M/s Fastway Transmission (P) Ltd., Chandigarh V. ACIT, Chandigarh

ITA 547/CHANDI/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2056 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 28-03-2017

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO.547/CHD/2017 / ASSESSMENT YEAR : 2013-14 ./ ITA NO.139/CHD/2019 / ASSESSMENT YEAR : 2012-13 ./ ITA NO.842/CHD/2018 / ASSESSMENT YEAR : 2014-15 ./ ITA NO.140/CHD/2019 / ASSESSMENT YEAR : 2015-16 M/S FASTWAY TRANSMISSION (P) LTD., PLOT NO.17, INDUSTRIAL AREA, PHASE-1, CHANDIGARH. ! THE A.C.I.T., CENTRAL CIRCLE-II, CHANDIGARH. ' # ./PAN NO: AABCF1854B $% & ' /ASSESSEE BY : SHRI ASHWANI KUMAR, CA & ' / REVENUE BY : SHRI CHANDRAJIT SINGH, CIT (DR) ON 4.12.2019 AND SMT CHANDRAKANTA CIT (DR) ON 18.03 2020 ( ) & %*# /DATES OF HEARING : 04.12.2019/18.03.2020 +, & %*# /DATE OF PRONOUNCEMENT: 06/05/2020 2 PER SANJAY GARG, JUDICIAL MEMBER: /ORDER THESE APPEALS RELATING TO DIFFERENT ASSESSMENT YEAR S HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE CORRESPO NDING SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS)-3 GURGAON, (HEREINAFTER REFERRED TO AS CI T(APPEALS)) U/S 250(6) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT). SINCE THE FACTS AS WELL THE ISSUES I NVOLVED IN ALL THE CAPTIONED APPEALS ARE IDENTICAL, HENCE, THESE H AVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF WITH THIS COMMON ORDER: 2. ITA NO 547/CHD/2017 FOR AY-2013-14 IS TAKEN AS T HE LEAD CASE FOR THE SAKE OF CONVENIENCE. ITA NO. 547/CHD/2017 3. THE BRIEF FACTS OF THE CASE, AS EXTRACTED FROM T HE IMPUGNED ORDERS OF THE LOWER AUTHORITIES, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MULTI SYSTEM OPERATORS AND DIGITAL CABLE SERVICES (DCS). THE DCS SERVICES ARE RENDERED TO THE CUSTOMERS THROUGH SET TOP BOXES. TH E ASSESSEE, THUS, ACTS AS AN INTERMEDIATE BETWEEN LOC AL CABLE OPERATORS AND BROADCASTERS. THE ASSESSEE FOR THE AS SESSMENT YEAR UNDER CONSIDERATION DECLARED A LOSS OF RS.30,2 1,64,573/- IN THE RETURN OF INCOME. DURING THE COURSE OF ASSE SSMENT 3 PROCEEDINGS, THE ASSESSING OFFICER (IN SHORT AO) NOTICED THAT THE ASSESSEE HAD ENTERED INTO A FINANCIAL LEASE AGR EEMENT WITH M/S CISCO CAPITAL SYSTEM INDIA PVT. LTD. (HEREINAFT ER REFERRED TO AS CISCO) FOR SUPPLY OF SET TOP BOXES (HEREINAFT ER REFERRED TO AS STB) AND HEAD ENDS. THE ASSESSING OFFICER FUR THER NOTED THAT CISCO WAS A NON-BANKING FINANCE COMPANY (NBFC) REGISTERED WITH RESERVE BANK OF INDIA AND WAS IN TH E BUSINESS OF PROVIDING DIFFERENT TYPES OF LOANS ON ASSETS/EQU IPMENTS TO ITS CUSTOMERS. THE ASSESSING OFFICER FOUND THAT T HE ASSESSEE HAD ENTERED INTO THE SAID AGREEMENT WITH CISCO THRO UGH MASTER LEASE FINANCE AGREEMENT DATED 7.12.2011 ALON G WITH A NUMBER OF SCHEDULES, WHEREIN THE LEASE TERM WAS 48 MONTHS FOR THE SUPPLY OF 7,91,924 NUMBER OF STBS AND HEAD ENDS FOR THE AMOUNT DETAILED AS UNDER: STB = RS.11,82,70,066 CUSTOM DUTY = RS.25,94,63,987 HEAD ENDS = RS.7,90,48,205 TOTAL = RS.144,67,82,258 THE AO FURTHER NOTED FROM THE NOTES TO ACCOUNTS, F ORMING PART OF THE BALANCE SHEET THAT THE ASSESSEE HAD TRE ATED THE ARRANGEMENT WITH CISCO AS A FINANCE LEASE CAPITALIZ ING THE PRINCIPAL COMPONENT (COST PLUS CUSTOM DUTY) OF THE AGREED LEASE RENT. THE ASSESSEE DEBITED ONLY THE INTEREST IN THE PROFIT AND LOSS ACCOUNT AND FURTHER TREATED THE ASSETS LEA SED (SET TOP BOXES) AS FIXED ASSETS. HOWEVER, FOR THE PURPOS E OF 4 COMPUTATION OF INCOME AS PER THE PROVISIONS OF THE INCOME TAX ACT, THE PRINCIPAL COMPONENT OF THE LEASE RENTALS A MOUNTING TO RS.58,87,16,983/- WAS ALSO CLAIMED AS DEDUCTION ALO NG WITH INTEREST COMPONENT. ON BEING ASKED TO EXPLAIN IN THIS RESPECT, THE ASSE SSEE EXPLAINED THAT IN THE BOOKS OF ACCOUNTS, FOLLOWIN G MANDATORY ACCOUNTING STANDARD AS-19 FOR THE COMPANIES PRESCRI BED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, TH E ASSETS WERE TREATED AS FIXED ASSETS AND THE TRANSACTION WI TH CISCO WAS TREATED AS FINANCE LEASE, WHEREAS, FOR THE PURP OSE OF INCOME TAX ACT, THE TRANSACTION WAS TREATED AS OPER ATING LEASE AND THEREBY CLAIMING THE LEASE RENTAL PAID TO CISCO AS DEDUCTION. THE AO, AFTER ANALYZING THE VARIOUS CLAUSES OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH CISCO, HELD THAT THE ASSESSEE HAD ENTERED INTO A FINANCE LEASE AGREEMENT WITH CISCO AND WAS ENTITLED TO CLAIM DEPRECIATION ON THE ASSETS SO LEASED. ACCORDINGLY, THE ASSESSING OFFICER DISALLO WED THE CLAIM OF DEDUCTION OF THE PRINCIPAL COMPONENT OF TH E LEASE RENTALS AMOUNTING TO RS.58,87,16,983/- MADE BY THE ASSESSEE AND ALLOWED DEPRECIATION @ 15% AMOUNTING TO RS.16,18,14,843/- ON THE LEASED ASSETS, THUS RESULT ING IN AN ADDITION OF RS.42,69,02,140/-. HE REJECTED THE ALT ERNATE CONTENTION OF THE ASSESSEE THAT THE STB WOULD FALL WITHIN THE 5 DEFINITION AND SCOPE OF COMPUTERS, HENCE, DEPRECIAT ION ON THE SAME SHOULD BE GRANTED @ 60% AS PROVIDED UNDER I.T. RULES, 1962. THE AO ALSO FOUND THAT THE ASSESSEE HAD CLAI MED DOUBLE DEDUCTION ON ACCOUNT OF INTEREST PAID TO CIS CO AMOUNTING TO RS.6,38,170/- AND ADDED THE SAME TO TH E INCOME OF THE ASSESSEE. THE ASSESSING OFFICER FURTHER MADE DISALLOWANCE ON ACCOUNT OF EXCESS DEDUCTION CLAIMED U/S 35D OF THE ACT BY THE ASSESSEE AMOUNTING TO RS.2.40 CRO RES AND RS.3,41,870/-. FURTHER DISALLOWANCE OF INTEREST, AMOUNTING TO RS.28,68,096/- WAS ALSO MADE, U/S 36(1)(III) OF THE ACT, ON ACCOUNT OF PAYMENTS MADE ON BEHALF OF ONE M/S G.S. MAJESTIC DEVELOPERS PVT. LTD. TREATING THE SAME TO BE IN THE NATURE OF LOAN FOR NON BUSINESS PURPOSE. THUS, AFTER MAKING A BOVE DISALLOWANCES/ADDITIONS, THE ASSESSING OFFICER ASSE SSED THE INCOME OF THE ASSESSEE AT RS.21,19,85,703 AS AGAINS T LOSS OF RS.30,21,64,573/- RETURNED BY THE ASSESSEE. 4. THE ASSESSEE APPEALED AGAINST THE AFORESAID ORDE R OF THE ASSESSING OFFICER BEFORE THE CIT(APPEALS) BUT COULD NOT SUCCEED ON ANY OF THE ISSUES RAISED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE HAS COME UP IN APPEAL BEFORE US RAISING THE FOLLOWING G ROUNDS: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (AP PEALS)- 5, GURGAON HAS GROSSLY ERRED IN DISMISSING ALL THE GROUNDS OF APPEAL AS TAKEN BEFORE HIM BY THE APPELLANT WITHOUT APPRECIATING THE DETAILED 6 SUBMISSIONS AND VARIOUS CONTENTIONS AS RAISED BY TH E ASSESSEE DURING THE COURSE OF NUMBER OF HEARINGS AN D HAS PASSED THE ORDER IN A SUMMARY MANNER AND HAS JUST CONFIRMED THE ADDITIONS, WHICH ARE TOTALLY UNCALLED FOR AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.6,00,38,170/-, WHICH HAD BEEN CLAIMED IN THE COMPUTATION OF INCOME U/S 37 AS INTEREST PAID TO THE M/S CISCO SYSTEM CAPITAL INDIA PVT. LTD., TOWARDS THE PAYMENT OF INTEREST ON ACCOUNT OF SET TOP BOXES TAKEN ON LEASE FROM THE AB OVE SAID COMPANY. 3. THAT THE WORTHY CIT (A) HAS ERRED IN HOLDING THA T THE TRANSACTIONS BETWEEN THE APPELLANT COMPANY AND M/S CISCO SYSTEM CAPITAL INDIA PVT. LTD., ARE ON ACCOUNT OF FINANCIAL LEASE AND WHICH FINDING IS AGA INST THE MATERIAL ON RECORD. 4. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO THE ADDITION OF RS.42,69,02,407/- AS LEASE RENTAL CHARG ES AND ALLOWING THE DEPRECIATION U/S 32 AS PER AO ORDER, WHICH IS AGAINST THE DECIDED LAW ON THE SUBJECT AND THE VARIOUS JUDGMENTS, WHICH WE HAD CITED BEFORE HIM THE CLAIM BY THE APPELLATE OF LEASE RENT TO THE TUNE OF RS.58,87,16,983/- HAS BEEN DENIED IN SUMMARY MANNER ON CERTAIN IRRELEVANT FACTS. 5. THAT THE WORTHY CIT (A) HAS ERRED IN HOLDING IN PARA 5.4.13 ABOUT TREATING THE LEASE RENTAL AS CAPITAL EXPENDITURE AND NOT ALLOWING THE DEDUCTION U/S 37 OF THE INCOME TAX ACT IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE DEDUCTION U/S 35D AMOUNTING TO RS.2.40 CRORES. 7. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,41,870/- ON ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE. 8. THAT THE WORTHY CIT(A) HAS ERRED IN CONFIRMING T HE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE INTEREST AMOUNTING TO RS.28,68,096/- U/S 36 (1)(III ) AND HOLDING THAT THE AMOUNT OF RS. 3.20 CRORES AS 7 ADVANCED BY THE COMPANY WAS NOT FOR THE BUSINESS PURPOSES. 9. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AM END THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEAR D OR DISPOSED OFF. 6. APART FROM THE ABOVE GROUNDS OF APPEAL, THE ASSE SSEE HAS TAKEN THE FOLLOWING ADDITIONAL GROUND OF APPEAL: 'WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED IN NOT ALLOWING DEPRECIATION ON SET TOP BOXES AT THE ELIGI BLE RATE OF 60% ' 7. GROUND NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE, HENCE NEEDS NO ADJUDICATION. 8. GROUNDS NO.2 : THE ASSESSEE VIDE GROUND NO. 2 HAS AGITATED THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.6,00,38,170/- MADE ON ACCOUNT OF INTEREST PAID T O M/S CISCO CAPITAL SYSTEM HOLDING THE SAME TO HAVE BEEN CLAIMED TWICE BY THE ASSESSEE. 9. THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS SUBMITTED THAT DURING THE RELEVANT YEAR 2013-14 FOR STBS & HEAD ENDS, THERE WERE TWO COMPONENTS OF THE LEASE P AYMENTS MADE BY THE ASSESSEE TO M/S CISCO PRINCIPAL COMPONENT RS. 58,87,16,983/- INTEREST COMPONENT RS. 6,00,38,178/- TOTAL RS. 64,87,55,153/- 8 THE LD. COUNSEL HAS FURTHER SUBMITTED THAT AS PER T HE ACCOUNTING STANDARDS AS-19 PRESCRIBED BY THE INSTIT UTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI), THE ASSESSEE CAPITALIZED THE AFORESAID TOTAL AMOUNT OF RS. 64,87,55,153/- IN THE BOOKS OF ACCOUNT AND CLAIMED DEPRECIATION ON IT. THE ASSE SSEE DID NOT DEBIT THE INTEREST COMPETENT OF RS. 6,00,38,178 /- IN THE PROFIT AND LOSS ACCOUNT, THOUGH INADVERTENTLY MENTI ONED SO IN NOTE 2J OF THE AUDITED ACCOUNTS THAT INTEREST COM PONENT HAS BEEN DEBITED. HOWEVER, ACTUALLY IT WAS NOT DONE SO. THE LD. COUNSEL IN THIS RESPECT HAS SUBMITTED THAT IT IS NO T THE CASE OF THE ASSESSING OFFICER THAT THE INTEREST COMPONENT W AS NOT ALLOWABLE AS DEDUCTION TO THE ASSESSEE BUT THE LIMI TED ISSUE THAT WHETHER THE ASSESSEE HAS CLAIMED DOUBLE DEDUCT ION OF THE SAME WHICH CAN BE WELL VERIFIED FROM THE ACCOUNTS O F THE ASSESSEE BY THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS FURTHER SUBMITTED THAT ASSESSING OFFICER MISTOOK THE FIGURE OF RS. 5.35 CRORES AS CL AIM OF DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE, RATHE R, THE SAID FIGURE WAS IN RESPECT OF INTEREST ON SERVICE TAX WH ICH WAS PART OF THE TOTAL FIGURE OF RS. 9.48 CRORES DEBITED UNDE R THE HEAD FINANCE COST AND NOT A PART OF THE FIGURE OF RS. 64.87 CORES RELATING TO THE LEASE PAYMENT CHARGES. THE LD. COUN SEL IN THIS RESPECT HAS FURTHER SUBMITTED THAT THE PAYMENT OF R S. 5.35 CORES, NOTICE OF WHICH HAS BEEN TAKEN BY THE ASSESS ING OFFICER WAS TOWARDS INTEREST ON SERVICE TAX WHICH WAS APPAR ENT FROM 9 THE FACT THAT THE SAID AMOUNT WAS DEPOSITED UNDER T HE CODE 00440218 CABLE OPERATOR. THE LD. COUNSEL HAS FU RTHER RELIED UPON THE COPY OF THE CHALLANS PLACED AT PAGE S 59 TO 61 OF THE PAPER BOOK TO SHOW THAT THE INTEREST / PENAL TY / OVERHEADS AS SERVICE TAX, WHEREAS, THE CODE 0044021 7 RELATES TO SERVICE TAX. THE SUM AND SUBSTANCE OF THE WHOLE ARGUMENTS OF THE LD. COUNSEL, WAS THAT THE INTEREST COMPONENT OF THE TOTAL LEASE RENTAL PAID BY THE ASSESSEE WAS REQUIRE D TO BE DEBITED INTO THE PROFIT AND LOSS ACCOUNT EVEN AS PE R AS-19, HOWEVER, THE ASSESSEE INADVERTENTLY CAPITALIZED THE ENTIRE AMOUNT OF LEASE RENTAL OF RS. 64.87 CRORES. HOWEVER , IN THE INCOME TAX RETURN, THE ENTIRE LEASE RENTAL OF RS. 6 4.87 CORES HAS BEEN CLAIMED AS DEDUCTION OF EXPENDITURE U/S 37 OF THE INCOME TAX ACT. THAT THERE WAS NO DEDUCTION OF THE INTEREST COMPONENT OF RS. 6,00,38,178/- WHICH IS OTHERWISE A LLOWABLE TO THE ASSESSEE UNDER BOTH THE CONDITIONS I.E. WHET HER THE TRANSACTION IS TAKEN AS THAT OF LEASE OR AS THAT OF LOAN. THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S 37 OF THE INTEREST EXPENDITURE INCURRED / PAID FOR THE PROCUREMENTS OF THE ASSETS WHICH WERE USED SOLELY FOR THE BUSINESS OF THE ASSE SSEE. 10. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON TH E FINDINGS OF THE LOWER AUTHORITIES AND HAS FURTHER SUBMITTED THAT THE ISSUE WHETHER DOUBLE DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE OF THE INTEREST EXPENDITURE SHOULD BE REST ORED TO THE 10 ASSESSING OFFICER FOR VERIFICATION. CONSIDERING THE ABOVE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTI ES, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFI CER FOR LIMITED PURPOSE OF VERIFICATION THAT WHETHER THE ASSESSEE H AS CLAIMED DOUBLE DEDUCTION OF THE AMOUNT OF RS. 6,00,38,178/- CLAIMED AS INTEREST COMPONENT OF THE TOTAL LEASE RENTAL CLA IM OF RS. 64,87,55153/-. HOWEVER, THE ISSUE AS TO THE ALLOWAB ILITY OF DEDUCTION OF PRINCIPAL COMPONENT OF RS. 58,87,16,98 3/- HAS BEEN CONTESTED VIDE GROUND NOS. 3 TO 5 WHICH HAS BE EN DISCUSSED IN THE SUBSEQUENT PARAS OF THIS ORDER. IN VIEW OF THIS, THE ISSUE RAISED VIDE GROUND NO.2 OF THE APPEAL IS ACCORDINGLY RESTORED TO THE FILE OF THE A SSESSING OFFICER IN THE TERMS AS INDICATED ABOVE. 11. GROUNDS NO 3, 4 & 5 : GROUND NOS.3, 4 AND 5 RAISED BY THE ASSESSEE ARE AGAINST THE ACTION OF THE LD. CIT (APPEALS) IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER TREATI NG THE LEASE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH CISCO A S A FINANCE LEASE AGREEMENT AS AGAINST OPERATING LEASE CLAIMED BY THE ASSESSEE. SINCE THE ISSUES RAISED VIDE ABOVE GR OUNDS ARE INTERLINKED, HENCE THE SAME ARE TAKEN TOGETHER FOR ADJUDICATION. 11 12. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO G ONE THROUGH THE RECORD. THE DETAILED SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE ON THE ISSUE ARE SUMMED UP POINT WISE AS UNDER: - A) THAT THERE WERE BOTH TYPES OF TRANSACTIONS DONE BY THE ASSESSEE WITH CISCO I.E. SOME EQUIPMENT WERE LEASED OUT BY THE CISCO AND THE OTHER WERE PURCHASED DIRECTLY BY THE ASSESSEE. IN CASE OF DIRECT PURCHAS E, THE ASSETS WERE CAPITALIZED AND DEPRECIATION CLAIME D ON THOSE. HOWEVER, IN CASE OF LEASED ASSETS, THOUG H, IN VIEW OF THE MANDATORY REQUIREMENT FOR THE COMPANIES AS PER COMPANIES ACT TO FOLLOW THE ACCOUNTING STANDARD AS-19 PRESCRIBED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, THE LEASE TRANSACTION WITH CI SCO WAS BOOKED AS FINANCE LEASE, HOWEVER, IN FACT, THE SAME WAS AN OPERATING LEASE. HENCE, THOUGH, AS PER THE ACCOUNTING STANDARD ES-19, STPS WERE CAPITALIZE D AND DEPRECIATION COMPUTED, HOWEVER, IN THE INCOME T AX RETURN THE DEPRECIATION SO COMPUTED WAS WRITTEN BAC K AND INSTEAD THE LEASE RENT (BOTH PRINCIPAL COMPONEN T AND INTEREST COMPONENT) WAS CLAIMED AS DEDUCTIBLE EXPENDITURE U/S 37 OF THE ACT. B) THAT AS PER THE PROVISIONS OF THE INCOME TAX ACT ( IN SHORT THE ACT), DEPRECIATION IS ADMISSIBLE UNDER SECTION 32 OF THE ACT ONLY TO THE OWNER OF THE ASSE T. THAT THE LEASE CHARGES PAID FOR THE USE OF THE ASSE T TO THE OWNER OF THE ASSET ARE ALLOWABLE AS REVENUE EXPENDITURE UNDER SECTION 37 OF THE I.T. ACT TO THE PAYER. C) THAT AT PAGE 80 IN PARAGRAPH 5.4.4 OF THE IMPUGNED ORDER, THE LD. CIT(A) HIMSELF HAS MENTIONED, THER E IS NO DOUBT ABOUT THE GENUINENESS OF THE LEASE AGREEMENT. THE LD. COUNSEL IN THIS RESPECT HAS SUBMITTED THAT WHEN THE CIT(A) DID NOT HAVE ANY DOU BT ABOUT THE GENUINENESS OF THE LEASE AGREEMENT, THEN 12 THERE WAS NO QUESTION OF MAKING ANY DISALLOWANCE HOLDING THE LEASE AGREEMENT AS NON-GENUINE. D) THAT THE INCOME TAX ACT DOES NOT RECOGNIZE THE DIFFERENCE BETWEEN THE FINANCE LEASE AND OPERATING LEASE. RELIANCE IN THIS RESPECT HAS BEEN PLACED UPO N THE CBDT CIRCULAR NO. 2 OF 2001. E) THAT IN THE PURCHASE BILLS CISCO HAS BEEN MENTIONED AS BUYER. F) THAT CISCO HAD CLAIMED THE LEASE RENTALS AS ITS INC OME AND TDS HAS BEEN DEDUCTED BY THE ASSESSEE ON THE LEASE RENTALS, WHICH HAD BEEN AFFIRMED ALSO BY CIS CO IN ITS REPLY TO QUERY RAISED TO IT BY THE AO BY ISS UING NOTICE U/S 133(6) OF THE ACT G) THAT CISCO HAS CLAIMED DEPRECIATION ON THE ASSETS/EQUIPMENT AS OWNER, WHICH HAS BEEN ALLOWED T O IT @ 60% FROM A.Y 08-09-A.Y 10-11 AND THAT EVEN AO HAD ACCEPTED DEPRECIATION CLAIMED ON STB @60% IN A. Y 13-14, WHICH WAS CONFIRMED BY THE DRP ALSO. H) THAT THE ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT DETERMINATIVE OF THE NATURE OF THE TRANSACTION. THE INCOME FOR THE PURPOSE OF LEVY OF INCOME TAX IS TO BE DETERMINED AS PER THE PROVISIONS OF THE INCOME TAX ACT, 1961, AND THE ACCOUNTING STANDARDS ARE NOT RELEVANT FOR THE SAME. