASSESSEE HAS INCURRED EXPENDITURE BY WAY OF INT EREST IN THE PREVIOUS YEAR AND THE INTEREST PAID IS NOT DIRECTLY ATTRIBUT ABLE TO ANY PARTICULAR INCOME OR RECEIPT THEN THE FORMULA PRESCRIBED WOULD APPLY. UNDER ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 22 CLAUSE (II) TO RULE 8D(2) OF THE RULES, THE ASSESSING OFFICER IS REQUIRED TO EXAMINE WHETHER THE ASSESSEE HAS INCURRED EXPEND ITURE BY WAY OF INTEREST IN THE PREVIOUS YEAR AND SECONDLY WHETHER THE INTEREST PAID WAS DIRECTLY ATTRIBUTABLE TO PARTICULAR INCOME OR RECEI PT. IN CASE THE INTEREST PAID WAS DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR IN COME OR RECEIPT, THEN THE INTEREST ON LOAN AMOUNT TO THIS EXTENT OR IN EN TIRETY AS THE CASE MAY BE, HAS TO BE EXCLUDED FOR MAKING COMPUTATION AS PE R THE FORMULA PRESCRIBED . IN VIEW OF THIS JUDGMENT OF THE HONBLE DELHI H IGH COURT, WHICH IS A BINDING PRECEDENT FOR THE DELHI BENCHES OF THE TRIBUNAL, IT IS MANIFEST THAT THE DISALLOWANCE ON ACCOUNT OF INTERE ST UNDER RULE 8D CANNOT BE DELETED SIMPLY ON THE GROUND THAT THE ASS ESSEES CAPITAL AND INTEREST FREE FUNDS ARE MORE THAN THE FUNDS INVESTE D IN SECURITIES YIELDING EXEMPT INCOME. THIS JUDGMENT IS RELEVANT IN THE CO NTEXT OF RULE 8D, WHICH IS APPLICABLE FROM THE AY 2008-09. THUS, THE REASONING GIVEN BY US FOR DELETING SUCH DISALLOWANCE U/S 14A ON ACCOUN T OF INTEREST FOR THE IMMEDIATELY PRECEDING YEAR, BEING THE OWN FUNDS AND INTEREST FREE FUNDS HIGHER THAN THE AMOUNT OF INVESTMENTS, CANNOT BE AP PLIED TO THE A.Y. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 23 2008-09 ONWARDS, WHEN THE MANDATE OF RULE 8D HAS CO ME INTO FORCE. ERGO, WE FIND NO FORCE IN THE CONTENTION OF THE LD. AR AND THE RESULTANT VIEW CANVASSED BY THE LD. CIT(A) THAT SINCE OWN CAP ITAL AND INTEREST FREE FUNDS EXCEEDED THE AMOUNT OF INVESTMENTS IN SECURIT IES YIELDING EXEMPT INCOME, HENCE NO DISALLOWANCE BE MADE. IN OUR CONS IDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGN ED ORDER ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO TH E FILE OF AO FOR DECIDING THIS ASPECT AFRESH, IN CONFORMITY WITH THE LAW LAID DOWN IN TAIKISHA ENGINEERING (SUPRA), AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 39. IN SO FAR AS THE FIRST COMPONENT OF DISALLOW ANCE AT RS.3 LAC IS CONCERNED, WE FIND THAT IT IS THIS AMOUNT WHICH WAS OFFERED BY THE ASSESSEE VOLUNTARILY AS DISALLOWABLE U/S 14A. WHEN THE ASSESSEE OFFERED THIS AMOUNT FOR DISALLOWANCE, THE ACTION OF THE AO IN AGAIN ADDING THIS AMOUNT UNDER CLAUSE (I) OF RULE 8D AMOUNTED TO DOUB LE DISALLOWANCE TO THIS EXTENT. WE, THEREFORE, ORDER FOR THE DELETION OF ADDITION TO THIS ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 24 EXTENT AND DIRECT THAT THIS AMOUNT SHOULD BE REDUCE D FROM THE ULTIMATE AMOUNT DETERMINED AS DISALLOWABLE U/S14A. 40. BEFORE PARTING WITH THIS ISSUE, WE WANT TO MAKE IT CLEAR THAT THE ASSESSEE EARNED TOTAL EXEMPT INCOME AT RS. 