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE APEX COURT IN KEDARNA TH JUTE MANUFACTURING CO. LTD. VS CIT (1971) 83 ITR 36 3; SUTLEJ COTTON MILLS LTD. VS CIT 116 ITR 1 AND FURTH ER UPON THE CBDT CIRCULAR NO.2 OF 2001 DATED 9.2.2001 STATING THAT THE ACCOUNTING STANDARDS ON LEASES WIL L HAVE NO IMPLICATION ON THE ALLOWANCE OF DEPRECIATIO N ON ASSET UNDER THE PROVISIONS OF INCOME TAX ACT. RELIANCE WAS FURTHER PLACED ON NOTIFICATION ISSUED BY THE CBDT DATED 9.1.2015 AND FURTHER DATED 29.9.2016 POINTING OUT THEREFROM THAT THE ACCOUNTING STANDARD S- 19 RELATING TO ACCOUNTING FOR LEASES HAS NOT BEEN NOTIFIED FOR THE PURPOSE OF APPLICABILITY UNDER THE INCOME TAX ACT. 13 I) THAT IN FINANCE LEASE THERE IS OUTRIGHT SALES AND T HE SELLER TRIES TO SECURE ITSELF WITH COLLATERAL SECUR ITY AS VIRTUALLY OWNERSHIP IS TRANSFERRED TO LESSEE, WHICH IS ABSENT IN THE PRESENT CASE WHERE CISCO HAS NO SECURITY RATHER OWNERSHIP AND CONTROL OVER THE ASS ET AND THERE IS NO CHARGE REGISTERED WITH THE ROC ALSO BY CISCO WHICH IS MANDATORY IF THERE IS OWNERSHIP OF LESSEE. J) THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER SUBMIT TED THAT SO FAR THE ARGUMENT THAT THE ASSESSEE HAD CLAI MED CENVAT CREDIT ON LEASEHOLD GOODS, HE EXPLAINED FROM PAGE 38 TO 41 OF THE WRITTEN SUBMISSIONS THAT FOR CLAIMING CENVET CREDIT, IT IS NOT ESSENTIAL THAT ASSESSEE MUST BE OWNER OF THE GOODS . K) THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER INVITE D OUR ATTENTION TO THE FOLLOWING CLAUSES OF THE LEASE AGREEMENT AND SUBMITTED THAT IT WAS APPARENT THAT T HE ASSESSEE WAS NOT THE OWNER OF THE EQUIPMENT AND THA T CISCO WAS THE OWNER OF THE EQUIPMENT: I) THAT IN THE MASTER LEASE AND FINANCE AGREEMENT FINANCING AND LEASING ARE SEPARATE TRANSACTIONS. THE FINANCE AGREEMENT IS APPLICABLE TO SOFTWARE LICENSE, MAINTENANCE, SERVICES WHEREAS LEASE AGREEMENT ARE APPLICABLE TO EQUIPMENT. II) THAT MONTHLY RENT WAS PAID FOR USAGE AND NO LUMP SUM PAYMENT WAS PAID SHOWING THAT THE ASSET HAD BEEN LEASED TO THE ASSESSEE FOR USAGE ONLY. III) THAT THE RISKS AND REWARDS OF OWNERSHIP WERE EQUALLY DISTRIBUTED BETWEEN THE LESSOR AND THE LESSEE. IV) AS PARA 1.2 OF THE DEED, THE LESSOR SHALL ALL TI MES RETAIN TITLE TO THE EQUIPMENT. WITHOUT PERMISSION OF THE LESSOR THE LESSEE SHALL NOT DISPOSE OF ANY O F THE EQUIPMENT. THE RECORD OF MAINTENANCE ETC. WILL BE PRODUCED BEFORE THE LESSOR. V) AS PER CLAUSES 5.1 AND 5.2, THE LESSEE WAS ENTIT LED TO USE THE ASSET IN ITS BUSINESS ONLY. 14 VI) AS PER CLAUSES 11.1 AND 11.2 OF THE DEED, IN DEFAULT OF PAYMENT BY THE ASSESSEE, THE CONSEQUENCES ENTAILED RETURNING THE ASSET TO THE LESSOR. VII) AS PER CLAUSE 9.1, ON END OF THE LEASE, THE EQUIPMENT WAS TO BE RETURNED TO THE LESSOR. VARIOUS JUDGEMENTS HAVE BEEN RELIED UPON BY LD. COU NSEL FOR THE ASSESSEE TO STRESS THE POINT THAT WHEN THE OWNE RSHIP HAD NOT TRANSFERRED TO THE LESSEE THEN THE ARRANGEMENT CAN NOT BE SAID TO BE OF A LOAN OR FINANCE. THE JUDGEMENTS REF ERRED TO ARE AS UNDER: 1. CIT VS SHAAN FINANCE (P) LTD. 231 ITR 308 (SC) 2. CIT VS. MAHARASHTRA APEX CORPORATION 254 ITR 98(SC) 3. ICDS LTD. VS. CIT 350 ITR 527(SC) 4. RAJSHREE ROADWAYS VS. UNION OF INDIA [2003] 129TAXMAN 663(RAJ.) 5. PKF FINANCE LTD. VS CIT (PB. & HRY) 6. CIT VS COSMO FILMS LTD. (2011) 338ITR 226 7. CIT VS PUNJAB STATE ELECTRICITY BOARD (2010) 320 ITR 469 (PB & HRY.) 8. BOMBAY DYEING & MFG. CO. LTD. VS. DCIT ITA 4599/MUM./2002 (MUMBAI TRIBUNAL). 9. MINDA CORPORATION LIMITED VS DCIT ITA NO. 1962/DEL/2012 (ITAT DELHI). THE LD. COUNSEL CONCLUDING HIS ARGUMENTS, HAS SUBMITTED THAT IN ANY CASE IT WOULD BE A REVENUE NE UTRAL EXERCISE. EITHER THE ASSESSEE WOULD BE ENTITLED TO LEASE CHARGES OR TO DEPRECIATION. HE IS THIS RESPECT HAS RELIED UPON 15 THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT V. TRIVENI ENGINEERING AND INDUSTRIES LTD. [2011] 336 ITR 374 (DELHI). 13. THE DEPARTMENT HAS ALSO FILED VARIOUS DOCUMENTS AND WRITTEN SUBMISSIONS IN SUPPORT OF ITS CONTENTION. T HE MAIN THRUST OF THE LD. DR HAS BEEN THAT THE IMPUGNED AGR EEMENT WAS A LOAN/FINANCE AGREEMENT, WITH THE ASSESSEE BEI NG THE OWNER OF THE ASSET FOR ALL PRACTICAL PURPOSES AND C ISCO BEING THE FINANCER. THE ARGUMENTS OF THE LD. DR ARE SUMME D UP AS UNDER:- A. THAT THE ASSESSEE AS PER ITS OWN WILL AND AS PER TH E ACTUAL NATURE OF THE TRANSACTION HAS FOLLOWED AS-19 , WHICH DOES NOT MANDATE OR REQUIRE AN ASSESSEE TO CLAIM A TRANSACTION AS A FINANCIAL LEASE. AS-19 SIM PLY PRESCRIBES AS TO WHAT IS THE OPERATING LEASE AND FINANCE LEASE. ASSESSEE HAVING ITSELF CATEGORIZED I T AS FINANCIAL LEASE IN THE BOOKS WAS ESTOPPED FROM TAKI NG A DIFFERENT STAND FOR THE PURPOSE OF TAXATION. B. THE ASSESSE FOR THE PURPOSE OF DEFERMENT OF TAX HA S GIVEN THE DIFFERENT TREATMENT TO THE AFORESAID TRANSACTION OF LOAN. C. AS PER THE LEASE AGREEMENT, THE LEASE TERM WAS NON- CANCELLABLE AND THE OBLIGATION WAS ABSOLUTE (CLAUSE 1.3). D. THAT THE LIFE SPAN OF SET TOP BOX WAS 3 TO 4 YEARS . THE TERM OF THE LEASE DEED WAS SO DEVISED TO COVER BOTH THE PRINCIPAL AND INTEREST COMPONENTS OF THE FINANCED AMOUNT WITHIN THE LEASE PERIOD.( LEASE SCHEDULE & CLAUSE 11 ). THE LESSEE HAD, ON THE 16 TERMINATION OF LEASE, THE OPTION TO TRANSFER THE AS SET AT RS.1 PER SET TOP BOX. E. THE CISCO HAS NO OWNERSHIP CONTROL OVER THE EQUIPMENT. IN CASE OF BREACH OF CONTRACT, THE SET T OP BOXES CANNOT BE TAKEN AWAY FROM THE MILLIONS OF CONSUMERS BY THE CISCO. THAT THE OTHER OPTION OF RETURNING THE ASSET AFTER UNINSTALLATION FROM CUSTOMERS PREMISES AND SHIPPING BACK TO THE LESSOR, BEING FAR MORE EXPENSIVE, THE SAID OPTION WAS MEREL Y A CAMOUFLAGE, WITH THE REAL INTENTION BEING TO SELL THE ASSET TO THE LESSEE AT VERY LOW PRICE ON THE TERMINATION/EXPIRY OF THE AGREEMENT. F. THE ASSESSEE HAD AVAILED CREDIT OF CUSTOM DUTY PAID ON THE IMPORT OF THE SET TOP BOXES AGAINST SERVICE TAX LIABILITY. THE ASSESSEE HAD ALSO AVAILED CENVAT CRE DIT ON STBS CLAIMING THEM TO BE CAPITAL GOODS. G. THAT THE REGULATIONS FRAMED BY TELECOM REGULATORY AUTHORITY OF INDIA (TRAI) STIPULATE THAT THE CUSTOM ER CAN KEEP THE BOX AFTER EXPIRY OF 3 YEARS OF INSTALLATION. THE ASSESSEE COULD NOT HAVE COMPLIED WITH ABOVE CONDITION IF IT WERE NOT THE OWNER OF TH E ASSET. H. THAT THE TDS HAD BEEN DEDUCTED ONLY ON THE INTEREST COMPONENT OF THE PAYMENTS MADE BY THE LESSEE AND NOT ON THE PRINCIPAL COMPONENTS. I. THAT THE PURCHASE BILLS OF THESE ASSETS REVEALED TH AT THE ASSET HAS BEEN BILLED TO FASTWAY TRANSMISSION ( P) LTD. RECOGNIZING THE ASSESSEE AS PRIMARY BUYER AND USER. J. THAT THE LESSOR HAS ALSO TREATED THE AGREEMENT AS FINANCE LEASE IN ITS BOOKS. K. THAT THE SWORN STATEMENTS OF SHRI RAJESH MEHRU, CFO OF THE COMPANY, SHRI SUSHIL THAKUR, ASSISTANT MANAGER (ACCOUNTS) IN THE COMPANY, SHRI CHAMAN LAL KATIYAL, ACCOUNTS HEAD IN THE COMPANY, RECORDED DURING THE COURSE OF SURVEY U/S 133A OR UNDER SECTION 131 OF THE ACT, REAFFIRMED THAT THE TRANSAC TION WAS THAT OF A LOAN. 17 L. THAT THE ASSESSEE THROUGH LETTER DATED 24.2.2014 ADDRESSED TO DDIT(INVESTIGATION) HAD STATED THAT IT HAD SHOWN THE LEASE FINANCE AS UNSECURED LOAN IN IT S BOOKS. M. THAT CISCO IS A NON BANKING FINANCE COMPANY (NBFC) AND ITS MAIN ACTIVITY IS OF FINANCING AND N OT LEASING. N. THAT ALL THE RISKS AND REWARDS ASSOCIATED WITH OWNERSHIP LAY WITH THE ASSESSEE, THE LESSEE. THE RI SKS AGREED TO BE BORNE BY THE LESSEE AS PER THE TERMS O F THE MLFA ARE AS UNDER: A) AS PER CLAUSE 1.2 OF THE AGREEMENT THE RISKS AND RESPONSIBILITY ASSOCIATED WITH THE PROCUREMENT OF THE ASSET LAY SOLELY UPON THE ASSESSEE. B) THE LESSEE WAS SOLELY RESPONSIBLE FOR DELIVERY, INSTALLATION, MAINTENANCE AND REPAYMENT OF THE EQUIPMENT, WARRANTEES, INDEMNITIES AND INSURANCE. ALL FEES, TAXES AND CHARGES LEVIED BY THE GOVERNMEN T WERE THE RESPONSIBILITY OF THE LESSEE. (CLAUSE 5.1- 5.3) C) THE RISKS ASSOCIATED WITH LOSS, THEFT, DAMAGE, DESTRUCTION OF ASSET LAY WITH THE LESSEE. (CLAUSE 5 .4) D) THE LESSEE WAS REQUIRED TO OBTAIN AND MAINTAIN THE RISK INSURANCE COVERAGE WITH RESPECT TO THE EQUIPMENT INSURED, AGAINST ANY CASUALTY TO THE EQUIPMENT, ANY COMMERCIAL LIABILITY ETC., WITH THE INSURANCE POLICY NAMING THE LESSEE AS THE INSURED. (CLAUSE 5.5) E) THE LESSEE WAS REQUIRED TO INDEMNIFY THE LESSOR AGAINST ALL CLAIMS SUCH AS DEMANDS, ACTIONS, DEBTS, SETTLEMENTS, ETC. ARISING ON ACCOUNT OF LEASING DOCUMENTS, EQUIPMENT, OWNERSHIP OF EQUIPMENT, INFRINGEMENT OF PATENT, COPYRIGHT, ETC. IT WAS POIN TED OUT THAT BY VIRTUE OF THE INDEMNITY CLAUSE THE LESS EE HAD BEEN BURDENED WITH EXTRAORDINARY RESPONSIBILITY AND RISKS WHILE THE LESSOR WAS EXONERATED FROM THE SAME AND THE ELEMENT OF BAILMENT WAS COMPLETELY MISSING. (CLAUSE 6) 18 F) WHILE THE LESSEE HAD THE RIGHT TO TERMINATE THE LEA SE BY PREPAYING THE RENT, THE LESSOR HAD NO SUCH OPTIO N EXCEPT IN THE CASE OF DEFAULT BY THE LESSEE. (CLAUS E 10.2) G) THE LESSEE WAS GRANTED ALL RIGHTS OF POSSESSION AND USER OF THE EQUIPMENT AND OF MANUFACTURER WARRANTEE RIGHTS RELATING TO THE ASSET. (CLAUSE 8) H) THE LESSEE HAD BEEN GIVEN RIGHT OF SUBLEASE THE EQUIPMENT TO ITS CUSTOMERS AND PUT PERMANENT MARKING ON THE EQUIPMENT. (CLAUSE 12 OF LEASE SCHEDULE) I) FOREIGN EXCHANGE FLUCTUATION LOSS OR GAIN ON IMPORTS OF ASSET WAS TO BE BORNE BY THE LESSEE. RELIANCE HAS BEEN PLACED ON THE DECISION OF THE SPE CIAL BENCH OF I.T.A.T. IN THE CASE OF INDUSIND BANK LTD. VS. CIT 135 ITD 165, ASEA BROWN BOVERI LTD. VS. INDUSTRIAL FINANCE CORPORATION OF INDIA, 154 TAXMAN 512, ASSOCIATION OF LEASING AND FINANCIAL SERVICE COMPANIES VS. UNION O F INDIA (2011) 2 SCC 352. RELIANCE WAS ALSO PLACED ON CBDT INSTRUCTION NO.1978 DATED 31.12.1999 LAYING DOWN CE RTAIN FEATURES TO DETERMINE THE OWNERSHIP OF LEASED ASSET FOR THE PURPOSE OF ALLOWING DEPRECIATION U/S 32 OF THE ACT. 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THE F IRST AND FOREMOST ARGUMENT OF THE LD. COUNSEL FOR THE ASSESS EE IS THAT SINCE THE INCOME TAX ACT,1961 DOES NOT RECOGNIZE T HE DIFFERENCE BETWEEN THE FINANCE LEASE AND OPERATING LEASE, HENCE WHATEVER TYPE OF LEASE IT MAY BE, THE ASSESSE E CAN NOT BE DENIED THE BENEFIT OF DEDUCTION U/S 37 OF THE AC T OF REVENUE 19 EXPENDITURE INCURRED BY THE ASSESSEE IN THE SHAPE O F LEASE RENTAL SOLELY FOR THE BUSINESS PURPOSE OF THE ASSES SEE. THAT THE DISTINCTION BETWEEN AN OPERATING LEASE OR FINAN CE LEASE IS PRESCRIBED IN THE ACCOUNTING STANDARD (AS-19) BY TH E ICAI WHICH IS MANDATORILY REQUIRED TO BE FOLLOWED BY THE COMPANIES FOR MAKING ACCOUNTING ENTRIES, HOWEVER, THE SAID ST ANDARD HAS NO RELEVANCE SO FAR AS THE COMPUTATION OF THE INC OME UNDER THE PROVISIONS OF INCOME TAX ACT WAS CONCERNED. THE LD. COUNSEL IN THIS RESPECT HAS RELIED UPON THE DECISIO N OF THE APEX COURT IN THE CASE OF KEDARNATH JUTE MANUFACTU RING CO. LTD. VS CIT (SUPRA) AND CBDT CIRCULAR NO. 2 OF 200 1 DATED 9.2.2001. 15. ON THE OTHER HAND, THE LD. DR IN HIS SUBMISSION S AS NOTED ABOVE AND FURTHER RELYING UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF INDUS IND BANK LTD. VS ACIT (SUPRA) AS WELL AS OF HON'BLE SUPREME COURT IN THE CASE OF ASSOCIATION OF LEASING AND FINANCING S ERVICES CO. LTD V UNION OF INDIA [2011] 2 SCC 352 HAS SUBMITTE D THAT THE ASSESSEE HIMSELF HAD TREATED THE AFORESAID LEASE A S FINANCE LEASE AS PER AS-19 AND FURTHER THAT AS PER AS-19, THE ASSESSEE IS ENTITLED TO ONLY DEPRECIATION ON THE E QUIPMENT AS PER THE RULES; THAT AFTER ANALYZING THE CONTENTS OF THE AGREEMENT IN QUESTION, THE ASSESSING OFFICER RIGHTL Y HELD THAT THE TRANSACTION IN QUESTION WAS A FINANCE LEASE AND HENCE, 20 THE ASSESSING OFFICER RIGHTLY DENIED THE DEDUCTION OF ALLEGED LEASE RENTAL PAID TO CISCO AS THE SAME WAS NOT A RE VENUE EXPENDITURE. 16. AT THIS STAGE, IT IS APPROPRIATE, IN OUR VIEW, TO FIRSTLY DISCUSS THE RELEVANT PROVISIONS OF THE ACT RELATING TO ALLOWABILITY OF CLAIM OF DEDUCTION AS DEPRECIATION ON CAPITAL ASSETS AND ALSO RELATING TO THE ALLOWABILITY OF REV ENUE EXPENDITURE. 17. SECTION 32 OF THE INCOME TAX ACT PRESCRIBES FO R ALLOWANCE OF DEDUCTION ON ACCOUNT OF DEPRECIATION O N CAPITAL ASSETS AND READS AS UNDER: SECTION 32 OF THE INCOME TAX ACT. DEPRECIATION. SECTION - 32 32. (1) IN RESPECT OF DEPRECIATION OF (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEI NG TANGIBLE ASSETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, L ICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMIL AR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1S T DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTION S SHALL BE ALLOWED (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAG ED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTA GE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESC RIBED; (II) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERC ENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED: [ PROVIDED 21 18. SECTION 37 OF THE INCOME TAX ACT DEALS WITH THE ALLOWABILITY OF THE EXPENDITURE SOLELY INCURRED FOR THE BUSINESS PURPOSES, THE RELEVANT PART OF THE SECTION IS REPRO DUCED AS UNDER:- GENERAL SECTION - 37 37. ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATU RE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION'. EXPLANATION . 19. A PERUSAL OF THE ABOVE PROVISIONS REVEALS THAT FOR THE CLAIM OF DEPRECIATION, ASSET MUST BE OWNED WHOLLY O R PARTIALLY BY THE ASSESSEE AND IS USED FOR THE PURPOSE OF BUSI NESS OR PROFESSION OF THE ASSESSEE. WHEREAS ANY EXPENDITURE , NOT BEING IN THE NATURE OF THE CAPITAL EXPENDITURE OR P ERSONAL EXPENDITURE OF THE ASSESSEE, LAID OUT OR EXPENDED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE IS ALLOWABLE AS A DEDUCTION OF EXPENDITURE U/S 37 OF T HE ACT. 20. THE QUESTION BEFORE US IS AS TO WHETHER THE PRI NCIPAL COMPONENT OF LEASE RENTAL CLAIMED BY THE ASSESSEE I S A REVENUE EXPENDITURE FALLING U/S 37 OF THE ACT OR A CAPITAL EXPENDITURE INCURRED FOR THE PURPOSE OF CAPITAL ASS ETS UPON 22 WHICH THE ASSESSEE CAN BE ALLOWED DEPRECIATION AS PER THE PROVISIONS OF SECTION 32 OF THE INCOME TAX ACT. 21. THE ASSESSEE IN THIS CASE HAS PLEADED THAT THE ASSETS / EQUIPMENT IN QUESTION WAS THE PROPERTY OF CISCO WHI CH WAS TAKEN BY THE ASSESSEE ON LEASE FROM CISCO AGAINST PAYMENT OF LEASE CHARGES; WHEREAS, THE SUM AND SUBSTANCE OF THE ARGUMENTS OF THE LD. DR HAS BEEN THAT THE TRANSACT ION IN FACT, WAS A FINANCE LEASE AS DEFINED BY THE ICAI I N ITS AS-19. THE AS-19 PRESCRIBED BY THE ICAI READS AS UNDER:- 3.1 A LEASE IS AN AGREEMENT WHEREBY THE LESSOR CON VEYS TO THE LESSEE IN RETURN FOR A PAYMENT OR SERIES OF PAY MENTS THE RIGHT TO USE AN ASSET FOR AN AGREED PERIOD OF TIME. 3.2 A FINANCE LEASE IS A LEASE THAT TRANSFERS SUBST ANTIALLY ALL THE RISKS AND REWARDS INCIDENT TO OWNERSHIP OF AN A SSET. 3.3 AN OPERATING LEASE IS A LEASE OTHER THAN A FINA NCE LEASE. 22. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE INCOME TAX ACT DOES NOT RECOGNIZE OR DIFFE RENTIATE BETWEEN DIFFERENT TYPES OF LEASE TRANSACTIONS. AS P ER THE PROVISIONS OF THE INCOME TAX ACT, ANY EXPENDITURE I NCURRED ON CAPITAL ASSETS CANNOT BE ALLOWED AS DEDUCTION OF EXPENDITURE, HOWEVER, AN ASSESSEE CAN CLAIM DEPRECI ATION AS PRESCRIBED BY THE RULES ON THE VALUE OF SUCH AN ASSET. HOWEVER, IF SUCH AN ASSET, AS CLAIMED IN THIS CASE BY THE ASSESSEE, IS NOT OWNED BY THE ASSESSEE, RATHER, THE SAME 23 HAS BEEN PROCURED ON LEASE OR HIRE BASIS TO BE USED SOLELY FOR BUSINESS PURPOSE OF THE ASSESSEE, THE HIRE CHAR GES / LEASE RENTAL PAID FOR SUCH AN ASSET WILL BE ADMISSI BLE AS REVENUE EXPENDITURE U/S 37 OF THE ACT. IN THIS CASE , THE REVENUE HAS TRIED TO DRAW DISTINCTION BETWEEN TWO T YPES OF LEASES CLASSIFYING THEM AS OPERATING LEASE AND FINA NCE LEASE AS PER GUIDELINES ISSUED BY THE ICAI VIDE AS-19. WE FIND THAT AS-19 HAS BEEN PRESCRIBED BY THE ICAI TO BE FO LLOWED FOR MAINTAINING THE ACCOUNT BOOKS BY THE COMPANIES. HOWEVER, SO FAR AS THE INCOME TAX ACT IS CONCERNED, THE SAME HAS NO RELEVANCE. THERE IS NO PROVISION UNDER THE INCOME TAX ACT DIFFERENTIATING BETWEEN OPERATING LE ASE AND FINANCE LEASE. FURTHER THE CBDT CIRCULAR NO. 2 OF 2 001 DATED 9.2.2001 READS AS UNDER:- CIRCULAR NO. 2 OF 2001 FINANCE LEASE AGREEMENTSEFFECT OF PUBLICATION OF A CCOUNTING STANDARDS ON ALLOWABILITY OF DEPRECIATION REG. 9/02/20 01 DEPRECIATION SECTION 32 UNDER THE INCOME-TAX ACT, IN ALL LEASING TRANSACTIONS, THE OWNER OF THE ASSET IS ENTITLED TO THE DEPRECIATION IF THE SAME IS USED IN THE BUSINESS, UNDER SECTION 32 OF THE INCOME-TAX ACT. THE OWNERSHIP OF THE ASSET IS DETERMINED BY THE TERMS OF CONTRACT BETWEEN THE LESSOR AND THE LESSEE . 1. THE CENTRAL BOARD OF DIRECT TAXES VIDE INSTRUCTION NO. 1978, DATED 31ST DECEMBER, 1999 24 (F.NO. 225/190/98/ITA.II) HAS LAID DOWN THE LINE OF INVESTIGATION IN SUCH CASES. IN CASES WHERE ASSETS ARE FACTUALLY NONEXISTENT, HAVING BEEN CREATED BY HAWALA TRANSACTION, THE QUESTION OF ALLOWANCE OF DEPRECIATION DOES NOT ARISE. IN CASES OF SALE AND LEASE-BACK OF ASSETS WITHOUT ANY ALTERNATION IN THE SITUATION OF ASSETS AND ITS WORKING, THE DENIAL OF DEPRECIATION CLAIMED HAS TO BE CONSIDERED KEEPING IN VIEW THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN THE CASE OF MCDOWEL & CO. LTD. (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC). 2. IT HAS COME TO THE NOTICE OF THE BOARD THAT THE NEW ACCOUNTING STANDARD ON LEASES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA REQUIRE CAPITALIZATION OF THE ASSET BY THE LESSEES IN FINAN CIAL LEASE TRANSACTION. BY ITSELF, THE ACCOUNTING STANDARD WILL HAVE NO IMPLICATION ON THE ALLOWANCE OF DEPRECIATION ON ASSETS UNDER THE PROVISIONS OF THE INCOME-TAX ACT. 3. THE CONTENTS OF THIS CIRCULAR MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. [F.NO. 225/86/2000/ITA-IIFROM CENTRAL BOARD OF DIRECT TAXES] SOURCE : (2001) 165 CTR (ST) 25 23. MOREOVER, A PERUSAL OF THE SAID AS-19 REVEALS T HAT THE SAME IN FACT TALKS OF A LOAN AGREEMENT DESCRIBED AS A LEASE. IN OUR VIEW, MORE CONFUSION WILL BE CREATED IF THE REL IANCE IS PLACED ON AS-19 PRESCRIBED BY ICAI FOR DECIDING THE CLAIM OF DEDUCTION UNDER THE INCOME TAX ACT. WHEN THE INCOME TAX ACT DOES NOT DISTINGUISHES BETWEEN VARIOUS TYPE OF LEAS ES, WE FIND NO JUSTIFIABLE REASON TO FIRSTLY DESCRIBE AND CATEG ORISE A PARTICULAR TYPE OF TRANSACTION/AGREEMENT AS A FORM OF LEASE NAMED FINANCE LEASE AND THEN TO SAY THAT THE PRO VISIONS OF SECTION 37 OF THE INCOME TAX ACT FOR CLAIM OF EXPEN DITURE ON LEASE RENTAL WILL NOT BE APPLICABLE ON SUCH TYPE OF LEASE; THIS, IN OUR VIEW, WILL BE AGAINST THE PROVISIONS OF THE INCOME TAX 25 ACT. ON THE ONE HAND, TERMING AND PLACING A TRANSAC TION / AGREEMENT UNDER THE GENRE OF LEASE AND THEN TO SA Y THAT SUCH PARTICULAR SPECIES OF THAT GENRE WILL NOT BE ENTITL ED TO THE DEDUCTIONS AS PRESCRIBED FOR THE LEASE TRANSACTIONS UNDER THE INCOME TAX ACT, IN OUR VIEW, SERVES NO PURPOSE OTHE R THAN CONFUSION AND CONFLICT OF OPINION GIVING RISE TO TH E DISPUTE AND LITIGATION ON THE ISSUE. AS PER THE PROVISIONS OF T HE INCOME TAX ACT WHAT IS TO BE DETERMINED AS TO WHETHER THE AGRE EMENT / TRANSACTIONS IN QUESTION IS OF A LEASE OR A LOAN OR OF A HIRE / PURCHASE. THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. VS CIT 227 ITR 172: [ 1997] 93 TAXMAN 502 (SC ) HAS HELD THAT NORMALLY, THE ACCOUNTING STANDARDS IS ACCEPTED BUT IT CANNOT OVERRIDE THE PR OVISIONS OF THE INCOME TAX ACT. THE RELEVANT PART OF THE OBSERVATIO N MADE BY THE BY THE HONBLE SUPREME COURT IS REPRODUCED AS UNDER : 28. IT IS TRUE THAT THIS COURT HAS VERY OFTEN REFERRED TO ACCOUNTING PRACTICE FOR ASCERTAINMENT OF PROFIT MAD E BY A COMPANY OR VALUE OF THE ASSETS OF A COMPANY. BUT WHEN THE QUESTION IS WHETHER A RECEIPT OF MONEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTIONS FROM T HAT RECEIPT ARE PERMISSIBLE IN LAW OR NOT, THE QUESTION HAS TO BE DECIDED ACCORDING TO THE PRINCIPLES OF LAW AND N OT IN ACCORDANCE WITH ACCOUNTANCY PRACTICE. ACCOUNTING PRACTICE CANNOT OVERRIDE SECTION 56 OR ANY OTHER PROVISION OF THE ACT. AS WAS POINTED OUT BY LORD RU SSELL IN THE CASE OF B.S.C. FOOTWEAR LTD. ( SUPRA), THE INCOME- TAX LAW DOES NOT MARCH STEP BY STEP IN THE FOOTPRIN TS OF THE ACCOUNTANCY PROFESSION. 26 FURTHER, IT HAS BEN HELD BY THE HON'BLE SUPREME COU RT IN THE CASE OF KEDARNATH JUTE MANUFACTURING CO. LTD. VS C IT (SUPRA) THAT WHETHER THE ASSESSEE WAS FULLY ENTITLED TO A P ARTICULAR DEDUCTION OR NOT, WOULD DEPEND UPON THE PROVISIONS OF THE INCOME TAX ACT AND NOT ON THE ENTRIES OF HIS BOOKS OF ACCOUNT. THE HON'BLE SUPREME COURT IN THE CASE OF SUTLEJ CO TTON MILLS VS CIT 116 ITR 1 HAS HELD THAT THE ENTRIES IN THE BOOKS OF ACCOUNT WERE NOT DETERMINATIVE OF THE TAXABLE INCOM E OF THE ASSESSEE 24. NOW, IN THIS CASE THE MOOT QUESTION BEFORE U S IS THAT WHETHER THE ASSESSEE IS THE OWNER OF THE EQUIPMENT OR THE SAME IS HIRED ON RENT BY THE ASSESSEE FROM CISCO OR TO SAY IN OTHER WORDS WHETHER THE AGREEMENT WITH CISCO IS OF A LEASE AS CLAIMED BY THE ASSESSEE OR THE SAME IS MERE LOAN / FINANCE AGREEMENT. THOUGH THE CONTENTION OF THE LD. AR HAS BEEN THAT SINCE THE AO HIMSELF TERMED THE TRANSACTION AS FINA NCE LEASE WHICH ADMITTEDLY IS A FORM OF LEASE HENCE, THE ASSE SSEE IS ENTITLED TO DEDUCTION OF LEASE RENTAL PAID AS REVEN UE EXPENDITURE. HOWEVER, WE ARE NOT CONVINCED WITH THE ABOVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. HON BLE SUPREME IN THE CASE OF SUNDARAM FINANCE LTD VS ST ATE OF KERALA AND ANOTHER 1966 AIR 1178, 1966 SCR (2) 82 8 (BY THE MAJORITY VIEW) HAS HELD THAT THE TRUE EFFECT OF A TRANSACTION MAY BE DETERMINED FROM THE TERMS OF THE AGREEM ENT 27 CONSIDERED IN THE LIGHT OF THE SURROUNDING CIRC UMSTANCES. IN EACH CASE THE COURT HAS, UNLESS PROHIBITED BY ST ATUTE, POWER TO GO BEHIND THE DOCUMENTS AND TO DETERMINE T HE NATURE OF THE TRANSACTION, WHATEVER MAY BE THE FORM OF THE DOCUMENT. THOUGH BOTH THE LD. REPRESENTATIVES OF THE PARTIES HAVE RELIED UPON VARIOUS CASE LAWS IN SUPPORT OF THEIR CONTENTI ONS, HOWEVER, WITHOUT SEPARATELY DISCUSSING THE FACTS OF EACH OF THE CASE LAW RELIED UPON, IT MAY BE WELL OBSERVED THAT IT IS NOWHERE HELD IN ANY OF THE CASE LAWS THAT THE NOMEN CLATURE GIVEN TO A TRANSACTION BY THE PARTIES IS SACROSANCT OR IS DETERMINATIVE OF THE NATURE OF THE TRANSACTION. IT IS ONLY AFTER CONSIDERING THE RELEVANT FACTS AND CIRCUMSTANCES AN D THE VARIOUS CLAUSES OF THE AGREEMENT THAT THE REAL INTE NTION OF THE PARTIES BEHIND THE AGREEMENT IS GATHERED WHICH IS DETERMINATIVE OF THE NATURE OF SUCH TRANSACTION/AGR EEMENT. A PERUSAL OF THE CASE LAWS CITED REVEALS THAT THE JUD GES OF THE HON'BLE APEX COURT AS WELL OF THE HON'BLE HIGH COUR TS ARE UNANIMOUS TO HOLD THAT THE TRUE LEGAL RELATION ARIS ING FROM A TRANSACTION DETERMINES THE TAXABILITY OF THE RECEIP T ARISING FROM THE TRANSACTION UNDER THE INCOME TAX ACT. IN A CASE, WHERE THE TERMS OF THE TRANSACTION ARE EMBODIED IN A DOCUMENT, THE TRUE EFFECT OF A TRANSACTION MAY BE D ETERMINED FROM THE TERMS OF THE AGREEMENT CONSIDERED IN THE L IGHT OF THE SURROUNDING CIRCUMSTANCES. FOR THE PURPOSE OF DECID ING WHETHER A PARTICULAR TRANSACTION IS A LEASE OR NOT, THE QUESTION 28 OF INTENTIONS OF THE PARTIES IS TO BE DETERMINED AN D THE INTENTION HAS TO BE INFERRED FROM THE CIRCUMSTANCES OF EACH CASE. AS PER THE FACTS OF THE PRESENT CASE, THE TRA NSACTION IN QUESTION MAY BE EITHER OF A LEASE OR OF A LOAN OR A HIRE- PURCHASE AGREEMENT. NOW WE WILL DISCUSS SEPARATELY ABOUT THE RESPECTIVE SALIENT FEATURES OF LEASE, LOAN AND HIR E-PURCHASE AGREEMENTS. 25. NO DEFINITION HAS BEEN GIVEN OF LEASE UNDER T HE INCOME TAX ACT. HOWEVER, THE TERM LEASE HAS BEEN DEFINED UND ER SECTION 105 OF THE TRANSFER OF PROPERTY ACT, 1882, BUT THE SAME IS IN CONTEXT TO LEASE OF IMMOVABLE PROPERTY. THE SAID DE FINITION IS REPRODUCED AS UNDER: 'A LEASE OF IMMOVABLE PROPERTY IS A TRANSFER OF A R IGHT TO ENJOY SUCH PROPERTY, MADE FOR A CERTAIN TIME, EXPRE SS OR IMPLIED, OR IN PERPETUITY, IN CONSIDERATION OF A PR ICE PAID OR PROMISED, OR OF MONEY, A SHARE OF CROPS, SERVICE OR ANY OTHER THING OF VALUE, TO BE RENDERED PERIODICALLY O R ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY THE TRANSF EREE, WHO ACCEPTS THE TRANSFER ON SUCH TERMS' THE SAID DEFINITION WHEN APPLIED IN CASE OF LEASE O F MOVEABLE PROPERTIES WOULD MEAN THAT THE LEASE IS THE TRANSFE R OF RIGHT TO ENJOY THE PROPERTY IN QUESTION. SUCH A TRANSFER OF RIGHT CAN BE MADE FOR A FIXED TIME OR FOR INDEFINITE TIME AND IN LIEU OF GETTING THE RIGHT TO POSSESS AND ENJOY THE PROPERTY, THE LE SSEE HAS TO PAY CERTAIN CONSIDERATIONS EITHER IN CASH OR IN KIND TO THE LESSOR. HENCE, THE LEASE IS AN ARRANGEMENT WHEREBY LESSOR CONVEYS 29 USER RIGHTS IN AN ASSET TO THE LESSEE. THE ASSET IS OWNED FOR ALL PRACTICAL PURPOSES BY THE LESSOR, HAVING ALL RIGHTS AND BEARING ALL RISKS ASSOCIATED WITH OWNERSHIP, AND THE LESSEE IS GIVEN ONLY THE USER RIGHTS IN THE ASSET. THE DOMINANT CON TROL OVER THE ASSET REMAINS WITH THE LESSOR. HOWEVER, IN A LOAN TRANSACTION, THE ASSET IS OWNED AND POSSESSED BY THE LOANEE/DEBTOR. THE LOANEE/DEBTOR B EARS AL THE RISK RELATING TO THE ASSET. THE CREDITOR IS ENT ITLED TO THE RETURN OF THE PRINCIPAL AMOUNT ALONG WITH INTEREST ETC. AS PER AGREEMENT BETWEEN THE CREDITOR AND DEBTOR. THE CRED ITOR, HOWEVER, FOR THE SECURITY OF THE MONEY ADVANCED MAY GET A LIEN OVER THE ASSET PURCHASED WITH THE LOAN AMOUNT UNTIL HIS DUES ARE PAID BACK BY THE DEBTOR. HOWEVER, THE CONFUSION ARISES IN CASE OF CERTAIN TR ANSACTION WHICH, THOUGH, APPARENTLY APPEARS TO BE OF LEASE OF ASSET VIZ. ASSET/S PURCHASED BY LESSOR AND FURTHER LEASED OUT TO THE LESSEE; BUT IN ACTUAL THIS TYPE OF TRANSACTION IS AN ARRANGEMENT OF FINANCING THE PURCHASE OF THE ASSET FOR THE SO CALLED LESSEE (DEBTOR) AND SUCH AN LESSEE IN FACT IS THE OWNER OF THE ASSET AND IS LIABLE TO BEAR ALL TYPE OF RISK S ASSOCIATED WITH SUCH ASSET. IN THIS FORM OF ARRANGEMENT, THE SO-CALLED LESSORS ROLE IS CONFINED TO ONLY FINANCING THE PUR CHASE AND HE HAS NO OTHER INTEREST OR IS NOT LIABLE FOR ANY RISK ASSOCIATED WITH THE ASSET. IT IS THE SO CALLED LESSEE WHO, F OR ALL PRACTICAL 30 PURPOSES, IS THE OWNER OF THE ASSET EXERCISING ALL RIGHTS OF OWNERSHIP AND BEARING ALL RISKS ASSOCIATED WITH THE ASSET, PAYING BACK THE ENTIRE COST OF THE ASSET TO THE LES SOR OVER THE TERM OF THE LEASE WHICH GENERALLY IS THE ECONOMIC L IFE OF THE ASSET AND ACQUIRING OWNERSHIP OF THE ASSET ON TERMI NATION OF THE LEASE AT VERY LOW PRICE. THE THIRD TYPE OF SUCH LIKE TRANSACTIONS IS A HIRE- PURCHASE AGREEMENT WHICH IN FACT IS LEASE CUM PURCHASE AGREE MENT. IN HIRE -PURCHASE AGREEMENT, THE HIRER HAS OPTION TO T ERMINATE THE AGREEMENT BY RETURNING THE GOODS TO THE OWNER, BUT, IN FINANCIAL LEASE, THE TERMS ARE SO DEVISED THAT THE GOODS ARE PASSED ON TO THE LESSEE WITHOUT ANY OPTION TO THE L ESSEE TO TERMINATE THE AGREEMENT AT HIS OWN WILL BY RETURNIN G THE GOODS. IN HIRE-PURCHASE AGREEMENT, THE SELLER REMAI NS THE OWNER OF THE GOODS TILL THE LAST INSTALMENT OF THE AGREED PRICE IS PAID BY THE HIRER OR THE HIRER CHOOSES TO BUY TH E GOODS BEFORE THE EXPIRY OF THE TERM OF AGREEMENT. AN INTE RESTING QUESTION AS TO WHETHER THE TRANSACTION WAS A HIRE-P URCHASE AGREEMENT OR A MERE LOAN/FINANCE TRANSACTION CAME I NTO CONSIDERATION BEFORE THE HONBLE SUPREME IN THE CAS E OF SUNDARAM FINANCE LTD VS STATE OF KERALA AND ANOTHE R 1966 AIR 1178, 1966 SCR (2) 828 AFTER ANALYZING THE VARI OUS TERMS AND CLAUSES OF THE AGREEMENT OBSERVED THAT AN OWNE R OF GOODS WHO PURPORTS TO CONVEY ABSOLUTELY OR ACKNOWLEDGES T O HAVE 31 CONVEYED GOODS AND SUBSEQUENTLY PURPORTS TO HIRE TH EM UNDER A HIRE-PURCHASE AGREEMENT IS NOT ESTOPPED FROM PROV ING THAT THE REAL BARGAIN WAS INTENDED TO BE A LOAN ON THE SECURITY OF THE GOODS. IT WAS HELD THAT IN A HIRE-PURCHASE AGRE EMENT THE HIRER BEING UNDER NO LEGAL OBLIGATION TO BUY, HAS A N OPTION EITHER TO RETURN THE GOODS OR TO BECOME ITS OWNER B Y PAYMENT IN FULL OF THE STIPULATED HIRE CHARGES AND THE PRIC E FOR EXERCISING THE OPTION. THIS CLASS OF HIRE PURCHASE AGREEMENTS MUST BE DISTINGUISHED FROM TRANSACTI ONS IN WHICH THE CUSTOMER IS THE OWNER OF THE GOODS AND W ITH A VIEW TO FINANCE HIS PURCHASE, HE ENTERS INTO AN ARRANGE MENT WHICH IS IN THE FORM OF A HIRE-PURCHASE AGREEMENT WITH T HE FINANCIER, BUT IN SUBSTANCE EVIDENCES A LOAN TR ANSACTION SUBJECT TO A HIRING AGREEMENT UNDER WHICH THE LEND ER IS GIVEN THE LICENSE TO SEIZE THE GOODS. 26. NOW, AFTER ANALYSIS OF THE VARIOUS CLAUSES OF T HE LEASE DEED IN QUESTION, IT IS TO BE NOTED: A) THAT AS PER CLAUSES 1.2 AND 8.1 OF THE AGREEMENT, THE LESSEE HAS TO SELECT THE EQUIPMENT TO BE PROCURED AND INFORM THE LESSOR ACCORDINGLY. THE OBLIGATION OF THE LESSOR IS RESTRICTED ONLY TO THE PAYMENT OF THE PRICE OF THE EQUIPMENT TO THE VENDOR . SO MUCH SO THAT AS PER THE SAID CLAUSES, IF THE LEA SE DOES NOT CONSUMMATE, THE LESSEE SHALL BE LIABLE TO PAY TO THE VENDOR IN ACCORDANCE WITH THE APPLICABLE 32 PURCHASE ORDER OR SHALL HAVE TO INDEMNIFY THE LESSO R AND HOLD THE LESSOR HARMLESS FROM ANY LIABILITY ARISING IN CONNECTION WITH ANY SUPPLY CONTRACT OR LESSOR RIGHT, TITLE, INTEREST IN THE EQUIPMENT. B) FURTHER AS PER CLAUSE 10.2 OF THE AGREEMENT, THE LESSEE IN ANY CASE HAS TO PAY THE FULL RENTAL AGREE D UPON AND EVEN THE RELATED ITEMS OF FINANCING TRANSACTION, EVEN IF IT PREMATURELY TERMINATES THE CONTRACT THUS ENSURING THE REPAYMENT TO THE LESSOR OF THE AMOUNT FINANCED BY IT. THE RELEVANT CLAUSE IS AS UNDER: 10 .2 PREPAYMENT. LESSEE MAY TERMINATE A LEASE OR FINANCING TRANSACTION BY PREPAYING ITS REMAINING RENT. LESSEE SHALL PROVIDE LESSOR WITH AT LEAST ONE (1) MONTH PRIOR WRITTEN NOTICE OF THE INTENDED PREPAYMENT DATE, LESSOR MAY, DEPENDING ON MARKET CONDITIONS AT THE TIME, REDUCE THE REMAINING RENT TO REFLECT SUCH PRE PAYMENT AND SHALL ADVISE LESSEE OF THE BALANCE TO BE PAID. IF A LEASE IS TERMINATED, LESSEE SHALL AT THE SAME TIME PREPAY ANY RELATED LINE ITEMS OF FINANCING TRANSACTION. C) AS PER CLAUSE 1.3 OF DEED, THE LEASE IS A NON- CANCELABLE LEASE AND LESSEE IS OBLIGED TO PAY THE R ENT DUE UNDER THE LEASED UNAFFECTED BY ANY CIRCUMSTANCE. THE RELEVANT CLAUSE IS REPRODUCED HEREUNDER: 1.3 TERM NOT CANCELABLE AND OBLIGATIONS ABSOLUTE, THE ORIGINAL TERM OF A LEASE WITH RESPECT TO EACH ITEM OF EQUIPMENT LEASED OR THE FINANCING TRANSACTION WITH RESPECT TO EACH FINANCED ITEM UNDER A SCHEDULE SHALL COMMENCE ON THE DATE AS SPECIFIED IN THE SCHEDULE (THE 'COMMENCEMENT DATE') AND SHALL CONTINUE FOR THE TERM PROVIDED IN THAT SCHEDULE, EXCEPT IN CASES PROVIDED IN SECTIONS 5.4,10.2 AND 11. 33 D) ALL COST, EXPENSES AND LIABILITY RELATING TO THE EQUIPMENT INCLUDING TAXES, INSURANCE AND MAINTENANCE HAVE TO BE BORNE BY THE ASSESSEE AS PER CLAUSE 2 OF THE AGREEMENT. E) FURTHER THE LESSEE IS RESPONSIBLE, AT ITS OWN EXPEN SE, FOR THE DELIVERY OF THE EQUIPMENT AND EVEN IN INSTALLATION THEREOF. F) FURTHER ALL RISKS PERTAINING TO DAMAGE, LOSS OR DESTRUCTION OF THE EQUIPMENT IS THE SOLE RESPONSIBILITY OF THE LESSEE. G) FURTHER THE LESSEE IS REQUIRED TO OBTAIN ALL RISK, INSURANCE COVERAGE WITH RESPECT TO THE EQUIPMENT FO R ENSURING AGAINST ANY CAUSALITY, COMMERCIAL LIABILIT Y ETC. H) THE LESSEE HAS BEEN GIVEN A RIGHT TO SUBLEASE THE ASSET ALSO. I) FURTHER AS PER SCHEDULE ATTACHED FORMING PART OF TH E AGREEMENT, THE LESSEE CAN REMOVE THE PERMANENT MARKING OF THE EQUIPMENT EVIDENCING LESSEES OWNERSHIP, SECURITY AND OTHER INTEREST THEREIN. 27. CONSIDERING THE ABOVE CLAUSES OF THE LEASE DEED IN QUESTION AND IN THE LIGHT OF PROPOSITION SETTLED TH ROUGH 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 O F THE NATURE OF THE SUCH CONTRACTS, WE HAVE NO HESITATIO N TO HOLD THAT THE TRANSACTION IN THE PRESENT CASE IS THAT OF A 34 LOAN/FINANCE. AFTER GOING THROUGH THE VARIOUS TERMS OF THE DEED, WE FIND THAT THE ONLY ROLE OF THE LESSOR IN T HE PRESENT ARRANGEMENT IS TO FINANCE THE TRANSACTION OF PURCHA SE OF EQUIPMENT, WITH THE LESSEE SELECTING THE EQUIPMENT TO BE SUPPLIED BY THE DEALER, USING IT FOR ITS EXPECTED E CONOMIC LIFE, PAYING BACK THE ENTIRE COST OF THE EQUIPMENT OVER T HE LEASE TENURE AND EXERCISING ALL RIGHTS OF OWNERSHIP OVER THE ASSET AND ALSO BEARING THE RISKS OF LOSSES, DAMAGES, ETC. ASSOCIATED WITH THE OWNERSHIP OF THE ASSET AND NO OPTION TO TH E LESSEE TO TERMINATE THE LEASE AND RETURN THE ASSET BEFORE THE END OF THE LEASE TERM. THUS, IT IS NEITHER A LEASE, NOR A HIRE PURCHASE AGREEMENT, BUT A LOAN/FINANCE ARRANGEMENT BETWEEN T HE PARTIES. SO FAR AS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE TITLE OF THE ASSET REMAINS WITH T HE LESSOR IS CONCERNED, WE FIND FROM THE CLAUSES OF THE AGREEMEN T THAT THE SAID TITLE IS RETAINED FOR THE PURPOSE OF SECURITY FOR RECOVERY OF PRINCIPAL AMOUNT. SO FAR AS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE MANDATORY REQUIREMENT FOR THE COMPANIES ACT AS PER COMPANIES ACT TO FOLLOW THE AC COUNTING STANDARD AS-19, THE LEASE TRANSACTION WITH CISCO WA S BOOKED AS FINANCE LEASE IS CONCERNED, THOUGH THE LAW IS WE LL SETTLED THAT THE ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT DE TERMINATIVE OF THE NATURE OF THE TRANSACTION , HOWEVER WE DO NO T AGREE WITH 35 THE CONTENTION THAT THE ASSESSEE IN THIS CASE WAS M ANDATORILY REQUIRED TO TREAT THE LEASE AS FINANCE LEASE IN THE BOOKS OF ACCOUNT. WE AGREE WITH THE SUBMISSION OF THE LD. DR THAT AS- 19 ONLY DEFINES THE NATURE OF THE LEASE TRANSACTION ; HOWEVER, IT DOES NOT MANDATE THAT EVERY LEASE TRANSACTION IS TO BE TREATED AS FINANCE LEASE IN THE BOOKS OF ACCOUNT. THE ASSES SEE IN THIS CASE, FULLY KNOWING THE FACTS AND AS PER THE ACTUAL INTENTIONAL BETWEEN THE PARTIES RELATING TO THE NATURE OF THE T RANSACTION, OUT OF ITS OWN WILL, HAS TREATED THE TRANSACTION IN QUESTION AS FINANCE LEASE. HOWEVER, WE HAVE ALREADY HELD THAT S AID TREATMENT BY THE ASSESSEE OF THE TRANSACTION IN QUE STION AS PER AS-19 HAS NO RELEVANCE SO FAR AS THE CLAIM OF D EDUCTIONS UNDER INCOME TAX ACT IS CONCERNED. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LESSOR, CISCO HAD BEEN ALLOWED DEPRECIATION ON THE ASSETS BY THE ITAT FROM A.Y 2008-09 TO 2010-11, THUS PROVING THAT ITS OWNERSHIP OF THE ASSETS STOOD ACCEPTED BY THE REVEN UE, IN OUR VIEW, IS OF NO CONSEQUENCE SINCE THE PRESENT LEASE AGREEMENT WAS ENTERED INTO ON 07-12-2011, RELATING TO A.Y. 20 12-13 WHICH IS A SUBSEQUENT ASSESSMENT YEAR. EVEN OTHERWI SE ON GOING THROUGH THE ORDERS OF THE ITAT IN THE CASE OF CISCO IT IS REVEALED THAT THE ISSUE BEFORE THE CO-ORDINATE BENC H OF THE ITAT RELATED ONLY TO THE RATE OF DEPRECIATION TO WH ICH THE ASSESSEE WAS ELIGIBLE ON THE LEASED ASSETS AND THE QUESTION REGARDING ENTITLEMENT OF CLAIM OF DEPRECIATION WAS NEVER BEFORE 36 IT. THEREFORE, IT CANNOT BE SAID THAT THE ITAT HAD DECIDED THE ALLOWABILITY OF CLAIM OF CISCO OF BEING OWNER OF TH E ASSET. EVEN OTHERWISE, IF THE CISCO HAS RETAINED SOME OWNE RSHIP RIGHTS OVER THE ASSETS FOR THE PURPOSE OF SECURITY OF THE LOAN AMOUNT AND THEREFORE, ASSUMING, FOR THE SAKE OF ARG UMENTS THAT THE ASSETS ARE NOT FULLY OWNED BY THE ASSESSEE , EVEN THEN THE PROVISIONS OF SECTION 32 WILL BE ATTRACTED AS I T PROVIDES FOR CLAIM OF DEPRECIATION ON ASSETS OWNED FULLY OR PART LY 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, I S OF NO HELP TO THE ASSESSEE. THE IMPUGNED ORDER IS TO BE READ A S A WHOLE, AND A SINGLE LINE OR WORD CAN NOT BE CHOSEN TO INTE RPRET A DIFFERENT MEANING. WHAT THE LD. CIT(A) HAS CONVEYED IS THAT THOUGH THE EXECUTION OF THE LEASE DEED IS NOT DOUBT ED BUT THE REAL INTENTION BEHIND THE DEED IS TO BE GATHERED FR OM THE VARIOUS CLAUSES OF THE DEED AND FACTS AND CIRCUMSTA NCES OF THE CASE. THUS, WE HAVE NO HESITATION IN HOLDING THAT T HE ARRANGEMENT IN THE PRESENT CASE WAS A LOAN / FINANC E ARRANGEMENT IN THE GUISE OF A LEASE AGREEMENT. 