2.94 CRO RE AND THE DISALLOWANCE MADE BY THE AO STANDS AT RS.8.97 CRORE . THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. HOLCIM INDIA PVT. LTD ., VIDE ITS JUDGMENT DATED 17.10.14, REPORTED IN (2014) 90 CCH 681 (DELHI HIGH COURT) AND IN A COUPLE OF OTHER JUDGMENTS HAS HELD THAT TH E DISALLOWANCE U/S 14A CANNOT EXCEED THE AMOUNT OF EXEMPT INCOME. THE AO IS, THEREFORE, DIRECTED TO TAKE INTO CONSIDERATION THE RATIO OF THESE JUDGMENTS WHILE COMPUTING FINALLY DISALLOWABLE AMOUNT U/S 14A . THE GROUND TAKEN BY THE ASSESSEE IS DISMISSED AND THAT BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 41. GROUND NO. 3 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.2,26,02,315/- MADE BY THE AO ON ACCO UNT OF CAPITALIZATION OF TRAINING EXPENSES. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 25 42. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THIS GROUND ARE, MUTATIS MUTANDIS , SIMILAR TO THOSE OF GROUND NO. 6 OF THE REVENUES APPEAL FOR ASSESSMENT YEAR 2007-08. FOLLO WING THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER IN DELETING THIS DISALLOWANCE. THIS GROUND IS NOT ALLOWED. 43. GROUND NO. 4 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.15,14,019/- MADE BY THE AO ON ACCOUN T OF CLUB EXPENSES. HERE AGAIN WE FIND THAT SIMILAR ISSUE HAS BEEN DECI DED BY US IN THE ASSESSEES APPEAL FOR THE AY 2007-08. FOLLOWING TH E VIEW TAKEN HEREINABOVE, WE UPHOLD THE ACTION OF THE LD. CIT(A) IN DELETING THIS DISALLOWANCE. 44. THE ONLY ISSUE WHICH SURVIVES IN THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.1,04,38,807/- MADE B Y THE AO ON ACCOUNT OF DEPRECIATION ON COMPUTER PERIPHERALS. THE ASSES SEE IN GROUND NO. 2 IS AGAINST NOT ALLOWING 60% DEPRECIATION ON COMPUTER TO PLATE (CTP). 45. THE FACTS OF THESE GROUNDS ARE THAT THE ASSESS EE CLAIMED DEPRECIATION ON COMPUTER PERIPHERALS, UPS, ETC., @ 60%, WHICH T HE AO REDUCED TO ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 26 15%. APART FROM THAT, THE ASSESSEE CLAIMED ADDITIO NAL DEPRECIATION @ 20% ON COMPUTER TO PLATE WHICH WAS INSTALLED IN THE FACTORY. THE AO REJECTED THE ASSESSEES CONTENTION FOR ALLOWING DEP RECIATION ON COMPUTER PERIPHERALS AT 60% AND ALSO REPELLED THE ASSESSEES CONTENTION FOR ALLOWING ADDITIONAL 20% DEPRECIATION ON CTP. THE LD. CIT(A) ACCEPTED THE ASSESSEES CLAIM OF ALLOWING DEPRECIATION @ 60% ON COMPUTER PERIPHERALS EXCEPT CTP, ON WHICH RATE OF DEPRECIAT ION WAS RESTRICTED TO 15%, BUT, ADDITIONAL DEPRECIATION @ 20% WAS GRANTED . BOTH THE SIDES ARE IN APPEAL ON THEIR RESPECTIVE STANDS. 46. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN SO FAR AS THE QUESTION OF A LLOWING DEPRECIATION @ 60% ON COMPUTER PERIPHERALS IS CONCERNED, WE FIND T HAT THE VIEW TAKEN BY THE LD. CIT(A) IS IN CONFORMITY WITH THE VIEW OF THE HONBLE JURISDICTIONAL HIGH COURT IN BSES YAMUNA POWER LTD. (SUPRA) . FOLLOWING THE SAME, WE UPHOLD THE ACTION OF THE LD. CIT(A) IN ALLOWING DEPRECIATION AT 60% ON COMPUTER PERIPHERALS. ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 27 47. AS REGARDS THE ASSESSEES CLAIM FOR ALLOWING DE PRECIATION @ 60% ON CTP, IT IS NOTICED THAT SECTION 32(1)(IIA) OF TH E ACT PROVIDES FOR ALLOWING ADDITIONAL DEPRECIATION IN THE CASE OF ANY NEW MACHINERY OR PLANT ACQUIRED AND INSTALLED AFTER 31.3.2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY AR TICLE OR THING, ETC. THE AO HAS RECORDED A CATEGORICAL FINDING IN NOT AC CEPTING THE ASSESSEES CLAIM FOR ADDITIONAL DEPRECIATION TO THE EFFECT THAT: COMPUTER AND COMPUTER SOFTWARE IS OUT OF THE AMBIT OF PLANT AND MACHINERY. WHEN WE LOOK AT APPENDIX TO INCOME-TAX RULES, IT TU RNS OUT THAT ITEM AT SR. NO. III IN NEW APPENDIX I IS: MACHINERY AND PL ANT. ITEM AT SL. NO. (5) COVERED UNDER ITEM III OF THE APPENDIX IS: COM PUTERS INCLUDING COMPUTER SOFTWARE. THUS, IT IS OSTENSIBLE THAT THE VIEWPOINT OF THE AO THAT THE COMPUTERS ARE NOT TO BE CONSIDERED AS PART OF THE MACHINERY FOR THE PURPOSE OF ADDITIONAL DEPRECIATION, IS NOT SUST AINABLE. THE LEGISLATURE HAS NOT SPECIFICALLY EXCLUDED COMPUTERS USED IN FACTORY FROM THE AMBIT OF NEW PLANT AND MACHINERY ELIGIBLE FOR ADDITIONAL ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 28 DEPRECIATION @ 20%. WE, THEREFORE, APPROVE THE VIE W TAKEN BY THE LD. CIT(A) IN DIRECTING TO ALLOW ADDITIONAL DEPRECIATIO N ON CTP AT 20%. 48. AS REGARDS THE ASSESSEES GRIEVANCE ABOUT NOT A LLOWING DEPRECIATION ON CTP AT 60%, WE ARE UNABLE TO FIND O UT ANYTHING IN THE LANGUAGE OF THE SECTION OR THE RULES BY WHICH AN IT EM OF PLANT AND MACHINERY WHICH CALLS FOR DEPRECIATION AT A HIGHER RATE BECOMES INELIGIBLE FOR ADDITIONAL DEPRECIATION. HERE IS A CASE IN WHICH THE ASSESSEE USED CTP PROCESSOR AND CTP SOFTWARE FOR CO NVERTING THE DATA OF PRINTING PLATES FOR USE IN PRINTING PRESS AS MAS TER PAGES. IN OTHER WORDS, CTP PERFORMS THE FUNCTIONS OF RECEIVING AND PROCESSING DATA READY FOR PRINTING PROCESS. THE CTP IS NOTHING BUT PART OF MACHINERY USED BY THE ASSESSEE IN ITS BUSINESS OF PRINTING PR ESS IN THE FACTORY ITSELF. SINCE CTP IS OTHERWISE AN ITEM OF PLANT AND MACHINE RY, BUT, FALLS UNDER THE BROADER HEAD OF COMPUTERS INCLUDING COMPUTER S OFTWARE, WHICH IS SUBJECT MATTER OF ITEM (5) UNDER THE BROADER HEADIN G III OF APPENDIX I, WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEPRECIATI ON ON CTP AT HIGHER ITA NOS.2508, 2203, 2202, 2507/DEL/2012, ITA NOS.986 & 340/DEL/2012. 29 RATE, IN LINE WITH OTHER COMPUTER PERIPHERALS. THE REVENUES GROUND IS DISMISSED AND THE ASSESSEES APPEAL IS ALLOWED. 49. IN THE RESULT, THE REVENUES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES AND THE ASSESSEES APPEAL IS PARTLY ALLOWE D. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18.03.201 5. SD/- SD/- [C.M. GARG] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 18 TH MARCH, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.