28. HOWEVER, THE CONTROVERSY DOES NOT END HERE. TH OUGH THE ASSESSEE IS HELD TO BE THE OWNER OF THE ASSET, HOWE VER, THE NEXT QUESTION THAT ARISE IS WHETHER THE ASSET IS HE LD BY THE 37 ASSESSEE AS BUSINESS/TRADING ASSET OR AS A CAPITAL ASSET. THE ASSESSEE, ADMITTEDLY, FURTHER GIVES ON HIRE THE STB S TO VARIOUS CONSUMERS AND INSTALLS THOSE IN THEIR PREMISES. THE CONSUMERS DEPOSIT REFUNDABLE SECURITY AMOUNT ALMOST EQUAL TO THE COST OF THE STBS TO THE ASSESSEE. ASSESSEE CHAR GES MONTHLY RENT FROM THE CONSUMERS FOR THREE YEARS. AF TER THE EXPIRY OF THREE YEARS, THE STBS BECOME THE PROPERTY OF THE CONSUMERS AND AT THE SAME TIME THE SECURITY DEPOSIT GETS FORFEITED AND APPROPRIATED TO THE INCOME OF THE ASS ESSEE, WHICH IS ALSO OFFERED/SUBJECTED TO INCOME TAX. THE TRANSACTION WITH CONSUMERS, THUS, APPARENTLY APPEARS TO BE OF A HIRE- PURCHASE, THE ASSESSEE BEING THE LESSER CUM SELLER , THE DETAIL OF THE TRANSACTION WE WILL DISCUSS IN THE LATER PAR T OF THE ORDER. HOWEVER, THE QUESTION THAT WILL ARISE AT THI S STAGE AS TO AN ASSET, HELD OR FURTHER GIVEN ON HIRE- PURCHASE B Y AN ASSESSEE WHO IS IN THE BUSINESS OF LETTING & SELLI NG A PARTICULAR TYPE OF GOOD (STBS) ON HIRE-PURCHASE BAS IS WHICH IS ESSENTIAL TO AND INTEGRAL PART OF MAIN BUSINESS OF BROADCASTING OF CHANNELS OF THE ASSESSEE, IS TO BE TREATED AS BUSINESS/TRADING ASSET OF THE ASSESSEE ELIGIBLE FOR CLAIM OF DEDUCTION OF EXPENDITURE U/37 OF THE ACT OR AS A CA PITAL ASSET OF THE ASSESSEE ELIGIBLE FOR CLAIM OF DEDUCTION OF DEPRECIATION UNDER SECTION 32 OF THE ACT. SINCE, NO ARGUMENTS HA VE BEEN ADVANCED ON THIS ISSUE BY ANY OF THE PARTIES, HENCE , IN VIEW OF THE DISCUSSION MADE IN EARLIER PARAS OF THIS ORDER, WE PROCEED 38 TO DECIDE THE NEXT CONTROVERSY TREATING THE ASSET A S A CAPITAL ASSET IN THE HAND OF THE ASSESSEE. THE ASSESSEE, THEREFORE, IS ENTITLED ONLY TO CLAIM INTEREST PAID AS PART OF THE SAID LEASE RENTALS AS EXPENDITU RE U/S 36 (1) (III) OF THE INCOME TAX ACT. THE ASSESSEE, IN VIEW OF THE DISCUSSION MADE ABOVE, IS NOT ENTITLED TO CLAIM THE PRINCIPAL COMPONENT OF ALLEGED LEASE RENT PAID AS REVENUE EX PENDITURE U/S 37(1) OF THE ACT. HOWEVER, THE ASSESSEE IS ALSO ENTITLED TO CLAIM DEPRECIATION ON THE SAID ASSETS PURCHASED FRO M BORROWED CAPITAL. ADDITIONAL GROUND: 29. NOW THE ISSUE RAISED THROUGH ADDITIONAL GROUND OF A PPEAL BEFORE US IS AS TO AT WHAT RATE DEPRECIATION IS ALL OWABLE TO THE ASSESSEE ON THE EQUIPMENT SO PURCHASED BY THE ASSES SEE AFTER OBTAINING FINANCE FROM THE CISCO. 30. THE LD. DR HAS OBJECTED TO THE ADMISSION OF ADD ITIONAL GROUND OF APPEAL AT THIS STAGE. IT HAS BEEN SUBMITT ED THE ADDITIONAL GROUND IS NOT A LEGAL GROUND AS THE ALLO WABILITY OF DEPRECIATION @ 60% OR @ 15% IS PURELY BASED ON FACT S AND CLASSIFICATION OF THIS ACT, THEREFORE, THE ABOVE AD DITIONAL GROUND CANNOT BE ADMITTED AT THIS STAGE. IN THE AL TERNATIVE, THE LD. DR HAS SUBMITTED THAT IF THE ADDITIONAL GRO UND IS TO BE ADMITTED, THE SAME MAY BE RESTORED TO THE FILE OF T HE CIT(A). 39 SHE, IN THIS RESPECT, HAS RELIED UPON THE DECISION OF THE HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. M/S TOLLARAM HASSOMAL (2006) 153 TAXMANN 532 (MP). HOWEVER, THE LD. AR OF THE ASSESSEE HAS SUBMITTED T HAT THE ISSUE AS TO WHETHER THE ASSESSEE IS ELIGIBLE F OR DEPRECIATION AT THE RATE OF 60%? WAS WELL BEFORE T HE ASSESSING OFFICER AND ALL THE RELEVANT FACTS HAVE BEEN DISCUS SED BY THE AO IN THE ORDER FOR AY 2012-13 AND 2013-14. HE HAS FURTHER SUBMITTED THAT THE ISSUE OF CLASSIFICATION OF COMPU TER PERIPHERALS AS COMPUTER EQUIPMENT ELIGIBLE FOR DEPR ECIATION WAS DECIDED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS BIRLASOFT LTD., ITA NO.1284/2011 WHICH WAS FURTHER AFFIRMED BY THE HONBLE SUPREME COURT. HE, THEREFOR E HAS SUBMITTED THAT THE MERE FACT THAT THE ISSUE OF CLAS SIFICATION WAS ADMITTED IN BOTH THE HIGH COURT AND SUPREME COU RT GOES TO PROVE THAT IT IS A LEGAL ISSUED AS BOTH THE COUR TS, AS PER THE PROVISIONS OF INCOME TAX ACT, 1961, CAN ONLY ENTERT AIN APPEALS WHICH HAVE A QUESTION OF LAW. THE LD. COUNSEL HAS F URTHER SUBMITTED THAT IF THE RELEVANT FACTS ARE ALREADY ON RECORD IN RESPECT AN ADDITIONAL CLAIM WHICH IN THIS CASE IS P URELY A LEGAL ISSUE, THERE IS NO BAR IN RAISING THE SAME AT ANY S TAGE OF THE LITIGATION. HE IN THIS RESPECT HAS RELIED ON THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT , 229 ITR 383 (SC). 40 31. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES ON THIS ISSUE. IT IS NOT DISPUTED THAT THE ISSUE RAISED BY WAY OF ADDITIONAL GROUND O F APPEAL WAS ALREADY BEFORE THE ASSESSING OFFICER IN THE PRO CEEDINGS FOR ASSESSMENT YEAR 2012-13, THE APPEAL AGAINST WHICH I S ALSO BEING ADJUDICATED WITH THIS COMMON ORDER. EVEN FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RAISED THIS I SSUE BEFORE THE AO BY WAY OF RECTIFICATION APPLICATION U/S 154 OF THE ACT. NEITHER ANY NEW FACT, NOR ANY NEW EVIDENCE IS REQUI RED TO BE PRODUCED FOR ADJUDICATION OF THE ABOVE ISSUE AS ALL THE RELEVANT FACTS RELATING TO THE ISSUE ARE ALREADY ON THE FILE. THE QUESTION AS TO WHETHER THE ASSESSEE CAN TAKE AN ADD ITIONAL GROUND AT THE APPELLATE STAGE EVEN WHEN THE SAME HA S NOT BEEN RAISED BEFORE THE LOWER AUTHORITIES HAS BEEN THOROU GHLY DISCUSSED BY THE CO-ORDINATE DIVISION BENCH OF THE TRIBUNAL AT MUMBAI, ONE OF US (JUDICIAL MEMBER) BEING PART OF THE SAID BENCH, IN THE CASE OF PANDOO P. NAIG IN ITA NO.7089/MUM/2011 DECIDED ON 24.06.2016 [2016 (9) T MI 1062]. THE TRIBUNAL, WHILE RELYING UPON THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWE R COMPANY LTD. VS. CIT 229 ITR 383, FULL BENCH OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY CO . LTD. VS. CIT (1993) 199 ITR 351, ANOTHER DECISION OF THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CIT VS. PRUTHVI BROKERS AND 41 SHAREHOLDERS PVT. LTD. (2012) 349 ITR 336 (BOM.) H AS HELD THAT THE APPELLATE AUTHORITIES HAVE JURISDICTION TO DEAL NOT MERELY WITH ADDITIONAL GROUND WHICH BECAME AVAILABLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUND S WHICH WERE AVAILABLE WHEN THE RETURN WAS FILED. THE RELEVANT PART OF THE ORDER OF THE TRIBUNAL IN THE CASE OF PANDOO P. NAI G FOR THE PURPOSE OF REFERENCE IS REPRODUCED AS UNDER: 19. NOW COMING TO THE POINT, WHETHER, THE CLAIM PU T BY THE ASSESSEE SHRI PANDOO P. NAIG BY WAY OF ADDITION AL GROUND BEFORE THE LD. CIT(A) REGARDING THE DELETION OF ADDITION OF RS.4 CRORE OFFERED DURING THE SURVEY AC TION AND THEREBY OFFERED IN THE RETURN OF INCOME CAN BE ALLO WED AT THIS STAGE? THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HA S PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C IT 229 ITR 383. THE FACTS BEFORE THE HONBLE SUPREME COUR T WERE THAT THE ASSESSEE IN THAT CASE OFFERED THE INTEREST AMOUNT FOR TAXATION AND THE ASSESSMENT WAS COMPLETED ON TH AT BASIS. BEFORE THE LD. CIT(A), THE ASSESSEE THOUGH HAD TAKEN A NUMBER OF GROUNDS OF APPEAL, HOWEVER, THE INCLUSION OF THE SAID AMOUNT OF INTEREST WAS NOT CHALLENGED. THE INCLUSION OF THE SAID AMOUNT OF IN TEREST WAS NOT OBJECTED TO EVEN IN THE GROUNDS OF APPEAL A S ORIGINALLY FILED BEFORE THE TRIBUNAL. HOWEVER, THE ASSESSEE BY WAY OF SUBSEQUENT LETTER RAISED THE ADDITIONAL G ROUND IN RELATION TO THE SAID INCLUSION OF INTEREST INTO THE INCOME OF THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES, THE QUES TION BEFORE THE HONBLE SUPREME COURT WAS WHERE ON THE FACTS FOUND BY THE AUTHORITIES BELOW A QUESTION OF LAW AR ISES (THOUGH NOT RAISED BEFORE THE AUTHORITIES) WHICH BE ARS ON THE TAX LIABILITY OF THE ASSESSEE, WHETHER THE TRIB UNAL HAS JURISDICTION TO EXAMINE THE SAME? THE HONBLE SUP REME COURT WHILE ANSWERING THE SAID QUESTION OBSERVED TH AT UNDER SECTION 254 OF THE INCOME TAX ACT, THE POWER OF THE TRIBUNAL IN DEALING WITH THE APPEALS IS EXPRESSED I N THE WIDEST POSSIBLE TERMS; THE POWER OF THE TRIBUNAL UN DER SECTION 254 IS NOT RESTRICTED ONLY TO DECIDE THE GR OUNDS WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS); THAT BOTH THE ASSESSEE AS WELL AS TH E DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS OBJ ECTION 42 BEFORE THE TRIBUNAL AND THE TRIBUNAL IS NOT PREVENT ED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. WHILE ANS WERING THE QUESTION IN AFFIRMATIVE, THE HONBLE SUPREME CO URT CONCLUDED THAT THE TRIBUNAL HAS JURISDICTION TO EXA MINE A QUESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUN D BY THE AUTHORITIES BELOW AND HAVING A BEARING ON THE TAX L IABILITY OF THE ASSESSEE. 20. THE FACTS OF THE CASE IN HAND ARE ON BETTER FOO TING. IN THE CASE IN HAND, THOUGH UNDER CONSISTENT PRESSU RE, THE ASSESSEE OFFERED THE ADDITIONAL INCOME FOR TAXATION IN THE ASSESSMENT PROCEEDINGS BUT WHEN HE WAS BURDENED WIT H MANY MORE ADDITIONS, HE AT THE FIRST INSTANCE DURIN G THE APPEAL BEFORE THE LD. CIT(A), CHALLENGED THE OFFER OF ADDITIONAL INCOME ON THE BASIS OF STATEMENT RECORDE D UNDER SECTION 133A. EVEN THE SAID GROUND WAS ALSO ADMITTED BY THE LD. CIT(A) FOR ADJUDICATION THOUGH FINALLY DECIDED AGAINST THE ASSESSEE. THE FULL BENCH OF TH E HONBLE BOMBAY HIGH COURT IN THE CASES OF AHMEDABA D ELECTRICITY COMPANY LTD. VS. CIT AND GODAVARI SUG AR MILLS LTD. VS. CIT BY WAY OF A COMMON ORDER DATED 30.04.1992 (1993) 199 ITR 351 HAS OBSERVED THAT THE BASIC PURPOSE OF AN APPEAL PROCEDURE IN AN INCOME T AX MATTER IS TO ASCERTAIN THE CORRECT TAX LIABILITY OF THE ASSESSEE IN ACCORDANCE WITH LAW. THEREFORE, AT BOT H THE STAGES, EITHER BY THE APPELLATE ASSISTANT COMMISSIO NER OR BEFORE THE APPELLATE TRIBUNAL, THE APPELLATE AUTHOR ITY CAN CONSIDER THE PROCEEDINGS BEFORE IT AND THE MATERIAL ON RECORD BEFORE IT FOR THE PURPOSE OF DETERMINING THE CORRECT TAX LIABILITY OF THE ASSESSEE. THE APPELLATE AUTHO RITIES, OF COURSE, CANNOT TRAVEL BEYOND THE PROCEEDINGS AND EX AMINE NEW SOURCE OF INCOME, FOR THAT PURPOSE OTHER SEPARA TE REMEDIES ARE PROVIDED TO THE DEPARTMENT UNDER THE I NCOME TAX ACT. THE HONBLE FULL BENCH OF THE BOMBAY HIGH COURT OBSERVED THAT APART FROM THE ABOVE, THERE WAS NOTHI NG IN SECTION 254 OR SECTION 251 WHICH WOULD INDICATE THA T THE APPELLATE AUTHORITIES ARE CONFINED TO CONSIDERING O NLY THE OBJECTIONS RAISED BEFORE THEM OR ALLOWED TO BE RAIS ED BEFORE THEM EITHER BY THE ASSESSEE OR BY THE DEPARTMENT, A S THE CASE MAY BE. THEY CAN CONSIDER THE ENTIRE PROCEEDI NGS TO DETERMINE THE TAX LIABILITY OF THE ASSESSEE. 32. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. (2012) 349 ITR 336 43 (BOM.) HAS OBSERVED THAT THE ASSESSEE IS ENTITLED T O RAISE NOT MERELY ADDITIONAL LEGAL SUBMISSIONS BEFORE THE APPE LLATE AUTHORITIES, BUT IS ALSO ENTITLED TO RAISE ADDITION AL CLAMS BEFORE THEM. THE APPELLATE AUTHORITIES HAVE JURISDICTION TO DEAL NOT MERELY WITH ADDITIONAL GROUNDS, WHICH BECAME AVAILA BLE ON ACCOUNT OF CHANGE OF CIRCUMSTANCES OR LAW, BUT WITH ADDITIONAL GROUNDS WHICH WERE AVAILABLE WHEN THE RETURN WAS FI LED. THE WORDS COULD NOT HAVE BEEN RAISED MUST BE CONSTRUE D LIBERALLY AND NOT STRICTLY. THERE MAY BE SEVERAL FACTORS JUS TIFYING THE RAISING OF A NEW PLEA IN AN APPEAL AND EACH CASE MU ST BE CONSIDERED ON ITS OWN FACTS. IN VIEW OF THE ABOVE DISCUSSION, THE ADDITIONAL GR OUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION . SINCE AS DISCUSSED ABOVE, ALL THE FACTS RELEVANT TO THE ISSU E RAISED THROUGH THE ABOVE STATED ADDITIONAL GROUND OF APPEA L ARE ON RECORD AND EVEN THE IDENTICAL GROUND HAS ALREADY BE EN ADJUDICATED BY THE LD. CIT(A) IN ASSESSMENT YEAR 20 12-13 AND THE APPEAL AGAINST THE SAID ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2012-13 IS BEING ADJUDICATED WITH THIS COMMON ORDER WHEREIN THE SAID GROUND HAS BEEN TAKEN AS ONE OF TH E MAIN GROUNDS, HENCE IN OUR VIEW, NO USEFUL PURPOSE WILL BE SERVED FOR RESTORING THE ADDITIONAL GROUND OF APPEAL TO TH E FILE OF THE CIT(A) FOR THE YEAR UNDER CONSIDERATION. HENCE, WE PROCEED TO ADJUDICATE THE ADDITIONAL GROUND OF APPEAL. 44 33. THE ASSESSING OFFICER HAS ALLOWED THE DEPRECIAT ION @ 15%, WHEREAS, THE CONTENTION OF THE COUNSEL FOR THE ASSESSEE IS THAT STBS WERE CLASSIFIABLE UNDER THE HEAD 'COMP UTERS INCLUDING COMPUTER SOFTWARE' AS PROVIDED UNDER ITEM -ILL (5) OF THE TABLE OF RATES OF DEPRECIATION IN APPENDIX 1 TO THE INCOME- TAX RULES, 1962 AND WERE ELIGIBLE FOR DEPRECIATION @ 60%. THE LD. COUNSEL TO DEMONSTRATE THAT A STB IS NOT ON LY IN ITSELF A COMPUTER BUT ALSO IS PART AND PARCEL OF A LARGER COMPUTER SYSTEM FROM WHICH IT GETS THE SIGNALS, DECODE THE A UDIO -VIDEO SIGNALS AND PASS ON TO THE TELEVISION. HE IN THIS RESPECT HAS MADE THE FOLLOWING WRITTEN SUBMISSIONS: WITHOUT PREJUDICE, IT IS FURTHER RESPECTFULLY SUBMITTED THAT EVEN IN A SCENARIO THE AFORESAID ARRANGEMENT IS TRE ATED AS FINANCE LEASE AND THE APPELLANT IS DEEMED TO BE THE OWNER OF THESE EQUIPMENT'S, THEN DEPRECIATION ON STBS SHOULD , IN OUR SUBMISSION, BE ALLOWED TO THE APPELLANT AT THE RATE OF 60%, BEING CLASSIFIABLE UNDER THE HEAD 'COMPUTERS INCLUD ING COMPUTER SOFTWARE' AS PROVIDED UNDER ITEM-ILL (5) O F THE TABLE OF RATES OF DEPRECIATION IN APPENDIX 1 TO THE INCOME-TAX RULES, 1962 FOR THE REASONS EXPLAINED HEREUNDER: WHAT IS STB? IN THIS REGARD, IT IS RESPECTFULLY SUBMITTED THAT S ET-TOP BOXES ARE BASICALLY HARDWARE DEVICES THAT ALLOWS A DIGITAL SI GNAL TO BE RECEIVED, DECODED AND DISPLAYED ON SCREENS. IN OTHE R WORDS, IT IS AN AUDIO-VISUAL EQUIPMENT THAT DECODES AND PERFORMS INPUT /OUTPUT PROCESSING FUNCTIONS. 45 A SET-TOP BOX IS A DEVICE THAT ENABLES A TELEVISION SET TO BECOM E A USER INTERFACE TO THE INTERNET AND ALSO ENABLES A TELEVISION SET TO RECEIVE AND DECODE DIGITAL TELEVISION (DTV) BROA DCASTS. THE MAIN COMPONENTS OF SET TOP BOX ARE: SYSTEM BUS; - TUNER(S); - MODULATORS AND DEMODULATORS; DEMULTIPLEXER AND DECRYPTOR; - DECODERS; GRAPHIC PROCESSORS; CPU AND MEMORY; - STORAGE DEVICES; - PHYSICAL INTERFACES; AND - PHYSICAL CHARACTERISTICS A SET-TOP BOX CONTAINS ONE OR MORE MICROPROCESSORS FOR RUNNING THE OPERATING SYSTEM, POSSIBLY LINUX OR WINDOWS CE, AND FOR PARSING THE MPEG TRANSPORT STREAM. IT ALSO INCLUDES RAM, AN MPEG DECODER CHIP, AND MORE CHIPS FOR AUDIO DECODIN G AND PROCESSING. FURTHER IT CONTAINS A HARD DRIVE FOR ST ORING RECORDED TELEVISION BROADCASTS, FOR DOWNLOADED SOFTWARE, AND FOR OTHER APPLICATIONS PROVIDED BY DTV SERVICE PROVIDER. DEFINITION/MEANING OF THE TERM COMPUTER/COMPUTERS INCLUDING COMPUTER SOFTWARE DEFINITION UNDER INCOME TAX ACT THE TERM 'COMPUTER' HAS NOT BEEN DEFINED UNDER THE ACT. HOWEVER, THE TERM 'COMPUTER SYSTEM' HAS BEEN DEFINE D UNDER EXPLANATION (A) TO CLAUSE (XI) OF SECTION 36(1) OF THE ACT WHICH READS AS UNDER: ''COMPUTER SYSTEM' MEANS A DEVICE OR COLLECTION OF DEVICES INCLUDING INPUT AND OUTPUT SUPPORT DEVICES AND EXCLUDING CALCULATORS WHICH ARE NOT PROGRAMMABLE AN D CAPABLE OF BEING USED IN CONJUNCTION WITH EXTERNAL FILES, OR MORE OF WHICH CONTAIN COMPUTER PROGRAMMES, ELECTRON IC INSTRUCTIONS, INPUT DATA AND OUTPUT DATA, THAT PERFORMS 46 FUNCTIONS INCLUDING, BUT NOT LIMITED TO, LOEIC, ARITHMETIC, DATA STORASE AND RETRIEVAL, COMMUNICATION AND CONTROL' DEFINITION UNDER INFORMATION TECHNOLOGY ACT 2000 FURTHER, THE TERM 'COMPUTER' HAS BEEN DEFINED IN TH E INFORMATION TECHNOLOGY ACT, 2000, TO MEAN ELECTRONI C, MAGNETIC, OPTICAL OR OTHER HIGH-SPEED DATA PROCESSING DEVICE OR SYSTEM WHICH PERFORMS LOGICAL, ARITHMETIC AND MEMORY FUNCT IONS BY MANIPULATIONS OF ELECTRONIC, MAGNETIC OR OPTICAL IM PULSES, AND INCLUDES ALL INPUT, OUTPUT, PROCESSING, STORAGE, CO MPUTER SOFTWARE OR COMMUNICATION FACILITIES WHICH ARE CONN ECTED OR RELATES TO THE COMPUTER IN A COMPUTER SYSTEM OR COM PUTER NETWORK. DEFINITION AS PER ICAI ATTENTION IN THIS REGARD IS FURTHER INVITED TO THE STUDY MATERIAL FOR PEE II INFORMATION TECHNOLOGY PAPER VI ISSUED B Y THE ICAI, WHICH STATES AS FOLLOWS: 'THE TERM 'COMPUTER' CAN LOGICALLY BE APPLIED TO AN Y CALCULATING MACHINE. HOWEVER, IN COMMON USAGE, THE DEFINITION OF A COMPUTER HAS BECOME MORE LIMITED IN A CONTEMPORARY USAGE. WE NOW DEFINE A COMPUTER AS AN ELECTRONIC DATA PROCESSING DEVICE CAPABLE OF RECEIV ING INPUT, STORING SETS OF INSTRUCTIONS FOR SOLVING PROBLEMS A ND GENERATING OUTPUT WITH HIGH SPEED AND ACCURACY. COM PUTERS ARE COMPOSED OF SWITCHES, WIRES, MOTORS, TRANSISTOR S AND INTEGRATED CIRCUITS ASSEMBLED ON FRAMES. THE FRAMES FORM COMPONENTS SUCH AS KEYBOARDS, PRINTERS, VISUAL DISP LAY UNITS, DISK DRIVES, MAGNETIC TAPE DRIVES AND CENTRA L PROCESSING UNITS. THESE COMPONENTS ARE WIRED TOGETH ER INTO A NETM'ORK CALLED A COMPUTING SYSTEM OFTEN CALLED A COMPUTER. ' [EMPHASIS SUPPLIED] THUS, FROM THE ABOVE, IT IS EVIDENT THAT 'COMPUTERS ' DO NOT SIMPLICITOR MEAN CPU'S, BUT ANY DEVICE WHICH CONTAI N COMPUTER PROGRAMMES, ELECTRONIC INSTRUCTIONS, INPUT DATA AND OUTPUT DATA AND PERFORMS FUNCTIONS INCLUDING, BUT NOT LIMITED T O, LOGIC, ARITHMETIC, DATA STORAGE AND RETRIEVAL, COMMUNICATI ON AND CONTROL QUALIFY AS 'COMPUTERS' FOR THE PURPOSE OF C LAIMING 47 DEPRECIATION @ 60% IN TERMS OF SECTION 32 OF THE AC T. THUS, FROM THE ABOVE, IF AN ANALYSIS CAN BE DRAWN AS TO HOW ST B'S CONSTITUTE A COMPUTER / COMPUTER SOFTWARE IS AS FOL LOWS: S. NO. AS PER DEFINITION OF COMPUTER AS PER SPECIFICATION OF STB, HOW IT CLASSIFIES AS STB 1. DEVICE THAT CONTAINS COMPUTER PROGRAMME AND ELECTRONIC INSTRUCTIONS A SET TOP BOX COMPRISES OF ALGORITHMS WHICH ENABLE THE NETWORK TO DETERMINE WHICH CHANNEL TO OPERATE BASED ON THE ELECTRONIC INSTRUCTIONS RECEIVED BY IT. 2. HAS THE CAPABILITY OF RECEIVING INPUTS AND THEN TRANSFORMING THEN INPUT INTO THE DESIRED OUTPUT USING THE ELECTRONIC INSTRUCTIONS IT IS AN AUDIO- VISUAL EQUIPMENT THAT DECODES AND PERFORMS INPUT /OUTPUT PROCESSING FUNCTIONS WHEREIN THE CONDITIONAL ACCESS SYSTEM (CAS) SENDS INPU T TO THE STB WHICH IN TURN ENABLES THE STB TO GIVE OUTPUT AS TO WHICH PACKAGE SHOULD BE DISPLAYED ON THIS (REFER TABLE 3 AT PAGE 3 OF THE SPECIFICATIONS). 3. COMPRISES OF A CENTRAL PROCESSING UNIT (CPU) STB COMPRISES OF POWERFUL 420 DMIPS 32 BIT RISC PROC ESSOR, WHICH IS EVIDENT FROM THE SPECIFICATION ENCLOSED. (REFER TABLE 3 AT PAGE 3 OF THE SPECIFICATIONS). 4. COMPRISES OF AN OPERATING SYSTEM WHICH ENABLES THE GIVING OF VARIOUS COMMANDS. POWER KEY CONDITIONAL ACCESS SYSTEM, WHICH SECURES DIGITAL SERVICES USING AN RSA ENCRYPTION ALGORITHM THAT MATHEMATICALLY MATCHES PAIRS OF KEYS AND IS COMPLIANT WITH DVB (ETR 289) COMMON SCRAMBLING ALGORITHM (REFER TABLE 3 AT PAGE 3 OF THE SPECIFICATIONS). 5. PERFORMS THE FUNCTION OF LOGIC/ARITHMETIC ALREADY EXPLAINED AB OVE. (REFER TABLE 3 AT PAGE 3 OF THE SPECIFICATIONS.) 6. PERFORMS THE FUNCTION OF DATA STORAGE BASE MODEL CONTAINS - 4MB FLASH RAM MEMORY (UPTO 8MB OPTION) - 32MB DRAF, 4KB EEPROM REFER TABLE 3 AT PAGE 3 OF THE SPECIFICATIONS.) THUS, IT IS EVIDENT THAT A SET TOP BOX IS A NOTHING BUT A COMPUTER FOR THE CABLE INDUSTRY TO FUNCTION IN AS M UCH AS SET 48 TOP BOXES TOO RESPONDS TO A SPECIFIC SET OF INSTRUC TIONS IN A WELL- DEFINED MANNER AND PERFORM INPUT/OUTPUT PROCESSING. THUS, IN VIEW OF THE ABOVE, IT MAY BE APPRECIATED T HAT SET TOP BOXES CLEARLY QUALIFY AS 'COMPUTER'. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THA T STB'S ARE CAPABLE OF BEING A COMPUTER AND ARE ALSO AN INTEGRA L PART OF THE NETWORK OF COMPUTERS, SUCH AS ORACLE BASED BILLING SYSTEM AND CONDITIONAL ACCESS SYSTEM (CAS) WHICH PROCESSES THE CONTENT AND THE INDIVIDUAL STB USAGE FOR THE SUBSCRIBER. TH E FACT THAT THE STB IS AN INTEGRAL PART OF THE ENTIRE COMPUTER NETWORK RESPONSIBLE FOR TRANSMITTING SIGNALS AND DISPLAYING THE RELEVANT OUTPUT ON THE MONITOR SCREEN/TELEVISION IS EXPLAINE D DIAGRAMMATICALLY AS PER ANNEXURE 1. FURTHER, APART FROM THE ABOVE AND EVEN OTHERWISE, I T MAY BE APPRECIATED THAT SET TOP BOXES ARE FUNCTIONALLY DEP ENDENT ON COMPUTERS AS DEMONSTRATED HEREUNDER: IT MAY BE PERTINENT TO NOTE THAT SET-TOP BOXES COMP RISE THREE SEPARATE SUBSYSTEMSTV, CONDITIONAL ACCESS (CA), AN D PC COMPONENTS. THE TV SUBSYSTEM INCLUDES A NUMBER OF T UNERS AND VIDEO DECODERS THAT ARE RESPONSIBLE FOR PROCESS ING STREAMS OF DIGITAL INFORMATION. THE CA SYSTEM PROVIDES MSOS WITH UNPRECEDENTED CONTROL OVER WHAT THEIR SUBSCRIBERS W ATCH AND WHEN THEY WATCH IT. THE PC SUBSYSTEM ITSELF IS MODU LAR-BASED, WHICH MEANS THAT SET-TOP DESIGNERS CAN ADD AND SUBT RACT VARIOUS COMPONENTS DEPENDING ON USER REQUIREMENTS. FOR INSTANCE, MSOS THAT WANT TO OFFER INTERNET SERVICES TO THEIR SUBSCRIBERS WILL INCORPORATE SOME TYPE OF STORAGE S OLUTION INTO THEIR PC SUBSYSTEM. MOREOVER, DETAILED TECHNICAL SPECIFICATIONS PROVING THE FACT THAT SET TOP BOX IS ITS SELF IT COMPUTER DEVICE AND ENTI RE TECHNICAL FUNCTIONS ARE NOT ONLY DIGITALLY DRIVEN THROUGH THE SOFTWARE PROGRAMS BUT IT ALSO CONTAINS FLASH MEMORY, CPU (CE NTRAL PROCESSING UNIT), POWER KEY, PROCESSOR ETC. ON THE LINES OF THE COMPUTERS. DETAILED TECHNICAL SPECIFICATIONS ARE EN CLOSED HEREWITH AS PER ANNEXURE-2. THUS, FOR THE AFORESAID REASON TOO, IT IS RESPECTFU LLY SUBMITTED THAT SINCE THE FUNCTIONING OF STB'S ARE DEPENDENT O N COMPUTERS 49 AND SOFTWARE, THUS ON THIS ACCOUNT AS WELL THEY ARE ELIGIBLE TO BE CLASSIFIED AS 'COMPUTERS' AND ELIGIBLE FOR DEPRECIA TION @ 60%. IT HAS BEEN CONCLUDED FROM THE ABOVE DISCUSSION THA T THE SET TOP BOXES AND AUDIO VISUAL STREAMING EQUIPMENT ARE SAME AS FORMER BEING THE TRADE NAME OF THE EQUIPMENT. FURTH ER SET TOP BOXES ARE ITSELF MINICOMPUTER WITH INBUILT HARDWARE AND SOFTWARE, TECHNICAL SPECIFICATION OF SET TOP BOXES HAS ALREADY BEEN DISCUSSED ABOVE WHICH VERBATIM TALLIES WITH TE CHNICAL SPECIFICATIONS OF COMPUTER SUCH AS DECODERS, GRAPHI C PROCESSORS, CPU AND MEMORY ETC. IT HAS ALSO BEEN PR OVED THAT COMPUTER IS INTEGRATED WITH BACK END SERVERS AND CO MPUTERS FOR TRANSMISSION OF SIGNALS. THEN JUDICIAL PRONOUNCEMEN TS ALSO SUPPORT THE CONTENTION OF THE ASSESSEE THAT THE SET TOP BOX IS OUT AND OUT COMPUTER AND THUS HAVE TO BE CLASSIFIED UNDER THE CATEGORY OF COMPUTER AND SOFTWARE FOR THE PURPOSE O F DEPRECIATION . 15. APART FROM ABOVE SUBMISSIONS, THE LD. COUNSEL FOR T HE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF SPECIFIC REL IANCE IN THIS REGARD IS PLACED ON THE DECISION OF BANGALORE BENCH OF TRI BUNAL IN THE CASE OF CISCO SYSTEMS CAPITAL (INDIA) PVT. LTD. VS. ACIT: I TA NO. 1558 OF 2012 TO SUBMIT THAT UNDER SIMILAR FACTS AND CIRCUMSTANCE S, THE CISCO HAS BEEN GRANTED 60% DEPRECIATION ON THE AUDIO VISUAL C ONFERENCING EQUIPMENT. THE LD. COUNSEL HAS FURTHER SUBMITTED TH AT THE ASSESSEE HAS ALWAYS BEEN ALLOWED DEPRECIATION @ 60% ON STB'S IN THE PRECEDING AS WELL AS SUBSEQUENT ASSESSMENT YEAR(S) IN ASSESSMENTS CONCLUDED UNDER SECTION 143(3) OF THE ACT IN RESPEC T OF STB'S THAT WERE OWNED BY THE ASSESSEE. HENCE THE PRINCIPLE OF CONSISTENCY SHOULD BE FOLLOWED. HE IN THIS RESPECT HAS MADE THE FOLLOWING SUBMISSIONS: SPECIFIC RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF BANGALORE BENCH OF TRIBUNAL IN THE CASE OF CISCO SYSTEMS CAPITAL (INDIA) PVT. LTD. VS. ACIT: ITA NO. 1558 OF 2012. IN THAT CASE, THE ASSESSEE CLAIMED DEPRECIATION @ 60% ON AUDIO VISUAL CONFERENCING EQUIPMENT AND VIDEO STREAMING E QUIPMENT'S 50 TREATING THEM AS COMPUTERS. HOWEVER, THE ASSESSING OFFICER RESTRICTED THE CLAIM OF DEPRECIATION TO 15% TREATIN G IT AS PLANT AND MACHINERY. ON OBJECTIONS FILED BEFORE THE DRP, THE ADDITION MADE IN DRAFT ASSESSMENT ORDER WAS CONFIRMED BY DRP . ON APPEAL FILED BEFORE THE TRIBUNAL AGAINST FINAL A SSESSMENT ORDER, IT WAS HELD AS UNDER : 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT TO TREAT THE EQ UIPMENT AS COMPUTER OR COMPUTER SYSTEM, THE NATURE OF THE EQUI PMENT AND THE FUNCTIONS THEY PERFORM ARE TO BE EXAMINED. 8.1 AS PER THE DETAILS FURNISHED BY THE LEARNED COU NSEL FOR THE ASSESSEE, AUDIO AND VIDEO CONFERENCING SYSTEM COMPRISE OF AUDIO-VIDEO DEVICES/EQUIPMENTS WHICH FACILITATE IN BRINGING PEOPLE AT DIFFERENT SITES TO GETHER FOR A MEETING. BESIDES THE AUDIO AND VISUAL AND MEETING ACTIVITIES, THESE SYSTEMS CAN ALSO BE USED TO SHARE DOCUMENT, COMPUTER INFORMATION AND BOARDS, CONFEREN CING WORKS ACROSS IT NET-WORK, ISD THROUGH COMPUTERS/COMPUTER NETWORK ETC., AND AUDIO/VIDEO FA CILITY CONSIST OF MANY ELEMENTS INCLUDING THE USE OF CODEC WHICH STANDS FOR CODER-DECODER. CODEC IS A DEVICE, WHICH CONVERTS AND COMPRESSES AN ANALOG AUDIO-VIDEO SIGNA L INTO DIGITAL DATA AND THEN SENDS IT OVER A DIGITAL LINE. THE DECODER REVERSES THE PROCESSES AT THE RECEIVING END AND THIS COMPRESSION AND DECOMPRESSION ALLOWS LARGE AMO UNT OF DATA TO BE TRANSFERRED ACROSS A NETWORK AT CLOSE TO REAL TIME. CONFERENCING SYSTEMS MAKE USE OF VARIOUS END POINTS IN A SYSTEM SUCH AS VIDEO INPUT CONSISTING OF CAMER A, VIDEO OUTPUT IN THE FORM OF MICROPHONES AND SPEAKERS ETC. THE DATA TRANSMISSION HAPPENS IN A NUMBER OF WAYS DEPENDING ON THE TECHNOLOGY BEING USED INCLUDING DI GITAL TECHNOLOGIES AS WELL AS ANALOG TECHNOLOGIES, BROADB AND INTERNET CONNECTION AND RADIO FREQUENCIES WHICH CAN INCLUDE SATELLITE TRANSMISSION AND WIFI. THEREFORE, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, COMPUTER SYSTEM IS EXTREMELY IMPORTANT TO CONFERENCING PROCE SS AND THEREFORE THE AUDIO VISUAL TRANSMISSION EQUIPMENT S HOULD BE CONSIDERED AS PART OF A COMPUTER. 8.2 REGARDING THE VIDEO STREAMING EQUIPMENT, IT WAS SUBMITTED THAT THE VIDEO STREAMING ALLOWS USER TO B EGIN VIEWING THE VIDEO CLIPS STORED IN A SERVER WITHOUT FIRST DOWNLOADING THE ENTIRE FILE AND AFTER A BRIEF PERIO D OF 51 INITIATING AND BUFFERING, THE FILE WILL BEGIN TO ST REAM OR PLAY IN REAL TIME. VIDEO STREAMING INVOLVES A SERIES OF STEPS INVOLVING THE USE OF MEDIA CONTENT, A COMPUTER THAT RUNS ENCODING SOFTWARE, SERVERS FOR UPHOLDING THE STREAM ED MEDIA FORMAT AND ACCESS TO SUCH MEDIA THROUGH VARIO US DEVICES. FROM THE ABOVE SUBMISSIONS, IT IS CLEAR TH AT THE EQUIPMENT USED BY THE ASSESSEE FOR AUDIO VISUAL CONFERENCING AND ALSO VIDEO STREAMING INVOLVES THE USE OF COMPUTER. AS CERTAIN INPUT AND OUTPUT EQUIPMENT MAY HAVE INDEPENDENT FUNCTIONALITY AND EXISTENCE BUT THE COM PUTER DEVICES WHICH ARE INVOLVED IN THESE ACTIVITIES WOUL D BE OF NO USE IF THESE INPUT AND OUTPUT DEVICES ARE NOT US ED. THEREFORE, THOUEH THE INPUT AND OUTPUT DEVICES MAY HAVE INDEPENDENT EXISTENCE AND FUNCTIONALITY IN SO FAR A S THE ACTIVITY OF THE ASSESSEE IS CONCERNED, THEY DO FORM PART OF THE COMPUTER NETWORK SYSTEM WITHOUT WHICH THE COMPU TER USED FOR THE PURPOSE OF AUDIO AND VIDEO CONFERENCES WOULD BE USELESS. THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF DATACRAFT INDIA LTD., (CITED SUPRA) HAS HELD THAT P ERIPHERAL EQUIPMENTS USED ALONG WITH COMPUTER ARE ALSO PART O F THE COMPUTER. WE FIND THAT A SIMILAR ISSUE HAD COME UP BEFORE 'B' BENCH OF THE TRIBUNAL AT DELHI IN THE CASE OF M/S.CRABTREE INDIA LTD. VS. ACITIN ITA NOS.3638 & 3639/DEL/2008 AND THE TRIBUNAL VIDE ORDERS DATED 25 -2- 2010 HAS HELD THAT VIDEO CONFERENCING SYSTEM IS A COMPUTER DEVICE THAT ACCEPTS INFORMATION IN THE FOR M OF DIGITAL DATA BY WAY OF VIDEO INPUT I.E. WITH THE HE LP OF WEB/CAM OR VIDEO CAMERA AND AUDIO INPUT WITH THE HE LP OF MICROPHONE AND THE SYSTEM THEREAFTER PROCESSED THE DATA AND TRANSFER THROUGH ANALOGUE OR DIGITAL TELEPHONE NETWORK OR LAN AND DIGITAL GIVES THE OUTPUT DATA BY WAY OF AUDIO VIDEO OUTPUT. THEREFORE, IT IS A TECHNICAL DEVICE W HOSE FUNCTIONS ARE SIMILAR TO THE COMPUTER BECAUSE BASIC ALLY COMPUTER ALSO RESPONDS TO A SPECIFIC SET OF INSTRUC TIONS IN A WELL DEFINED MANNER. THE TRIBUNAL CONSIDERED THE DE CISION OF THE IT AT, CALCUTTA BENCH IN THE CASE OF ITO VS. SIMRAN MAJUMDAR (98 ITD 119) WHEREIN THE TRIBUNAL HAD CONSIDERED THE SIMILAR ISSUE WHEREIN DEPRECIATION A T THE RATE OF 60% WAS CLAIMED ON PRINTERS AND SCANNERS AN D IT WAS HELD THAT THEY WERE ELIGIBLE FOR DEPRECIATION A T THE RATE OF 60%. THE TRIBUNAL, HOWEVER, HELD THAT THE CONTEN TIONS OF THE ASSESSEE THEREIN WERE NOT BEFORE THE AO AND THE REFORE THE ISSUE WAS SET ASIDE TO THE FILE OF THE AO TO CO NSIDER EACH OF THE ITEMS IN DETAIL AND FIND OUT WHICH CAN BE EQUATED AND CONSTRUED AS COMPUTER FOR THE PURPOSE O F GRANTING DEPRECIATION AT THE RATE OF 60% AFTER PROV IDING THE ASSESSEE DUE OPPORTUNITY OF HEARING. 52 8.3 IN THE CASE BEFORE US ALSO, ALL THE COMPONENTS OF THE EQUIPMENT ARE NECESSARY FOR FULFILLMENT OF THE OBJE CTIVE OF THE AUDIO-VISUAL CONFERENCING AND VIDEO STREAMING. SOME OF THE COMPONENTS MAY EXIST INDEPENDENTLY AND MAY ALSO BE FUNCTIONING INDEPENDENTLY BUT IN THE ASSESSEE'S BUS INESS THEY ARE ONLY PERFORMING THE FUNCTIONS AS INPUT AND OUTPUT DEVICES. THE ASSESSEE CAN ALSO USE THIS EQUIPMENT INDEPENDENT OF THE COMPUTER SYSTEM USED IN THE AUDI O VISUAL CONFERENCING AND VIDEO STREAMING ACTIVITY. B UT DID THE ASSESSEE USE THEM INDEPENDENTLY IS THE QUESTION . IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THE AO , INSTEAD OF CLASSIFYING THE ENTIRE EQUIPMENT AS PLAN T AND MACHINERY AND NOT COMPUTER, IS REQUIRED TO EXAMINE EACH ITEM IN DETAIL AS REGARDS ITS FUNCTION AL DEPENDENCY ON THE COMPUTER AND ITS INDEPENDENT EXISTENCE. THE ITEMS WHICH ARE FUNCTIONALLY DEPENDENT ON COMPUTERS ARE DEFINITELY PART OF COMPUTER AND THE ITEMS WITH INDEPENDENT EXISTENCE MAY NOT BE COMPUTERS BUT WHEREVER IT IS FOUND THAT THE DEVICE IS NOT USED INDEPENDENT OF THE COMPUTER SYSTEM AND THE PURPOSE OF AUDIO VISUAL CONFERENCING AND VIDEO STREAMING, THE SAME SHALL BE TREATED AS COMPUTERS AND WHEREVER IT IS USED INDEPENDENTLY FOR ANY OTHER PURPOSE IT SHALL BE TREATED AS PLANT AND MACHINERY. THE A O, SHALL, THUS ALLOW DEPRECIATION AT THE RATE OF 60% ON THE EQUIPMENT WHICH COULD BE CLASSIFIED AS COMPUTER AND AT THE RATE OF 15% ON TH E EQUIPMENT WHICH COULD BE CLASSIFIED AS PLANT AND MACHINERY. THIS ISSUE IS ACCORDINGLY SET ASIDE TO THE FILE OF THE AO FOR RE-ADJUDICATION IN ACCORDANCE WITH LA W AND OUR OBSERVATION ABOVE. ' (EMPHASIS SUPPLIED) IT IS PERTINENT TO NOTE THAT IN THE REMAND PROCEEDI NGS, THE ASSESSING OFFICER ALLOWED DEPRECIATION @ 60% ON AUD IO-VISUAL EQUIPMENTS. FURTHER, IT IS SUBMITTED THAT IN THE ASSESSMENT ORD ER PASSED IN THE CASE OF CISCO FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT AUDIO- VISUAL EQUIPMENTS (SET-TOP BOXES) ARE ELIGIBLE FOR DEPRECI ATION AT THE RATE OF 60%. THE RELEVANT FINDINGS OF THE ASSESSING OFFICER ARE REPRODUCED AS UNDER: '9. 1 THE ISSUE OF THE PERCENTAGE OF DEPRECIATION TO BE ALLOWED IN THE CASE OF AUDIO- VISUAL EQUIPMENTS HAD BEEN REMANDED TO THE ASSESSING OFFICER FOR AY 2008-09 AN D 2009-10. THIS ISSUE WAS DISCUSSED IN DETAIL WITH TH E AUTHORIZED REPRESENTATIVES DURING THE PASSING OF TH E REMANDED BACK ORDER FOR THE AY 2008-09 AND 2009-10. 53 BASED ON THE SUBMISSION OF THE ASSESSEE, IT WAS CON CLUDED THAT THE ASSESSEE IS MAKING USE OF THESE AUDIO-VISU AL EQUIPMENTS ALONG WITH THE COMPUTERS AND THEY FORM P ART OF THE INTEGRAL COMPUTER SYSTEM AND HENCE IT WAS DECID ED THAT THEY ARE ELIGIBLE FOR DEPRECIATION AT 60%. HEN CE, THE SAME IS APPLICABLE HERE AND THE AUDIO VISUAL EQUIPM ENTS ARE BEING ALLOWED DEPRECIATION AT 60%. ' FURTHER, EVEN OTHERWISE, IT IS SETTLED LAW THAT VAR IOUS EQUIPMENT AND PERIPHERALS WHICH ARE ATTACHED TO THE COMPUTER SYSTEM AND/OR THEIR FUNCTIONALITY IS DEPENDENT ON COMPUTER S ARE CLASSIFIABLE UNDER THE HEAD 'COMPUTERS' AND ELIGIBL E FOR DEPRECIATION @ 60%. REFERENCE IN THIS REGARD MAY BE MADE TO THE DECISIO N OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. BIRLASOFT LTD: ITA NO 1284/2011 WHEREIN IT WAS HELD THAT COMPUTER PERIPHERALS SHOULD BE INCLUDED UNDER THE HEAD 'COMPUTER EQUIPME NT' AND ARE THEREFORE, ENTITLED TO DEPRECIATION @ 60%.THE S AID DECISION HAS BEEN AFFIRMED BY THE SUPREME COURT IN CIT VS BIRLASOFT LTD: SLP NO. 20645/2012. IT WAS HELD LIKEWISE BY THE JURISDICTIONAL DELHI HI GH COURT IN THE CASE OF CIT VS. BSES RAJDHANI POWERS LTD. IN ITA NO 1266/2010. IN THAT CASE, THE COURT WHILE ADJUDICATING THE ISSUE OF DEPRECIATION ON COMPUTER ACCESSORIES AND P ERIPHERALS HELD THAT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS PRINTERS, SCANNERS AND SERVER, ETC., FORM AN INTEGR AL PART OF THE COMPUTER SYSTEM. FURTHER, THE COURT OBSERVED THAT C OMPUTER ACCESSORIES AND PERIPHERALS CANNOT BE USED WITHOUT THE COMPUTER AND CONSEQUENTLY, AS THEY ARE THE PART OF THE COMPUTER SYSTEM, THEY ARE ENTITLED TO DEPRECIATION AT HIGHER RATE OF 60%. RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS WHEREIN DEPRECIATION AT HIGHER RATE OF 60% APPLICABLE TO CO MPUTERS HAS BEEN UPHELD IN RESPECT OF VARIOUS EQUIPMENT AND PER IPHERALS ATTACHED TO THE COMPUTER SYSTEM: INCOME TAX OFFICER VS SAMIRAN MAJUMDAR : 98 ITD 1 19 (KOL) DCIT VS DATACRAFT INDIA LTD : (2010) 133 TTJ 377 (MUM) (SB) INSPECTING ASSISTANT COMMISSIONER VS COMMISSION A ND GENERAL AGENCY : 17 ITD 6 (BANGALORE) ESCORTS TRACTORS LTD VS ASSTT CIT : 101 TAXMANN 1 71 (DELHI) CIT VS KARNATAKA POWER CORPORATION : 247 ITR 268 54 EXPEDITORS INTERNATIONAL (INDIA) (P) LTD VS ADDL CIT : 118 TTJ 652 ACCORDINGLY, IT IS RESPECTFULLY PRAYED THAT THE ASS ESSING OFFICER MAY KINDLY BE DIRECTED TO ALLOW DEPRECIATION @60% O N THE AFORESAID STB'S, IN CASE THE APPELLANT IS DEEMED TO BE THE OWNER OF SUCH ASSETS. PRINCIPLE OF CONSISTENCY THE APPELLANT IS PROVIDING 'DIGITAL CABLE SERVICE' TO ITS CUSTOMERS SINCE 2009 AND FOR CARRYING ON THIS BUSIN ESS, IT HAD PURCHASED SET TOP BOXES ('STBS') IN THE EARLIER ASS ESSMENT YEARS OUT OF ITS OWN FUNDS AND CLAIMED DEPRECIATION @ 60% THEREON WHICH WAS ALLOWED BY THE TAX AUTHORITIES AFTER DUE APPLICATION OF MIND. IN THIS REGARD, IT IS RESPECTFULLY SUBMITTED THAT T HOUGH PRINCIPLE OF RES-JUDICATA DOES NOT APPLY TO INCOME TAX PROCEE DINGS, IT IS WELL SETTLED THAT IF THERE BEING NO CHANGE EITHER I N FACTS OR IN LAW, AS COMPARED TO THE EARLIER AND SUBSEQUENT YEAR S, THE POSITION ACCEPTED/ DETERMINED BY THE DEPARTMENT NEE DS TO BE FOLLOWED EVEN ON THE PRINCIPLE OF CONSISTENCY. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS: - CIT VS. EXCEL INDUSTRIES LTD.: 358 ITR 295 (SC) - RADHASOAMI SATSANG V. CIT: 193 ITR 321 (SC) - DIT (E) V. APPAREL EXPORT PROMOTION COUNCIL: 244 ITR 734 (DEL) - CIT V. NEO POLYPACK (P) LTD: 245 ITR 492 (DEL.) - CIT V. DALMIA PROMOTERS DEVELOPERS (P) LTD: 281 I TR 346 (DEL.) - DIT V. ESCORTS CARDIAC DISEASES HOSPITAL: 300 ITR 75 (DEL.) - CIT V. P. KHRISHNAWARRIER: 208 ITR 823 (KER) - CIT V HARISHCHANDRA GUPTA 132 ITR 799 (ORI) - CIT V. SEWABHARTI HARYANA PRADESH: 325 ITR 599 (P &H) - CIT V. RAJASTHAN BREWERIES LIMITED.: ITA 889/2009 (DEL) - SLP DISMISSED. THUS, IN VIEW OF THE ABOVE, THE DEPARTMENT HAVING A CCEPTED THAT STB'S ARE ELIGIBLE FOR DEPRECIATION @ 60% IN EARLIE R AS WELL AS SUBSEQUENT YEARS, THE SAME STAND OUGHT NOT TO BE CH ANGED/ MODIFIED DURING THE YEAR UNDER CONSIDERATION EVEN O N THE PRINCIPLE OF CONSISTENCY, PARTICULARLY, WHEN NO NEW FACT/ INFORMATION HAS BEEN BROUGHT ON RECORD FOR THE SAME . 55 BRIEF NOTE ON THE ASSESSMENT PROCEEDINGS OF CISCO S YSTEMS CAPITAL (INDIA) PRIVATE LIMITED. CISCO SYSTEMS CAPITAL (INDIA) PRIVATE LIMITED IS TH E OWNER OF SET TOP BOXES. THESE HAVE BEEN CLASSIFIED AS AUDIO, VIDEO CONFERENCING AND VIDEO STREAMING EQUIPMENT'S. THIS MATTER HAS BEEN DECIDED BY INCOME TAX APPELLATE TRIBUNAL BANGA LORE BENCH-C BANGALORE VIDE ITS ORDER DATED 19-09-2014 F OR THE AY 2008-09, AT PAGE 10 OF THIS ORDER IT WAS HELD THAT THE ABOVE SAID EQUIPMENT, IS TO BE TREATED AS COMPUTER AND ACCORDI NGLY THE AO SHALL THUS ALLOW DEPRECIATION @60%. SIMILARLY FOR T HE AY 2010- 11 VIDE ITS ORDER DATED 19-02-2016 ITAT BANGALORE-A BENCH BANGALORE HAS ALSO HELD THAT THE DEPRECIATION @60% OF THE EQUIPMENT SHALL BE ALLOWED. KEEPING IN VIEW THE IMPORT OF DETAILED SUBMISSIONS MADE ABOVE IT IS CRYSTAL CLEAR THAT THE APPELLANT COMPANY IS E NTITLED TO CLAIM OF LEASE RENTALS PAID TO M/S CISCO SYSTEMS CAPITAL (INDIA) PRIVATE LIMITED AND IT IS PRAYED THAT THE APPEAL BE KINDLY ADJUDICATED ACCORDINGLY. 34. THE LD. DR ON THE OTHER HAND, HAS SUBMITTED THA T THE CONTENTION OF THE LD. COUNSEL IS THAT THE CISCO HAS BEEN ALLOWED DEPRECIATION @ 60% ON STBS IS NOT COMING OU T OF THE ORDER OF THE TRIBUNAL (SUPRA); THAT IN THE CASE OF CISCO, DEPRECIATION @ 60% HAS BEEN ALLOWED ON ROUTERS AND SWITCHES AND NOT ON STBS. THE LD. DR HAS FURTHER SUBMITTED T HAT STBS ARE INFORMATION APPLICATION DEVICES DESIGNED TO PER FORM A DEFINITE ELECTRONIC FUNCTION. THAT THE FUNCTION OF THE STBS IS TO RECEIVE INPUT SIGNALS DECODE THOSE SIGNALS AND P ASS ON TO TV. HE, IN THIS RESPECT HAS RELIED UPON THE DECISIO N OF THE ITAT (SPECIAL BENCH) OF THE TRIBUNAL IN THE CASE OF DATA CRAFT INDIA LTD. (2010) 40 SOT 295 (MUM.) (SB) ITAT), WHEREIN IT HAS BEEN HELD THAT TV IS NOT A COMPUTER. HE HAS FUR THER 56 SUBMITTED THAT A DEVICE CAN BE SAID TO BE PART OF C OMPUTER SYSTEM WHEN ITS FUNCTIONS DEPENDS UPON COMPUTER. IF IT IS INDEPENDENT OF COMPUTER AND IT CAN FUNCTION INDEPEN DENTLY THEN IT WILL NOT FALL WITHIN THE SCOPE OF THE DEVIC E THAT MAY BE INCLUDED IN THE TERM COMPUTER SYSTEM. HE HAS SUBM ITTED THAT THE STBS JUST PASS INFORMATION TO THE TVS, IT IS NO T A COMPUTER. HE HAS FURTHER SUBMITTED THAT THE STBS WO ULD NOT ALSO FALL WITHIN THE DEFINITION OF AUDIO-VISUAL EQU IPMENT UPON WHICH DEPRECIATION @ 60% HAS BEEN ALLOWED IN THE CA SE OF CISCO. HE, THEREFORE, HAS SUBMITTED THAT THE ASSESS ING OFFICER HAS RIGHTLY ALLOWED THE DEPRECIATION @ 15%. THE LD. DR HAS ALSO RELIED UPON THE OBSERVATIONS AND FINDINGS MADE BY THE ASSESSING OFFICER ON THIS ISSUE IN THE ASSESSMENT O RDER FOR AY 2014-15. THE LD. DR, HAS ALSO STRONGLY RELIED UPON THE DECISION OF THE CO-ORDINATE COCHIN BENCH OF THE TRI BUNAL IN THE CASE OF ACIT VS KERALA COMMUNICATORS CABLE LIM ITED (ITA NO. 271/COCHI/2018 DATED 30.4.2019), TO SUBMIT THAT THE CO- ORDIANTE BENCH OF THE TRIBUNAL HAS DECIDED THE ISSU E OF DEPRECIATION @ 15% ON STBS IN FAVOUR OF THE REVENU E. THE LD. DR IN THIS RESPECT HAS ALSO MADE THE FOLLOWING WRITTEN SUBMISSIONS: NOTE ON DEPRECIATION ALLOWABLE ON SET TOP BOX 60 % OR 15% 1. IT IS WORTH NOTING THAT DURING THE ASSESSME NT PROCEEDINGS FOR AY 2017-18 THE ASSESSEE HAS MADE ELABORATIVE SUBMISSIONS TO JU STIFY THAT IT IS ELIGIBLE FOR 60 % DEPRECIATION ON STBS. THE ASSESSEE HAS MADE THE F OLLOWING MAJOR SUBMISSIONS: 57 ' COMPANY HAS ALSO STARTED DIRECT PURCHASE OF SET T OP BOXES APART FROM THE SET TOP BOXES PROCURED THROUGH LEASE, THE COMPANY HAS CLAIMED 60% DEPRECIATION ON THESE ASSETS DUE TO NAT URE OF ASSET BEING INTEGRATED WITH COMPUTERS AND RUN THROUGH SOFTWARE AIDED BY MEMORY CARD AND MOTHER BOARD. THUS SET TOP BOXES ARE COMPU TER IN ITSELF AND ARE ALSO INTEGRATED WITH LARGE COMPUTER SYSTEM WHIC H PROVIDE FROM THE BACKEND DIRECTIONS FOR THE UPDATIONS IN PACKAGES AN D COMMANDS FOR THE RUNNING OF PROGRAMS. CISCO BEING THE OWNER OF SET TOP BOXES HAS CLAIME D DEPRECIATION @60% ON SET TOP BOXES. IN THE HONBLE IT AT INCOME TAX APPELLATE BENGALORE BENCH 'C BENGALORE IN CASE OF CISCO SYSTEMS CAPITAL (INDIA) PRIVATE LIMITED FOR THE AY 2008-09 IT WAS HELD THAT 'AS REGARD AUDIO VI SUAL CONFERENCING EQUIPMENT'S AND VIDEO STEAMING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED DETAILED SUBMISSIONS BEFORE THE AO AS WEL L AS BEFORE US TO CONVINCE US THAT THEY ARE ALSO PART OF THE COMPUTER SYSTEM AND ARE NOT INDEPENDENTLY FUNCTIONAL. HE HAS DRAWN OUR ATTENTIO N TO THE DETAILED SUBMISSIONS FILED BY THE ASSESSEE WHICH HAS ALSO BE EN REPRODUCED BY THE AO IN HIS ORDER'. IT IS EVIDENT THAT A SET TOP BOX IS A TECHNICAL D EVICE WHOSE FUNCTIONS ARE SIMILAR TO A COMPUTER IN AS MUCH AS SET TOP BOXES T OO RESPOND TO A SPECIFIC SET OF INSTRUCTIONS IN A WELL DEFINED MANN ER AND PERFORM INPUT/OUTPUT PROCESSING. IT IS RESPECTFULLY SUBMITTED THAT SINCE THE FUNCT IONING OF STB'S ARE DEPENDENT ON COMPUTERS AND SOFTWARE, THUS ON THIS A CCOUNT AS WELL THEY ARE ELIGIBLE TO BE CLASSIFIED AS 'COMPUTERS' AND EL IGIBLE FOR DEPRECIATION @ 60%. SPECIFIC RELIANCE IN THIS REGARD IS PLACED ON THE D ECISION OF BANGALORE BENCH OF TRIBUNAL IN THE CASE OF CISCO SYSTEMS CAPI TAL (INDIA) PVT. LTD. VS. ACIT: ITA NO. 1558 OF 2012 FURTHER, IT IS SUBMITTED THAT IN THE ASSESSMENT ORD ER PASSED IN THE CASE OF CISCO FOR THE ASSESSMENT YEAR 2013-14, THE ASSES SING OFFICER HAS ACCEPTED THE FACT THAT AUDIO-VISUAL EQUIPMENTS (SET -TOP BOXES) ARE ELIGIBLE FOR DEPRECIATION AT THE RATE OF 60%. ' 2. WHAT IS A SMART TV- A TV OR A COMPUTER ? SIMILARLY WHAT IS A SMART PHONE WHICH CAN MAKE VIDEO CALLS, DISPLAY UNLIMITED VIDEO S FROM YOUTUBE ETC WEBSITES? SO WHAT IS THAT DISTINGUISHES PRE-CONFIGU RED SPECIAL ELECTRONIC DEVICES FROM COMPUTERS? DIFFERENT DEVICES NOW-A-DAY S HAVE EMBEDDED MANY DIFFERENT HARDWARE LIKE RELAYS, TRANSISTORS, MEMORY CHIPS, DIGITAL GATES ETC. AND FURTHER THEY ALSO INCLUDE VARIOUS SOFTWARE IN ORDER TO EXECUTE PRE-CONFIGURED 58 FUNCTIONS. SUCH DEVICES INCLUDE TOASTERS, WASHING M ACHINES, MICROWAVE OVENS, MOBILE PHONES, SMART TVS, DIGITAL WRISTBANDS ETC. 3. THEREFORE VARIOUS COURTS HAVE COME WITH THE CONC EPT OF COMPUTER NETWORK. FURTHER UNDER INCOME TAX ACT FOR COMPUTER OR COMPUT ER NETWORK 60 % DEPRECIATION IS ALLOWABLE. WHAT FALLS UNDER COMPUTE R AND COMPUTER NETWORK HAS BEEN DEFINED 3.1 ITAT SPECIAL BENCH IN THE CASE OF DATACRAFT IND IA LTD. (SUPRA) HAD THE OCCASION TO CONSIDER THE MEANING OF WORD 'COMPUTER' . AFTER ELABORATELY CONSIDERING THE SPECIAL BENCH HAS EXPOUNDED AS UNDE R: 'THUS IN ORDER TO DETERMINE WHETHER A PARTICULAR MA CHINE CAN BE CLASSIFIED IS A COMPUTER OR NOT, THE PREDOMINANT FU NCTION, USAGE AND COMMON PARLANCE UNDERSTANDING, WOULD HAVE TO BE TAK EN INTO ACCOUNT. TO ANALYSE FURTHER, LET US TAKE THE CASE OF A TELEV ISION, THE PRINCIPAL TASK OF WHICH IS TO DELIVER VISUALS ACCOMPANIED WITH AUD IO. THE SIGNALS ARE RECEIVED THROUGH THE RELEVANT NETWORKS SUCH AS DISH TV, TATA SKY ETC. BUT TV DOES NOT BECOME COMPUTER FOR THE REASON THAT ITS PRINCIPAL FUNCTION CANNOT BE DONE ONLY WITH THE AID OF 'COMPU TER FUNCTIONS' NOTWITHSTANDING THE FACT THAT IN THE ENTIRE PROCESS OF NETWORKING OR RECEIVING THE OUTPUT FROM DIFFERENT CHANNELS AND MA KING IT AVAILABLE TO THE VIEWERS, SOME SORT OF COMPUTER FUNCTIONS ARE NECESSARILY INVOLVED. SIMILARLY TAKE THE CASE OF MOBILE PHONE. ITS PRINCI PAL TASK IS TO RECEIVE AND SEND CALLS. IT IS NOT A STAND-ALONE APP ARATUS WHICH CAN OPERATE WITHOUT THE RELEVANT NETWORK, SUCH AS AIRTE L, BSNL, RELIANCE. IT, THEREFORE, FOLLOWS THAT ANY MACHINE OR EQUIPMENT CA NNOT BE DESCRIBED AS COMPUTER, IF ITS PRINCIPAL OUTPUT OR FUNCTION IS THE RESULT OF SOME SORT OF 'COMPUTER JUNCTIONS' IN CONJUNCTION WITH SOME NO N-COMPUTER FUNCTIONS. IN ORDER TO BE CALLED AS COMPUTER, IT IS SINE QUA N ON THAT THE PRINCIPAL OUTPUT/OBIECT/FUNCTION OF SUCH MACHINE SH OULD BE ACHIEVABLE ONLY THROUGH 'COMPUTER FUNCTIONS' 3.2 FROM THE ABOVE EXPOSITION IT IS EVIDENT THAT JU ST BECAUSE SOME SORT OF COMPUTER FUNCTIONS ARE NECESSARILY INVOLVED, MECHAN ICAL SYSTEM CANNOT BE SAID TO BE COMPUTER UNLESS ITS PRINCIPAL FUNCTION CANNOT BE DONE WITHOUT THE AID OF COMPUTER FUNCTION. IN OTHER WORDS, ANY MACHINE OR E QUIPMENT CANNOT BE DESCRIBED AS COMPUTER IF ITS PRINCIPAL OUTPUT OR FU NCTION IS THE RESULT OF SOME SORT OF 'COMPUTER FUNCTIONS' IN CONJUNCTION WITH SO ME NON-COMPUTER FUNCTIONS. IT WAS HELD THAT IN ORDER TO BE CALLED AS COMPUTER, IT IS SINE QUA NON THAT THE PRINCIPAL OUTPUT/OBJECT/FUNCTION OF SUCH MACHINE CO ULD BE ACHIEVED ONLY THROUGH 'COMPUTER FUNCTIONS' 4. STB IS AN INFORMATION APPLIANCE DEVICE THAT GENE RALLY CONTAINS A TV-TUNER INPUT AND DISPLAYS OUTPUT TO A TELEVISION SET AND A N EXTERNAL SOURCE OF SIGNAL, TURNING THE SOURCE SIGNAL INTO CONTENT IN A FORM TH AT CAN THEN BE DISPLAYED ON 59 THE TELEVISION SCREEN OR OTHER DISPLAY DEVICE. THEY ARE USED IN CABLE TELEVISION, SATELLITE TELEVISION, AND OVER-THE-AIR TELEVISION S YSTEMS, AS WELL AS OTHER USES. 4.1 THE MAIN PURPOSE OF STBS IS TO DELIVER THE AUDI O-VIDEO SIGNALS TO THE TV VIEWERS. BUT USING THE COMPLEX TECHNOLOGY, MORE AND MORE VALUE IS ADDED FOR THE OPERATOR I.E. MAINTAINING THE DATABASE OF THE C LIENTS, MAINTAINING THE VIEWER'S LOG REGISTERS, THE LIST OF THE CHANNELS SU BSCRIBED BY VIEWERS, THE PAYMENT SCHEDULE OF THE VIEWERS ETC. THESE ADDITION AL FEATURES ARE ACHIEVED USING COMPUTERS AT THE BACK END. THE STBS INSTALLED AT THE PREMISES OF THE USERS HELPS THE OPERATOR TO ACTUALIZE THIS INFORMAT IONAL AND SUPERVISORY CONTROL. HOWEVER, THE MAIN FUNCTION OF THE STBS IS TO DELIVE R THE AUDIO-VIDEO FEED TO USERS. THE MAJOR FUNCTION OF THE STBS I.E. DECODING AND THUS DELIVERING THE AUDIT VIDEO SIGNALS TO THE TV SETS IS INDEPENDENT O F THE VARIOUS SERVERS INSTALLED AT THE PREMISES OF MSO (MULTIPLE SYSTEM OPERATOR). THEREFORE, THE MAIN FUNCTIONS OF THE STBS DO NOT DEPEND ON SERVERS AND OTHER ELECTRONIC DEVICES INSTALLED IN THE PREMISES OF OPERATOR. THIS MAIN FU NCTION IS NOT DEPENDENT ON BACKEND COMPUTERS INSTALLED AT THE PREMISES OF OPER ATOR BECAUSE STBS ARE DEVICES WHICH ARE USED EVEN IN CABLE TELEVISION, OV ER THE AIR TELEVISIONS ETC. 4.2 THEREFORE STBS ARE NEITHER A PART OF COMPUTER S YSTEMS NOR A DEPENDENT ON COMPUTERS. THEY CAN BE AT BEST CALLED AS INFORMATIO N APPLIANCES ATTACHED TO TELEVISION SETS TO ENJOY MULTIPLE CONTENTS. FURTHER AS PER CASE LAW OF DCIT MUMBAI V. DATA CRAFT INDIA LTD. (2010) 40 SOT 295 ( MUM.) (SB) ITAT), IT IS ALREADY DECIDED BY HON'BLE ITAT THAT TELEVISIONS CA NNOT BE TREATED AS COMPUTERS. THEREFORE, ANY ASSEMBLY ATTACHED TO TELE VISIONS I.E. STBS IN THIS CASE CANNOT BE TREATED AS 'COMPUTERS'. THEREFORE, D EPRECIATION RATE OF 60 % SHOULD NOT BE ALLOWED TO ASSESSEE. 5. FURTHER VARIOUS SUBMISSIONS MADE BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS ARE ANALYZED AS UNDER: HOWEVER, FIRST OF ALL IT IS OBSERVED THAT THE ORD ER OF HON'BLE ITAT IN THE CASE OF CISCO SYSTEM(INDIA) PVT. LIMITED IS REL ATED TO THE AUDIT VIDEO CONFERENCING DEVICES AND DEPRECIATION OF 60% HAS BEEN ALLOWED BY THE HON'BLE ITAT AND THUS BY THE A.O. ON SUCH AU DIT VIDEO CONFERENCE DEVICES. THE IMPORTANT POINTS OF THE JUD GMENT ARE MENTIONED AS BELOW: O AUDIO AND VIDEO CONFERENCING SYSTEM COMPRISE OF AUD IO-VIDEO DEVICES/EQUIPMENTS WHICH FACILITATE IN BRINGING PEO PLE AT DIFFERENT SITES TOGETHER FOR A MEETING. BESIDES THE AUDIO AND VISUA L AND MEETING ACTIVITIES, THESE SYSTEMS CAN ALSO BE USED TO SHARE DOCUMENT, COMPUTER INFORMATION AND BOARDS, CONFERENCING WORKS ACROSS I T NET-WORK, ISD THROUGH COMPUTERS/COMPUTER NETWORK ETC., 60 O CONFERENCING SYSTEMS MAKE USE OF VARIOUS END POINTS IN A SYSTEM SUCH AS VIDEO INPUT CONSISTING OF CAMERA, VIDEO OUTPUT I N THE FORM OF MICROPHONES AND SPEAKERS ETC. THE DATA TRANSMISSION HAPPENS IN A NUMBER OF WAYS DEPENDING ON THE TECHNOLOGY BEING US ED INCLUDING DIGITAL TECHNOLOGIES AS WELL AS ANALOG TECHNOLOGIES , BROADBAND INTERNET CONNECTION AND RADIO FREQUENCIES WHICH CAN INCLUDE SATELLITE TRANSMISSION AND WIFI O VIDEO STREAMING ALLOWS USER TO BEGIN VIEWING THE VI DEO CLIPS STORED IN A SERVER WITHOUT FIRST DOWNLOADING THE ENTIRE FILE AND AFTER A BRIEF PERIOD OF INITIATING AND BUFFERING, THE FILE WILL BEGIN TO STREAM OR PLAY IN REAL TIME. VIDEO STREAMING INVOLVES A SERIES OF STEPS IN VOLVING THE USE OF MEDIA CONTENT, A COMPUTER THAT RUNS ENCODING SOFTWA RE, SERVERS FAR UPHOLDING THE STREAMED MEDIA FORMAT AND ACCESS TO S UCH MEDIA THROUGH VARIOUS DEVICES O FROM THE ABOVE SUBMISSIONS, IT IS CLEAR THAT THE EQ UIPMENT USED BY THE ASSESSEE FOR AUDIO VISUAL CONFERENCING AND ALSO VID EO STREAMING INVOLVES THE USE OF COMPUTER. AS CERTAIN INPUT AND OUTPUT EQUIPMENT MAY HAVE INDEPENDENT FUNCTIONALITY AND EXISTENCE BUT TH E COMPUTER DEVICES WHICH ARE INVOLVED IN THESE ACTIVITIES WOULD BE OF NO USE IF THESE INPUT AND OUTPUT DEVICES ARE NOT USED. THEREFORE, THOUGH THE INPUT AND OUTPUT DEVICES MAY HAVE INDEPENDENT EXISTENCE AND FUNCTION ALITY IN SO FAR AS THE ACTIVITY OF THE ASSESSEE IS CONCERNED, THEY DO FORM PART OF THE COMPUTER NETWORK SYSTEM WITHOUT WHICH THE COMPUTER USED FOR THE PURPOSE OF AUDIO AND VIDEO CONFERENCING WOULD BE US ELESS HOWEVER THE ASSESSEE IN THE PRESENT CASE HAS FAIL ED TO JUSTIFY HOW STBS ARE ON PAR WITH AUDIO-VIDEO CONFERENCING DEVICES. FURTHER, IT IS OBSERVED THAT THE ASSESSEE HIMSELF HAS MADE CLAIM OF DEPRECIATION OF 15% ON STBS IN PREVIOUS YEARS. IT I S WORTH NOTING THAT FOR AY 2012-13 TO AY 2016-17, THE ASSESSEE HAS ALWAYS BEEN CLAIMING 15 % DEPRECIATION ON STBS. FOR AY 2017-18, THE ASSESSEE FOR THE FIRST TIME HAS CLAIMED THAT IT IS ELIGIBLE FOR 60 % DEPRECIATION O N STBS. THEREFORE, IT IS INFERRED THAT WITHOUT ANY PROPER JUSTIFICATION ASSE SSEE IS CLAIMING HIGHER DEPRECIATION RATE I.E. 60% ON THE SAME KIND OF STBS WHICH IS NOT ACCEPTABLE. 6. FURTHER, A BRIEF NOTE ON ANALOGY OF THE STBS WIT H THE MOBILE PHONE IS DISCUSSED AS UNDER:- 6.1 THE STB IS A SELF-CONTAINED SYSTEM INSTALLED AT THE PREMISES OF THE CUSTOMERS. THE FUNCTIONING OF THE STB IS ANALOGOUS TO THE FUNCTIONING OF THE MOBILE PHONES. 61 1. LIKE THE MOBILE PHONE THE DATA IS TRANSMITTED AND R ECEIVED USING RF WAVES FURTHER THE SIGNAL IS ENCRYPTED WHEN IT IS TR ANSMITTED VIA SATELLITE. THE MOBILE DECODES SIGNAL AND ALLOW THE PERSONS TO TALK. SIMILARLY, STBS RECEIVE ENCRYPTED SIGNALS AND IT IS DECODED BY STBS TO ALLOW THE USERS TO WATCH THE PROGRAMS. IN MOBILE PHONES, IF T HERE IS NO BALANCE THEN OUTGOING CALLS CAN'T BE MADE TILL THE SIM IS R ECHARGED. SIMILARLY IF THE CUSTOMER HAS NOT RECHARGED ITS SMART CARD EMBED DED IN STBS THEN THE CORRESPONDING SIGNAL WILL NOT BE DECODED BY THE STB. 2. WHEN WE RECHARGE SIM OF MOBILES, THEN TELECOM OPERA TORS CHANGE FEW BITS OF THE SIGNALS TRANSMITTED BY THE MOBILES WHIC H ALLOW THE USER TO MAKE PHONE CALLS. SIMILARLY, WHEN THE CUSTOMER REQU ESTS THE MSO OR MAKES AN ONLINE PAYMENT TO RECHARGE ITS SMART CARD THE MSO MERELY MODIFY FEW BITS OF THE ENCRYPTED SIGNAL WHICH GIVES THE COMMANDS TO STB TO DECODE THE SAME AND THUS ALLOW THE CUSTOMER TO ENJOY THE PROGRAM. THIS IS ANALOGOUS TO MOBILE RECHARGE AS DI SCUSSED ABOVE. 3. THE MOBILES ARE NOT THE PART OF THE COMPUTER/SERVER SYSTEMS INSTALLED AT THE PREMISES OF THE TELECOM OPERATORS. ALTHOUGH HAR DWARE/SOFTWARE INSTALLED AT THE TELECOM OPERATOR PREMISES CONTROL THE MOBILE PHONE FUNCTIONING BY GIVING COMMANDS. FOR EXAMPLE TO KEEP THE CONTROL OVER THE BILLING PAYMENT OF THE MOBILE PHONES THE TELECO M OPERATOR USES NUMBER OF SERVERS AND OTHER DEVICES. FURTHER, THE F UNCTIONING OF THE MOBILES IS ALSO ENRICHED BY THE HARDWARE AND SOFTWA RE INSTALLED AT THE PREMISES OF THE TELECOM OPERATORS. HOWEVER, IT CANN OT BE SAID THAT THE MOBILES ARE PART OF THE SERVERS SYSTEMS INSTALLED A T THE PREMISES OF THE TELECOM OPERATORS. THE SAME IS ALSO APPLICABLE ON T HE STB, THE SERVERS INSTALLED AT THE PREMISES OF THE MSO ONLY ADD O THE FUNCTIONING OF THE STBS THE MAJOR FUNCTION OF THE STBS I.E. DECODING AND THUS PROJECTING THE AUDIT VIDEO SIGNALS TO THE TV SETS IS INDEPENDE NT OF THE VARIOUS SERVERS INSTALLED AT THE PREMISES OF MSO. THEREFORE, THE MAIN FUNCTIONS OF THE MOBILE PHONES AS WELL AS STBS DO NOT DEPEND ON SUCH SERVERS. 6.2 SINCE, IT IS ESTABLISHED FACT THAT THE MOBILE P HONES ARE ELIGIBLE FOR 15% DEPRECIATION. FURTHER, THE ASSESSEE HAS NO FAIR JUS TIFICATION HOW STBS ARE A PART OF COMPUTER SYSTEMS OR HOW STBS ARE ON PAR WITH AUD IO VIDEO CONFERENCING DEVICES, THEREFORE THE CLAIM OF THE ASSESSEE FOR HI GHER DEPRECIATION IS INADMISSIBLE. FURTHER THE RELIANCE IS ALSO PLACED O N THE FOLLOWING CASE LAWS:- 62 ITAT SPECIAL BENCH IN THE CASE OF DATACRAFT INDIA L TD. (SUPRA) HAD THE OCCASION TO CONSIDER THE MEANING OF WORD 'COMPUTER 1 ., AS EXPLAINED IN ABOVE MENTIONED PARAS. IN THE CASE OF DCIT MUMBAI V. DATA CRAFT INDIA LTD. (2010) 40 SOT 295 (MUM.) (SB) ITAT), THE ISSUE WAS RELATED TO ROUTER AND SWITCHES WHICH WERE PART AND PARCEL OF LE 'COMPUTER' HARDWARE AND OTHER FUNCTIONS WERE FOUND TO BE INTEGRATED ONE. IN THE CASE OF CIT V. B SES YAMUNA POWERS LTD. ITA 1267 OF 2010 (DELHI HIGH COURT, DEPRECIATI ON WAS ALLOWED AT THE RATE OF 60% ON 'COMPUTER' ACCESSORIES AND PERIP HERALS SUCH AS PRINTERS, SCANNERS AND SERVER AS THESE WERE INTEGRA L PART OF THE COMPUTER SYSTEM RESPONSIBLE FOR COMPLETING THE REQUIRED WORK ING. HERE IS NOT THE CASE LIKE THAT. IN THE CASE OF NESTLE INDIA LTD. V. DCIT111 TTJ 498 (ITAT DELHI) IT HAS BEEN HELD THAT UPS IS NOT AN INTEGRAL PART OF COMPU TER, HENCE NOT ENTITLED FOR HIGHER RATE OF DEPRECIATION. SIMILARLY, THOUGH ATM IS RUN ON THE BASIS OF COMPUTER DEVISE, IS NOT ENTITLED FOR HIGHE R DEPRECIATION APPLICABLE TO THE COMPUTER. THIS PROPOSITIONS IS TH ERE IN THE CASE OF HDFC BANK LTD. V. ACIT 2011 TIOL - 101 (ITAT MUMBAI ). SIMILARLY, MACHINES FOR DESIGNING AND PRINTING USING COMPUTER TECHNOLOGY HAD NOT BEEN REGARDED AS COMPUTERS, VIDE: ST. REDDIAR & SON S V. DCIT129ITD 475 (ITAT COCHIN). IN THE CASE LAW OF FEDERAL BANK LTD. V. ASSTT COMMI SSIONER OF INCOME- TAX HON'BLE KERELA HIGH COURT HELD THAT THE RATE O F DEPRECIATION AT 60 PER CENT IS AVAILABLE ON COMPUTERS. SINCE EPABX AND MOB ILE PHONES ARE NOT COMPUTERS, THE ASSESSEE WAS NOT ENTITLED TO DEPRECI ATION AT 60 PER CENT. IN VIEW OF THE ABOVE MENTIONED DISCUSSION, IT IS RE QUESTED TO HON'BLE ITAT DEPRECIATION RATE OF 60 % ON SET TOP BOXES SHOULD N OT BE ALLOWED TO ASSESSEE. 35. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE HAS MADE THE FOLLOWING SUBMISSIONS TO REBUT THE OBSERVATIONS OF THE ASSESSING OFFICER AND AS WELL AS REGARDING THE APPLICABILITY OF THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF DA TA CRAFT (SUPRA): 63 REASONING AGAINST ASSESSMENT ORDER FOR AY 2012-13 W HERE 60% NOT ALLOWED PARA NO. AS PER ORDER APPLICABILITY TO FASTWAY 6.2.4 THE LD. AO HAS STATED THAT THE SAID EQUIPMENTS ARE NEITHER COMPUTERS NOR ENERGY SAVING DEVICES AS PER THE REQUIREM ENT OF THE APPENDIX I & IA OF INCOME TAX RULES 1962. IT ALSO GOES TO SAY THAT THE STBS ARE NOT ELECTRICAL EQUIPMENTS. IT IS SUBMITTED THAT THE LD. AO DID NOT GO INTO THE TECHNICALITY OF THE PRODUCT AND HAS SUMMARILY DECIDED THAT STB'S ARE NOT COMPUTERS WITHOUT CITING ANY REASONING OR RATIONALE. 6.2.5 RELIANCE ON THE ORDER OF CISCO BY THE ASSESSEE IS NOT IN PLACE BECAUSE THE ORDER DOES NOT TALK ABOUT STB'S BUT ABOUT AUDIO VISUAL CONFERENCING EQUIPMENTS AND VIDEO STREAMING EQUIPMENTS, WHEREIN IT WAS CONTEN DED THAT THEY WERE PART OF THE COMPUTER SYSTEM. SINCE THE WORD STB WAS NOT MENTIONED IN THAT ORDER, THE ASSESSEE IS NOT ELIGIBLE. FURTHER, IT HAS ALSO BEEN MENTIONED THAT IN THE OTHER JUDGEMENT OF CISCO IT TALKS ABOUT GIVING DEPRECIATION TO ROUTERS AND SWITCHES @ 60% AND NOT TO STB'S IT IS SUBMITTED THAT WHEN THE HON'BLE BENCH HAS ALLOWED AUDIO VISUAL STREAMING EQUIPMENT TO BE PART OF COMPUTER SYSTEM, STB IS WAY ADVANCED AND A COMPUTER IN ITSELF. THE LD. ASSESSING OFFICER DID NOT EXAMINE THIS IN DETAIL A ND HAS SUMMARILY CONCLUDED THAT IT IS NOT PART OF A COMPUTER. APPLICABILITY OF DCIT VS DATACRAFT INDIA LIMITED TO THE CASE OF FASTWAY TRANSMISSIONS PRIVATE LIMITED PARA NO. AS PER ORDER APPLICABILITY TO FASTWAY 31.1 IN SHORT, 'ROUTER' IS A HARDWARE DEVICE THAT ROUTES DATA (HENCE THE NAME) FROM A LOCAL AREA NETWORK (LAN) TO ANOTHER NETWORK CONNECTION. A ROUTER ACTS LIKE A COIN SORTING MACHINE, ALLOWING ONLY AUTHORIZED MACHINES TO CONNECT TO OTHER COMPUTER SYSTEMS. MOST ROUTERS ALSO KEEP LOG FILES ABOUT THE LOCAL NETWORK ACTIVITY. NOW THE QUESTION IS WHETHER THIS 'MACHINE' CAN BE IT IS SUBMITTED THAT THE ASSESSEE HAS ALREADY ESTABLISHED THAT THE STB'S HAVE ALL THE CAPABILITIES OF A COMPUTER AND THEREFORE ELIGIBLE FOR DEPRECIATION OF A COMPUTER. 64 USED INDEPENDENT OF COMPUTER. IF YES, THEN IT CANNOT BE CALLED 'COMPUTER HARDWARE' IN ALL CIRCUMSTANCES. 31.4 IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT ROUTER AND SWITCHES CAN BE CLASSIFIED AS A COMPUTER HARDWARE WHEN THEY ARE USED ALONG WITH A COMPUTER AND WHEN THEIR FUNCTIONS ARE INTEGRATED WITH A 'COMPUTER' IN OTHER WORDS, WHEN A DEVICE IS USED AS PART OF THE COMPUTER IN ITS FUNCTIONS, THEN IT WOULD BE TERMED AS A COMPUTER. IN THE CASE OF FASTWAY TRANSMISSION PRIVATE LIMITED, THE STB'S ARE COMPUTER IN THEMSELVES AND ARE ALSO PART OF A LARGER COMPUTER SYSTEM AT THE BACK END. IT IS SUBMITTED THAT WHILE STB'S ARE COMPUTERS IN THEMSELVES, THE ARE ALSO INTEGRATED WITH A COMPUTER MAKING THEM ELIGIBLE FOR DEPRECIATION OF A COMPUTER 32 NOW WE WILL ADVERT TO THE DECISIONS RELIED ON BY THE RIVAL PARTIES. WE HAVE SET OUT ABOVE THE CASES DECIDED BY VARIOUS BENCHES OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE LEAD ORDER IS IN THE CASE OF SAMIRAN MAJUMDAR (SUPRA) WHICH HAS BEEN FOLLOWED, DIRECTLY OR INDIRECTLY, IN MOST OF THE SUBSEQUENT CASES. WE WILL TAKE UP THIS CASE FOR DISCUSSION, IN WHICH THE QUESTION WAS WHETHER PRINTER AND SCANNER COULD BE ALLOWED A HIGHER RATE OF DEPRECIATION AS APPLICABLE TO COMPUTERS. THE BENCH NOTICED THAT THE PRINTER AND SCANNER CANNOT BE USED WITHOUT COMPUTER. IT WAS ON THIS APPRECIATION OF THE FACTUAL POSITION THAT THE PRINTER AND SCANNERS WERE HELD TO BE PART OF COMPUTER QUALIFYING FOR DEPRECIATION AT THE RATE APPLICABLE TO COMPUTER. THE HON'BLE BENCH HAS REIIED ON THE JUDGEMENT OF SAMIRAN MAJUMDAR WHEREIN THE) 1 HAVE ARGUED THAT PRINTERS AND SCANNERS CANNOT BE USED WITHOUT COMPUTERS AND THEREFORE THEY ARE ELIGIBLE TO BE TREATED AS COMPUTERS. SIMILARLY, STB'S AGAIN, WHILE BEING COMPUTER IN THEMSELVES, CANNOT BE USED INDEPENDENTLY UNLESS INTEGRATED WITH A COMPUTER AND THUS QUALIFYING THE ASSESSEE FOR DEPRECIATION OF A COMPUTER. 32 IN THE OPPOSITION THE ORDERS TAKING VIEW IN FAVOUR OF THE REVENUE ARE LED BY THE CASE OF ROUTERMANIA TECHNOLOGIES(SUPRA). IN THIS CASE IT WAS OBSERVED THAT THE IN THE OPPOSING JUDGEMENT, THE ARGUMENT WAS THAT ROUTERS DO NOT PERFORM ANY LOGICAL, ARITHMETICAL OR MEMORY FUNCTIONS AND THUS NOT ELIGIBLE. 65 ROUTER IS A DEVICE WHICH LINKS OR CONNECTS THE COMPUTERS FOR THE EXCHANGE OF RELEVANT DATA. IN REACHING THE CONCLUSION THAT ROUTER IS NOT ELIGIBLE FOR DEPRECIATION AT THE RATE APPLICABLE TO COMPUTER, THE BENCH NOTICED THAT THE ROUTER AT ITS OWN DOES NOT PERFORM ANY LOGICAL, ARITHMETICAL OR MEMORY FUNCTIONS BY MANIPULATIONS OF ELECTRONIC, MAGNETIC OR OPTICAL IMPULSES. IN THE CASE OF THE ASSESSEE, THE STB'S HAVE THEIR OWN CPU, OPERATING SYSTEM, INPUT / OUTPUT MECHANISM ENABLING THEM TO CARRY OUT ALL THE FUNCTIONS OF A COMPUTER. ACCORDINGLY, IT IS SUBMITTED THAT THE SAID JUDGEMENT IS NOT APPLICABLE TO THE COMPANY. 33 WE PREFER THE VIEW TAKEN IN THE CASE OF SAMIRAN MAJUMDAR (SUPRA) OVER THAT IN THE CASE OF ROUTERMANIA TECHNOLOGIES (SUPRA) ; WITH UTMOST RESPECT, THE MUMBAI BENCH HAD TAKEN A NARROW VIEW ON THIS ISSUE, BY HOLDING THAT ONLY A DEVICE WHICH CAN PERFORM LOGICAL, ARITHMETICAL OR MEMORY FUNCTIONS BY MANIPULATIONS OF ELECTRONIC IMPULSES ETC. IS COMPUTER. IT HAS RESTRICTED THE MEANING OF COMPUTER ONLY TO THE CPU OF THE COMPUTER AND PULLED OUT THE INPUT AND OUTPUT DEVICES FROM THE AMBIT OF COMPUTER. NO DOUBT THE FUNCTION OF THE COMPUTER, AS ONE COMPOSITE UNIT, IS TO PERFORM LOGICAL, ARITHMETICAL OR MEMORY FUNCTIONS ETC., BUT IT IS NOT ONLY THE EQUIPMENT WHICH PERFORMS SUCH FUNCTIONS THAT CAN BE CALLED AS COMPUTER ; ALL THE INPUT AND OUTPUT DEVICES, AS DISCUSSED ABOVE, WHICH SUPPORT IN THE RECEIPT OF INPUT AND OUTFLOW OF THE OUTPUT ARE ALSO PART OF COMPUTER. CPU ALONE, IN OUR OPINION, CANNOT BE CONSIDERED AS SYNONYMOUS TO THE EXPRESSION 'COMPUTER'. THE FUNCTION OF CPU IS AKIN TO THE BRAIN PLAYING A PIVOTAL ROLE IN THE CONDUCT OF THE BODY. AS WE DO NOT CALL THE BRAIN ALONE AS IN THE INSTANT CASE, THE ASSESSEE HAS ALREADY FILED DETAILED CHART OF THE SYSTEM HOW A STB FUNCTIONS WHICH ESTABLISHES THE FACT THAT THEY ARE AN ABSOLUTE INTEGRAL PART OF THE CAS SERVER COMPUTER AND WITHOUT THE STB THESE COMPUTERS CANNOT FUNCTION. IT IS THE STB'S THAT WHILE PERFORMING THEIR INDEPENDENT FUNCTIONS AS A COMPUTER, GIVE THE ENTIRE NETWORK THE FUNCTIONING. AS HAS BEEN HELD BY THE HON'BLE BENCH THAT THE BRAIN CANNOT BE CALLED THE BODY ALONE AND THAT ALL PARTS OF THE BODY ALONG WITH THE BRAIN COMPRISE OF THE BODY. SIMILARLY, THE STB'S CANNOT BE SEEN IN ISOLATION AND HAVE TO BE SEEN PART OF THE ENTIRE COMPUTER/NETWORK SYSTEM WHICH IT IS AN INTEGRAL PART OF IN THE INDUSTRY OF THE ASSESSEE. THUS, IN LIGHT OF THESE SUBMISSIONS, THE ASSESSEE IS ENTITLED TO DEPRECIATION AS COMPUTERS. 66 THE BODY, SIMILARLY THE CPU ALONE CANNOT BE DESCRIBED AS COMPUTER. THUS THE COMPUTER HAS TO NECESSARILY INCLUDE THE INPUT AND OUTPUT DEVICES WITHIN ITS SCOPE, SUBJECT TO THEIR EXCLUSIVE USER WITH THE COMPUTER, AS DISCUSSED ABOVE. IF WE CONSTRICT THE DEFINITION OF COMPUTER ONLY TO PROCESSING UNIT, AS HAS BEEN HELD IN THE CASE OF ROUTERMANIA (SUPRA),THEN EVEN THE KEYBOARD AND MOUSE ETC. WILL NOT QUALIFY TO BE CALLED AS COMPUTER BECAUSE THESE EQUIPMENTS ALSO DO NO PERFORMLOGICAL, ARITHMETICAL OR MEMORY FUNCTIONS. IN THE LIGHT OF THE MEANING OF 'COMPUTER' DISCUSSED IN EARLIER PARAS, WE ARE INCLINED TO AGREE WITH THE VIEW TAKEN BY THE KOLKATA BENCH IN SAMIRAN MAJUMDAR (SUPRA). 36. A PERUSAL OF ABOVE SUBMISSIONS REVEALS THAT BOT H THE LD. REPRESENTATIVES OF THE PARTIES IN THEIR RIVAL SUBMI SSIONS HAVE TRIED TO DEMONSTRATE FROM THE OPERATION AND FUNCTIO NING OF THE STBS AS TO THE WHETHER THE STBS PERFORM FUNCTIONS A S THAT OF A STANDARD COMPUTER OR NOT. THE COUNSEL FOR THE AS SESSEE, AS NOTED ABOVE, HAS FIRSTLY SUBMITTED THAT THE COMPONE NTS OF THE STB ARE SAME AS THAT OF A COMPUTER AND THAT THE STB IN ITSELF IS A MINI COMPUTER, THE ONLY DIFFERENCE BEING THAT IT IS DEVISED TO PERFORM SPECIALIZED FUNCTIONS. THAT IN THE STBS HAR DWARE AND SOFTWARE ARCHITECTURE USED IS THAT OF A COMPUTER. T HAT THE STBS HAVE THEIR OWN CPU, OPERATING SYSTEM, INPUT-OUTPUT MECHANISM 67 ENABLING THEM TO CARRY OUT ALL THE FUNCTIONS OF A C OMPUTERS. FURTHER, HE HAS ALSO DEMONSTRATED FROM THE FUNCTION ING OF THE STBS THAT AN STB PERFORMS FUNCTION OF A COMPUTER WI TH A SLIGHTLY REDUCED INSTRUCTIONS SET. THAT THE SYSTEM SOFTWARE OR THE DEVICE DRIVERS ARE ALSO AS THAT IN A PERSONAL COMPUTER BUT INSTRUCTED TO PERFORM THE SPECIALIZED FUNCTIONING MEANT FOR THE S TBS.; THAT EVEN THE APPLICATION SOFTWARE IN STBS IS SAME AND D EVELOPED WITH THE SAME PROGRAMMING LANGUAGE AS FOR A COMPUTER, BU T FOR SPECIFIC AND SPECIALIZED FUNCTIONS. HOWEVER, THE MAIN THRUST OF THE ARGUMENT OF THE LD. DR HAS BEEN THAT JUST BECAUSE SOME SORT OF COMPUTER FUNCTIONS A RE NECESSARILY INVOLVED, MECHANICAL SYSTEM CANNOT BE S AID TO BE A COMPUTER UNLESS ITS PRINCIPAL FUNCTION CANNOT BE DO NE WITHOUT THE AID OF THE COMPUTER FUNCTION. THE LD. DR RELYI NG UPON THE DECISION OF SPECIAL BENCH IN THE CASE OF DATA CRAF T INDIA LIMITED (SUPRA) HAS SUBMITTED THAT ANY MACHINE OR EQUIPMENT CANNOT BE DESCRIBED AS COMPUTER UNLESS ITS PRINCIPA L OUTPUT OR FUNCTION IS THE RESULT OF SOME SORT OF COMPUTER FUN CTION IN CONJUNCTION WITH SOME NON-COMPUTER FUNCTIONS. THAT SINCE THE MAIN FUNCTION OF STBS IS TO DELIVER THE AUDIO / VID EO FEED TO USER, THUS THE MAJOR FUNCTION OF THE STBS I.E. DECO DING AND THUS DELIVERING THE AUDIO VIDEO SIGNALS TO THE TV SETS I S INDEPENDENT OF THE VARIOUS SERVERS INSTALLED AT THE PREMISES OF MU LTI SYSTEM OPERATOR (MSO). THAT THE MAIN FUNCTIONS OF THE STBS DO NOT 68 DEPEND ON SERVERS AND OTHER ELECTRONIC DEVICES INST ALLED IN THE PREMISES OF MSO. HE, THEREFORE, HAS SUBMITTED THAT STBS CANNOT BE DESCRIBED AS COMPUTER RATHER AT THE BEST CALLED INFORMATIZATION APPLIANCES ATTACHED TO TV SET TO EN JOY MULTIPLE CONTENTS. THE MAIN ARGUMENT OF THE LD. DR IS THAT A S PER THE DECISION OF THE DCIT VS DATA CRAFT INDIA LIMITED. (2010) 40 SOT 295 (MUM)(SB)(ITAT), THE TELEVISIONS CANNOT BE TREA TED AS COMPUTERS AND HENCE ANY ASSEMBLY ATTACHED TO TELEVI SION, I.E. STBS IN THIS CASE CANNOT BE TREATED AS COMPUTERS. THAT IN THE CASE OF CISCO, 60% DEPRECIATION HAS BEEN ALLOWED BY THE ITAT ON AUDIO / VIDEO CONFERENCE DEVICES. HOWEVER, THE ASSE SSES IN THE PRESENT CASE HAS FAILED TO JUSTIFY HOW STBS ARE AT PAR WITH AUDIT / VIDEO CONFERENCING DEVICES. FURTHER, THE LD. DR H AS SUBMITTED THAT THE FUNCTIONING OF THE STBS IS ANALOGUES TO TH E FUNCTIONING OF THE MOBILE PHONES. THE LD. DR, THEREFORE, HAS S UBMITTED THAT SINCE THE MOBILE PHONES CANNOT BE SAID TO BE COMPUT ERS, HENCE, SIMILARLY, THE STBS ALSO CANNOT BE SAID TO BE COMPU TERS. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE ALSO RELYING UPON THE DECISION OF THE SPECIAL BENCH IN DCIT VS DATA CRAFT INDIA LTD. (2010) 40 SOT 295 (MUM)(SB)(ITAT ) HAS SUBMITTED THAT THE ASSESSEE HAS ALSO DEMONSTRATED T HAT STBS HAVE ALL THE CAPABILITIES OF A COMPUTER AND THAT TH EY ARE NOT ONLY MINI COMPUTERS IN ITSELF BUT ALSO PART OF A LARGER COMPUTER SYSTEM AT THE BACK-END. THAT THE STBS CANNOT BE US ED 69 INDEPENDENTLY UNLESS INTEGRATED WITH A COMPUTER. TH E LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS RELIED UPON TH E DECISION OF THE TRIBUNAL IN THE CASE OF SAMIRAN MAJUMDAR ( SU PRA), WHEREIN, IT HAS BEEN HELD THAT THE PRINTER AND SCANNER CANNO T BE USED WITHOUT COMPUTER AND, HENCE, WERE HELD TO BE A PART OF COMPUTER QUALIFYING FOR DEPRECIATION AT THE RATE APPLICABLE TO THE COMPUTERS. THE LD. REPRESENTATIVES OF BOTH THE PART IES, THEREFORE, HAVE MAINLY STRESSED UPON THE FUNCTIONING OF THE ST BS TO SUBMIT WHETHER THEY PERFORM THE FUNCTIONS OF A COMPUTER OR NOT; ALTHOUGH THE SUBMISSION OF THE LD. COUNSEL OF THE A SSESSEE IS THAT AN STB IS A COMPUTER ITSELF AND YET, IT IS FUR THER ATTACHED TO A LARGER COMPUTER NETWORK AT BACK AND THUS BEING PA RT AND PARCEL OF A LARGER COMPUTER SYSTEM ALSO, WHEREAS, T HE LD. DR HAS STRESSED THAT ALTHOUGH THE STB MAY BE PERFORMING MA NY FUNCTIONS AS THAT OF A COMPUTER, YET THE PRIMARY FU NCTION OF THE STB IS DECODING OF THE AUDIO VIDEO SIGNALS AND FU RTHER DELIVERING THE AUDIO VIDEO SIGNALS TO TV SETS, HE NCE, THE PRIMARY FUNCTION IS NOT OF COMPUTING, HENCE, THEY C ANNOT BE SAID TO BE COMPUTERS. 37. IN OUR VIEW, THOUGH BOTH THE LD. REPRESENTATIVE S HAVE GONE TOO TECHNICAL REGARDING THE SPECIFIC FUNCTIONS OF T HE STBS TO SUBMIT WHETHER THEY FALL WITHIN THE DEFINITION AND SCOPE OF COMPUTER OR NOT? HOWEVER, IN OUR VIEW, NEITHER UNDE R THE 70 PROVISIONS OF INCOME TAX ACT NOR IN THE APPENDIX 1 TO INCOME TAX RULES, 1962 (PROVIDING FOR RATE OF DEPRECIATION) AN Y SUCH HYPER TECHNICAL APPROACH HAS BEEN TAKEN. THE RATE OF DEP RECIATION ON A CAPITAL ASSET UNDER THE PROVISIONS OF INCOME TAX AC T AND RULES THERETO HAS BEEN PROVIDED TAKING INTO CONSIDERATION THE GENERAL OR APPROXIMATE AGE OF THE ASSET AND THE SPEED AT WH ICH IT DEPRECIATES. SIMILAR TYPE OF ASSETS IRRESPECTIVE O F THEIR QUALITY, MAKE OR THE MATERIAL USED IN, ARE PLACED UNDER THE SAME CATEGORY ON WHICH RATE OF DEPRECIATION IS SAME/EQU AL E.G. ALL TYPE OF BUILDINGS EXCEPT PURELY TEMPORARY ERECTIONS HAVE BEEN PLACED UNDER THE SAME CATEGORY IRRESPECTIVE OF THEI R STRENGTH AND QUALITY OF THE MATERIAL USED TO ERECT SUCH BUILDING S. ALL TYPES OF FURNITURE AND FITTINGS HAVE BEEN PLACED IN THE SAME CATEGORY. ALL TYPES OF MOTOR VEHICLES IRRESPECTIVE OF THEIR QUALI TY AND MATERIAL USED, WHICH MAY AFFECT THEIR LIFE SPAN, HAVE BEEN P LACED IN ONE CATEGORY AND SO ON. THE ONLY DIFFERENCE IS WHETHER THE ASSET IS USED FOR COMMERCIAL HIRING/RENTING OR FOR OWN USAGE/CONSUMPTION. AT SERIAL NO.5 OF APPENDIX 1 TO THE RULES, THE COMPUTER INCLUDING COMPUTER SOFTWARE HAVE BEEN PLACED WITH ADMISSIBLE RATE OF DEPRECIATION THEREUPON @ 60% . AS PER NOTE 7 APPENDED BELOW THE APPENDIX 1, IT HAS BEEN MENTI ONED THAT COMPUTER SOFTWARE MEANS ANY COMPUTER PROGRAMME REC ORDED ON ANY DISC, TAPE PERFORATE MEDIA OR OTHER INFORMATION STORAGE DEVICE. THE VARIOUS COURTS OF LAW WHILE ADJUDICAT ING ON THE ISSUE OF ALLOWABILITY OF RATE OF DEPRECIATION HAVE INTERPRETED 71 COMPUTER AND COMPUTER SOFTWARE AS A COMPUTER SYS TEM WHICH INCLUDES THE OTHER ASSOCIATED EQUIPMENT ATTACHED WI TH THE CPU SUCH AS MONITOR, MOUSE, KEY BOARD, PRINTER, SCANNER ETC. AS THESE EQUIPMENT/DEVICES THOUGH, IN THEMSELVES WILL NOT BE DOING THE FUNCTION OF COMPUTER BUT THEY ARE REQUIRED TO B E ATTACHED WITH THE COMPUTERS AND CANNOT BE OPERATED INDEPENDE NTLY. THE LIFE SPAN OF THESE DEVICES ATTACHED TO THE CPU GOES WITH THAT OF THE COMPUTER. IN THE MODERN ERA OF FAST EVOLUTION IN TECHNOLOGY SECTOR, THE TECHNOLOGICAL DEVICES BASED ON COMPUTER PROGRAMMING AND SOFTWARE ARE BEING REPLACED OR REQUIRED TO BE R EPLACED IN A VERY SHORT SPAN OF TIME WITH THEIR NEW AND IMPROVED VERSIONS WITH ENHANCED CAPABILITIES AND PERFORMANCE FEATURES ETC. DUE TO REVOLUTIONARY DEVELOPMENTS IN THIS SECTOR. A BUSINE SSMAN HAS TO REPLACE THE OLD EQUIPMENT WITH THE NEW/IMPROVED ONE TO COMPETE IN THE MARKET. HENCE, THESE TYPES OF COMPUTER DEVIC ES BECOME OBSOLETE VERY SOON DUE TO THEIR NEW VERSIONS AND SU BSTITUTES. THEREFORE, THE HIGHER RATE OF DEPRECIATION HAS BEEN GIVEN ON COMPUTERS AND SOFTWARE AS COMPARED TO ORDINARY PLAN T AND MACHINERY. THERE ARE MANY CASE LAWS WHEREIN THE EX PENDITURE INCURRED ON SOFTWARE ETC. CLAIMED AS REVENUE EXPE NDITURE BY THE ASSESSEE HAS BEEN SO ALLOWED BY THE COURTS DUE TO ITS SHORT LIFE AS IT IS REQUIRED TO BE REPLACED WITH THE NEW AND IMPROVED VERSIONS IN A SHORT SPAN OF TIME. THE GROWTH IN TE CHNOLOGY SECTOR IS VERY FAST AND THE OLDER DEVICES BECOME USELESS A ND OBSOLETE, NOT ALWAYS DUE TO THE REASON THAT THESE DEVICES HA VE OUTLIVED 72 THEIR LIFE BUT DUE TO THE FACT THAT THEY ARE REQUIR ED TO BE REPLACED WITH THEIR NEW VERSION TO KEEP PACE WITH THE TIME A ND TO COMPETE IN THE MARKET. IN OUR VIEW, IT IS NOT ONLY THE PRIMARY FUNCTION T HAT MAY BE THE SOLE CRITERIA FOR DECIDING WHETHER THE STBS WILL BE ELIGIBLE FOR DEPRECIATION AS APPLICABLE TO THE COMPUTERS OR NOT, RATHER THE OVERALL FACTS AND CIRCUMSTANCES SUCH AS THE ARCHITE CTURAL DESIGN, NATURE OF ITS COMPONENTS, THE ECONOMIC LIFE OF THE STBS AND THEIR FUNCTIONS BOTH PRIMARY AND OTHER FUNCTIONS, T HAT ARE THE DECIDING FACTORS. A PERUSAL OF THE APPENDIX 1 TO INCOME TAX RULES,196 2 REVEALS THAT THE RATE OF DEPRECIATION PROVIDED IS NOT ITEM OR QUALITY SPECIFIC, RATHER, THE DEPRECIATION RATE HAS BEEN ME NTIONED TAKING THE GENRE OF THE PARTICULAR TYPE OF ASSETS AND NO T ON THE BASIS OF ANY SPECIFIC SPECIES OR TO SAY NOT ON THE BASIS OF DIFFERENTIATING NATURE OR QUALITIES OF THE ASSETS FALLING WITHIN O NE GENRE/CATEGORY. AS NOTED ABOVE, DIFFERENT TYPE OF A SSETS MAY BE OF DIFFERENT SPECIES BUT FALLING IN ONE OR SAME GENRE WILL BE ELIGIBLE FOR DEPRECATION AT THE SAME RATE. A BROADER ASPECT OF THE NATURE AND TYPE OF ASSET HAS BEEN TAKEN UNDER THE APPENDIX 1. APART FROM THE CRITERIA OF NORMAL AGE OF AN ASSET, A HIGH ER RATE OF DEPRECIATION HAS ALSO BEEN PROVIDED FOR CERTAIN ASS ETS FOR THE PURPOSE OF GIVING INCENTIVES IN CERTAIN TYPE OF BUSINESS SUCH AS 73 LIFESAVING EQUIPMENT, ENERGY SAVING EQUIPMENT AND E NVIRONMENT AND POLLUTION CONTROLLING EQUIPMENT ETC. 38. IT IS PERTINENT TO MENTION HERE THAT IN THE CAT EGORY OF ENERGY SAVING DEVICES MENTIONED UNDER SERIAL NO. 8 (IX) (E) UNDER ELECTRICAL EQUIPMENT, ON THE FOLLOWING TYPE O F DEVICES A HIGHER RATE OF DEPRECIATION I.E. @ 80%, AS APPLICAB LE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, HAS BEEN GIVEN :- K) REMOTE TERMINAL UNITS/INTELLIGENT ELECTRONIC DEVICES, COMPUTER HARDWARE/SOFTWARE, ROUTER/BRIDGES, OTHER REQUIRED EQUIPMENT AND ASSOCIATED COMMUNICATION SYSTEMS FOR SUPERVISORY CONTROL AND DATA ACQUISITION SYSTEMS, ENERGY MANAGEMENT SYSTEMS AND DISTRIBUTION MANAGEMENT SYSTEMS FOR POWER TRANSMISSION SYSTEMS. A PERUSAL OF THE ABOVE REVEALS THAT IN CASE OF THE AFORESAID DEVICES USED FOR SUPERVISORY CONTROL AND DATA ACQUI SITION SYSTEMS, ENERGY MANAGEMENT SYSTEM AND DISTRIBUTION MANAGEMENT SYSTEM FOR POWER TRANSMISSION SYSTEMS, T HE VARIOUS DEVICES WHICH ARE EITHER COMPUTER HARDWARE OR SOFTWARE OR ARE CLOSELY LINKED TO OR ASSOCIATED WITH OR ATTA CHED TO AND GENERALLY PERFORMING EITHER THE SAME OR IDENTICAL F UNCTIONS, HAVE NOT ONLY BEEN PLACED UNDER THE SAME CATEGORY BUT TH EY HAVE BEEN MENTIONED TOGETHER BUT SEPARATED WITH / (SL ASH) WHICH MEANS SAME OR SIMILAR OR INCLUSIVE OF OR TO SAY EI THER / OR . IT IS USED FOR CONNECTING NON-CONTRASTING ITEMS OR AS A SHORTER 74 SUBSTITUTE FOR THE CONJUNCTION OR AND INCLUSIVE OF I.E., A OR B OR BOTH. WHEN CERTAIN THINGS ARE SO CLOSELY RELAT ED THAT ONE OVERLAPS THE OTHER AND IT IS DIFFICULT TO MAKE A CL EAR DISTINCTION BETWEEN THE TWO OR BOTH ARE INCLUSIVE IRRESPECTIVE OF ANY DISTINCTION, SUCH ITEMS ARE SEPARATED BY / INSTEA D OF SYMBOL OF COMMA , WHICH GIVES A SEPARATE IDENTITY TO EACH OF THE ITE M INCLUDED IN THE SAME LIST. ANOTHER EXAMPLE IN THIS RESPECT IS GIVEN IN RESPECT OF LIFE SAVING MEDICAL EQUIPMENTS WHICH READS AS UNDER: (XIA) LIFE SAVING MEDICAL EQUIPMENT, BEING (A) D.C. DEFIBRILLATORS FOR INTERNAL USE AND PACE MAKERS (C) HEART LUNG MACHINE (D) COBALT THERAPY UNIT (E) COLOUR DOPPLER (F) SPECT GAMMA CAMERA (G) VASCULAR ANGIOGRAPHY SYSTEM INCLUDING DIGITAL S UBTRACTION ANGIOGRAPHY (H) VENTILATOR USED WITH ANAESTHESIA APPARATUS (I) MAGNETIC RESONANCE IMAGING SYSTEM (J) SURGICAL LASER (K) VENTILATOR OTHER THAN THOSE USED WITH ANAESTH ESIA (L) GAMMA KNIFE (M) BONE MARROW TRANSPLANT EQUIPMENT INCLUDING SILA STIC LONG STANDING INTRAVENOUS CATHETERS FOR CHEMOTHERAPY 75 (N) FIBRE OPTIC ENDOSCOPES INCLUDING, PAEDIATRIC RESECTOSCOPE/AUDIT RESECTOSCOPE, PERITONEOSCOPES, ARTHOSCOPE, MICROLARYNGOSCOPE, FIBREOPTIC FLEXIBLE NASAL PHARYNGO BRONCHOSCOPE, FIBREOPTIC FLEXIBLE LARYNGO BRONCHOSCOPE, VIDEO LARYNGO BRONCHOSCOPE AND VIDEO OESOPHAGO GASTROSCOPE, STROBOSCOPE, FIBREOPTIC FLEX IBLE OESOPHAGO GASTROSCOPE (O) LAPAROSCOPE (SINGLE INCISION) A PERUSAL OF THE ABOVE DETAILS REVEALS THAT SEPARA TE ITEMS THOUGH FALLING UNDER THE HEADING LIFE SAVING MEDICAL EQUI PMENT HAVE BEEN MENTIONED SEPARATELY UNDER DIFFERENT ALPHABETI C NUMBERS, HOWEVER, THE ITEMS AT (N) ABOVE SHOWS THAT PAEDIATR IC RESETOSCOPE AND AUDIT RESECTOSCOPE HAVE BEEN SEPARATED WITH / (SLASH), WHEREAS, THE OTHER ITEMS THOUGH OF SIMILAR NATURE H AVE BEEN SEPARATED WITH , (COMMA) AND WHEREAS, THE OTHER ITEMS WHICH ARE NOT SIMILAR BUT FALLING UNDER THE MAIN HEAD LI FE SAVING EQUIPMENTS HAVE BEEN SEPARATED WITH DIFFERENT ALPH ABETIC NUMBERS. FROM THE ABOVE DISCUSSION, IT IS LOGICALLY INFERRED THAT THE DEVICES SUCH AS REMOTE TERMINAL UNITS/INTELLIGENT E LECTRONIC DEVICES, COMPUTER HARDWARE/SOFTWARE, ROUTER/BRIDGES ARE INCLUSIVE OF OR ARE OVERLAPPING EACH OTHER BECAUSE OF THE SIMILARITY OF THE FUNCTIONS OR THEIR FUNCTIONS ARE IN AID TO EACH OTHERS FUNCTIONS FOR A COLLECTIVE MAIN FUNCTION. THE STBS NO DOUBT WOULD ALSO FALL WITHIN THE CATEGORY OF THE AB OVE NAMED 76 INTELLIGENT ELECTRONIC DEVICES, HOWEVER, STBS SIN CE ARE NOT ARE ELECTRIC ENERGY SAVING DEVICES, HENCE, THE SAME WIL L NOT BE ELIGIBLE FOR HIGHER RATE OF DEPRECATION @ 80%. HOW EVER, CLUE FROM THE ABOVE CAN BE TAKEN TO INCLUDE THE ABOVE DEVICES FOR CLAIM OF DEPRECIATION AS IS ELIGIBLE FOR COMPUTER AND SOFTW ARE AS THESE DEVICES(STBS) ARE IDENTICAL TO COMPUTERS NOT ONLY I N THEIR ARCHITECTURAL DESIGN BUT ALSO IN THEIR FUNCTIONING . EVEN IT HAS ALSO NOT BEEN DISPUTED BY THE LD. DR THAT THE STBS ALSO PERFORM COMPUTING FUNCTIONS BUT HE HAS ONLY TRIED TO MAKE D ISTINCTION BETWEEN THE TWO BY STATING THAT THE MAIN FUNCTION OF AN STB IS DECODING OF AUDIO VIDEO SIGNALS. HOWEVER, IN OUR VI EW, SUCH HYPER TECHNICAL CRITERIA CANNOT BE ADOPTED IN VIEW OF THE GENERAL AND BROADER CRITERIA ADOPTED IN APPENDIX 1 RELATING TO THE CLASSIFICATION OF THE ITEMS FOR THE PURPOSE OF DEPR ECIATION RATE. SO FAR AS THE ARGUMENT OF THE LD. DR THAT SINCE LIK E A SMART TV OR A MOBILE TELEPHONE CANNOT BE SAID TO BE COMPUTER , HENCE, THE STBS CAN ALSO BE NOT CATEGORIZED AS COMPUTER, IN OU R VIEW, HAS NO FORCE. NOW A DAYS, THE SMART TVS ARE IN MARKET. THE WORD SMART ADDED BEFORE A TV SHOWS THAT IT IS CAPABLE OF PERFORMING CERTAIN SMART OR INTELLIGENT FUNCTIONS AS THAT OF A COMPUTER. IN FACT, THESE SMART TVS HAVE ALL THE FEATURES AND FUN CTIONS OF A COMPUTER AND IN THE ABSENCE OF ANY SPECIFIC CLASSIF ICATION IN APPENDIX 1, IT WILL BE REQUIRED TO BE SEEN WHETHER SUCH APPLIANCE IS A SIMPLE TV OR AN ADVANCE APPLIANCE WI TH AN INBUILT COMPUTER SYSTEM AND PERFORMING FUNCTIONS AS THAT OF A COMPUTER. 77 THERE HAS BEEN A GREAT EVOLUTION IN MOBILE PHONES A LSO. NOW A DAYS, MOBILE PHONES ARE MINI COMPUTERS. CONSIDERING THE SPEED AT WHICH THESE DEVICES ARE EVOLVED TO NEW AND IMPRO VED VERSIONS, THE COMPONENT OF SUCH DEVICES BEING DELICATE AND SE NSITIVE AND THE FUNCTIONING OF SUCH DEVICES BEING A MIXTURE OF COMMUNICATION AND COMPUTING, WHICH IS AKIN TO THAT IS PERFORMED BY A COMPUTER, THE MOBILE PHONES, IN OUR VIEW, CANNOT BE PLACED AND EQUATED WITH SIMPLE PLANT AND MACHINE RY OF EVERY TYPE, RATHER, IT WILL BE APPROPRIATE TO PLACE THESE UNDER THE GENRE COMPUTERS AND SOFTWARE. SO FAR AS THE ARGUMENT OF THE LD. DR THAT JUST BECAUSE SOME SORT OF COMPUTER FUNCTIONS A RE NECESSARILY INVOLVED, MECHANICAL SYSTEM CANNOT BE S AID TO BE COMPUTER, WE AGREE TO THAT EXTENT WITH THIS ARGUMEN T OF THE LD. DR. NOW A DAYS WITH THE ADVANCEMENT OF TECHNOLOGY, EVEN THE MACHINES MEANT TO PERFORM MECHANICAL FUNCTIONS SUCH AS A WASHING MACHINE OR A LIFT HAVE ALSO BEEN EMBEDDED W ITH SOME SORT OF COMPUTER DEVICE, WHICH GIVES COMMAND TO SAI D MACHINE TO PERFORM CERTAIN SPECIFIC FUNCTIONS; HOWEVER, CONSID ERING THE MATERIAL AND COMPONENTS OF SUCH MACHINES, THEIR LIF E, THEIR MAIN AND ASSOCIATED FUNCTIONS AND CHARACTERISTICS, THEY CAN BE CATEGORIZED EITHER AS MECHANICAL DEVICES, ELECTRIC AL DEVICES, ELECTRONIC DEVICES OR COMPUTER DEVICES. EVEN WHERE SUCH DIVISION IS GENERALLY NOT POSSIBLE, THE COMPOSITION OF SUCH TYPE OF MACHINES CAN BE DIVIDED AND THEIR COMPONENTS CAN BE SEGREGATED TO FIND WHICH COMPONENT WOULD FALL IN THE CATEGORY OF PLANT AND 78 MACHINERY AND WHICH IN COMPUTER CATEGORY. WHICH DE VICE WOULD FALL UNDER WHAT CATEGORY OF APPENDIX 1 WILL DEPEND UPON THE OVERALL CHARACTERISTICS AND NOT A SINGLE OR SOLE FA CTOR CAN BE SAID TO BE DETERMINATIVE OF. HENCE, CONSIDERING THE NATU RE OF THE EQUIPMENT, THEIR ARCHITECTURE, THEIR COMPONENTS, TH EIR FUNCTIONS AND ALSO THEIR AVERAGE LIFE, STBS IN OUR VIEW WOULD FALL UNDER THE CATEGORY OF COMPUTER FOR THE PURPOSE OF DETERMINATI ON OF RATE OF DEPRECIATION. 39. THE NEXT CONTENTION OF THE LD. DR , RELYING UP ON THE DECISION OF SPECIAL BENCH IN THE CASE OF DATA CRAFT INDIA L IMITED (SUPRA), HAS BEEN THAT ANY MACHINE OR EQUIPMENT CANNOT BE DESCRIBED AS COMPUTER UNLESS ITS PRINCIPAL OUTPUT O R FUNCTION IS THE RESULT OF SOME SORT OF COMPUTER FUNCTION IN CON JUNCTION WITH SOME NON-COMPUTER FUNCTIONS; THAT SINCE THE MAIN FU NCTION OF STBS IS TO DELIVER THE AUDIO / VIDEO FEED TO USER, THUS THE MAJOR FUNCTION OF THE STBS I.E. DECODING AND THUS DELIVER ING THE AUDIO VIDEO SIGNALS TO THE TV SETS IS INDEPENDENT OF THE VARIOUS SERVERS INSTALLED AT THE PREMISES OF MULTI SYSTEM OPERATOR (MSO). HE, THEREFORE, HAS SUBMITTED THAT STBS CANNOT BE DESCRI BED AS COMPUTER RATHER AT THE BEST CALLED INFORMATIZATION APPLIANCES ATTACHED TO TV SET TO ENJOY MULTIPLE CONTENTS. THE MAIN ARGUMENT OF THE LD. DR, THUS, HAS BEEN THAT AS PER THE DECIS ION OF THE DCIT VS DATA CRAFT INDIA LIMITED. (SUPRA) SINCE T HE TELEVISIONS CANNOT BE TREATED AS COMPUTERS AND HENCE ANY ASSEMB LY ATTACHED 79 TO TELEVISION, I.E. STBS IN THIS CASE CANNOT BE TRE ATED AS COMPUTERS. HOWEVER, IN OUR VIEW, THE STBS ARE NOT J UST ATTACHMENTS TO THE TELEVISION. THEY ARE ESSENTIAL F OR THE BUSINESS OF THE ASSESSEE TO PROVIDE THE BROADCASTING/D2H SER VICES OFFERED BY THE ASSESSEE TO THE CONSUMERS PREMISES. IT IS P ART OF THE SETUP ESSENTIAL TO TRANSMIT, DECODE AND SEND THE AU DIO/VIDEO SIGNAL TO THE TELEVISION. THESE, THUS ARE ATTACHED BEING ITS PART AND PARCEL OF THE MAIN SERVER SYSTEM OF THE OPERATO R RECEIVE COMMANDS, DECODE THEM AS PER PROGRAMMING AND TRANSM IT TO THE TV. THE MERE ATTACHMENT OF STB WITH TELEVISION WILL NOT BE OF ANY USE UNLESS IT IS CONNECTED WITH THE MAIN SERVER SYS TEM. UNDER THE CIRCUMSTANCES, EVEN AS PER THE PARAMETERS LAID DOWN BY THE SPECIAL BENCH IN THE CASE OF DATA CRAFT INDIA (SU PRA), STBS WOULD FORM PART AND ATTACHMENT OF THE COMPUTER SYST EMS. 40. EVEN IT IS AN ADMITTED FACT THAT IN THE CASE OF CISCO, THE MATTER RELATING TO THE DEPRECIATION ON AUDIO VISUAL CONFERENCE DEVICES HAD BEEN RESTORED BY THE TRIBUNAL TO THE FI LE OF THE ASSESSING OFFICER FOR DECISION A FRESH ON THE ISSUE AS PER THE OBSERVATIONS/GUIDELINES OF THE TRIBUNAL. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSING OFFICER IN THE SET ASIDE PR OCEEDINGS HAS GRANTED DEPRECIATION @ 60% ON THOSE AUDIO-VISUAL EQ UIPMENT ON THE ANALOGY THAT THEY BEING ATTACHED, FORM PART OF THE COMPUTER SYSTEMS. HOWEVER, THE SOLE CONTENTION OF THE LD. DR IN THIS RESPECT HAS BEEN THAT IT IS NOT PROVED THAT STBS AN D AUDIO VISUAL 80 CONFERENCE DEVICE MENTIONED IN THE CISCOS CASE WER E SIMILAR TO THE STBS. HOWEVER THE LD. COUNSEL FOR THE ASSESSEE IN THIS RESPECT HAS SUBMITTED THAT A LETTER WAS WRITTEN BY THE ASSESSING OFFICER HIMSELF TO THE CISCO FOR CLARIFICATION ON THIS POINT, TO WHICH THE CISCO VIDE THEIR LETTER DATED 18.02.2016 REPLIED AS UNDER: 5. DETAILS OF DEPRECIATION CLAIMED BY US ON ASSETS UNDER LEASE WITH FASTWAY TRANSMISSION FOR AY 2013-14 & AY 2014-15: THE ASSETS PROVIDED ON LEASE TO M/S FASTWAY TRANSMISSION PVT. LTD. ARE NETWORKING EQUIPMENTS WHICH WOULD FALL WITHIN THE COMPUTERS BLOCKS WE HAVE ACCORDINGLY CLAIMED THE DEPRECIATION @ 60% AS APPLICABLE TO COMPUTERS BLOCK. THE TOTAL AMOUNT CLAIMED AS DEPRECIATION IN OUR TAX RETURNS FOR AY 2013-14 IS INR 573,385,590 & FOR AY 2014-15 DEPRECIATION CLAIM IS INR 812,535,709 THE MATTER THEREFORE STANDS CLARIFIED BY THE CISCO ITSELF. 41. EVEN OTHERWISE, MAY BE THE AUDIO-VISUAL DEVICE AS MENTIONED IN THE ORDER OF THE CISCO NOT BE THE SAM E EQUIPMENT I.E STBS , BUT THESE WOULD FALL IN THE SAME CATEGOR Y BEING INFORMATION APPLIANCES. LD. DR IN HIS ARGUMENTS H AS ALSO STRESSED THAT STB IS INFORMATION APPLIANCE. UNDER THE CIRCUMSTANCES, THE CASE OF THE ASSESSEE CAN NOT BE DIFFERENTIATED FROM THAT OF CISCO ON THE ISSUE OF RATE OF DEPRECIA TION ADMISSIBLE ON SUCH INFORMATION APPLIANCES BEING T REATED AS PART OF THE COMPUTER SYSTEMS IN THE CASE OF CISCO. 81 42. SO FAR AS THE RELIANCE OF THE LD. DR ON THE DEC ISION OF THE COORDINATE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS KERALA COMMUNICATORS CABLE LIMITED (SUPRA) IS CONC ERNED, WE FIND THAT AT IN THAT CASE THE ASSESSEE HAD CLAIMED THE DEPRECIATION AT THE RATE OF 80% BY CLAIMING THEM TO BE ENERGY SAVING DEVICES. THE COORDINATE BENCH HELD THAT THE STBS DID NOT FALL WITHIN THE DEFINITION OF ENERGY SAVING DEVICES . THE FACTS OF THE SAID CASE ARE THEREFORE DISTINGUISHABLE. 43. EVEN OTHERWISE, IT IS THE OWN CASE OF THE DEPAR TMENT THAT THE STBS HAS A SHORT LIFE OF THREE YEARS. REFERRIN G TO THE CLAUSES OF THE MASTER LEASE AGREEMENT WITH CISCO, AS DISCUS SED ABOVE, IT HAS BEEN VEHEMENTLY CONTENDED BY THE DEPARTMENT THAT THE LEASE DEED WAS SO DEVISED THAT THE TERM OF LEASE EN DS WITH THE LIFE OF THE EQUIPMENT; THAT AFTER THE PAYMENT OF THE LAST INSTALLMENT, THE EQUIPMENT IS RENDERED VALUELESS; T HAT THE AVERAGE LIFE OF THE STBS IS THREE YEARS ONLY AND TH AT IS WHY THE LEASE DEED ALSO ENDS AT THREE YEARS. IN THIS RESPE CT, IN THE WRITTEN SUBMISSIONS FILED ON 13.12.2017 BY THE DEPA RTMENT, STRONG RELIANCE HAS BEEN PLACED ON THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IN THIS R ESPECT, WHICH READS AS UNDER:- THE ECONOMIC LIFE SPAN OF ASSET NAMELY SET TOP BOX (STB) IS 3 TO 4 YEARS. THIS FACT IS ASCERTAINED 82 AS PER THE TRAI GUIDELINE (PAGE 232, PARA 19 & 21 OF DPB-II) AND THE SWORN STATEMENT RECODED U/S 131 ON 20.2.2014 OF SH SUSHIL THAKUR S/O SH. KARAM SINGH THAKUR WORKING AS ASSISTANT MANAGER (ACCOUNTS) IN THE ASSESSEE COMPANY SINCE 2008 (PAGE 143 OF DPB-III) WHEREIN HE HAD CATEGORICALLY STATED THAT THAT USAGE LIFE OF STB I S APPROX. 3-4 YEARS ONLY AND LEASE TENURE IS ALSO 3- 4 YEARS. THE TENURE AS PER LEASE SCHEDULE IS NEARLY THE SAME AS ECONOMIC LIFE OF THE EQUIPMENT. THUS, LEASE PERIOD IS SETTLED IN SUCH A WAY SO THAT THE CISCO FULLY RECOVERS THE INVESTMENT IN THE ASSET TOGETHER WITH INTEREST THEREON WITHIN THE LIF E SPAN OF THE ASSET. FURTHER, IN THE WRITTEN SUBMISSIONS DATED 26.2.2018 , IT HAS BEEN SUBMITTED AS UNDER:- THE PHYSICAL LIFE OF THE ASSETS IS NOT RELEVANT HE RE. IT IS THE ECONOMIC LIFE SPAN OF STB WHICH IS RELEVANT AS PER ITAT SPECIAL BENCH DECISION IN INDUS IND BANK AND ACCOUNTING STANDARD. AS PER TRAI GUIDELINE AND SWORN STATEMENT U/S 131 OF SHRI SUSHIL THAKUR THE ECONOMIC LIFE SPAN IS 3 TO 4 YEARS. EVEN OTHERWISE THE ASSESSEE HAS CHARGED DEPRECIATION OF THESE ASSETS @ 27.82% (PAGE 176 OF DPB 1 ON STB / HEADENDS) IN ITS BOOKS VIZ-A-VIZ CHARGING OF DEPRECIATION ON OTHER ASSETS @ 14%. THUS MAJOR PART OF THE LIFE OF STB IS COVERED IN 3 TO 4 YEARS. FURTHER, THE ASSESSING OFFICER HAS ALSO PLACED RELI ANCE 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) 83 2. AFTER THREE YEARS FROM THE DATE OF INSTALLATION NO RENT. THE SET TOP BOX SHALL BECOME THE PROPERTY OF THE SUBSCRIBER EXCEPT SMART CARD/VIEWING CARD 3. SECURITY DEPOSIT (ADJUSTABLE) RS. 800/- 4. AMOUNT OF SECURITY DEPOSIT REFUNDED ON RETURN OF THE SET 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 C ONSUMERS PREMISES, THE CONSUMER BECOMES THE OWNER OF THE PRO PERTY. 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 OWNERSHIP TO THE CONSUMER AFTER 3 YEARS FROM THE DA TE OF INSTALLATION. WE HAVE ALREADY AGREED IN THIS RESPEC T WITH THE CONTENTION OF THE DEPARTMENT. HOWEVER, AS PER THE TRAI NOTIFICATION ALSO, THE LIF E OF THE STBS HAS BEEN TAKEN AT 3 YEARS. AS PER THE SAID NOTIFICA TION OF THE TRAI, AFTER 3 YEARS, THE CONSUMER BECOMES THE OWNER OF THE EQUIPMENT BUT AT THE SAME TIME, THE SERVICE PROVIDE R (ASSESSEE HEREIN) IS ALSO ABSOLVED OF THE LIABILITY OF ANY WA RRANTY / GUARANTEE OR MAINTENANCE OF THE EQUIPMENT, MEANING THEREBY THE ASSESSEE RECOVERS THE RENT FOR 3 YEARS FROM THE CON SUMER AND 84 FURTHER THE SECURITY DEPOSIT RECEIVED FROM THE CONS UMER IS FORFEITED/APPROPRIATED TO THE ASSESSEE AT THE END O F 3 YEARS AND ON THE OTHER HAND THE CONSUMER BECOMES THE OWNER OF THE EQUIPMENT. AS OBSERVED IN THE ASSESSMENT ORDER, AT THE END OF THE 3 YEARS, THE SECURITY DEPOSIT SO FORFEITED OR A PPROPRIATED TO IT IS OFFERED AS INCOME BY THE ASSESSEE. THE EQUIPMENT THUS IS DEEMED TO BE SOLD TO THE CONSUMER. THUS, THE AGREEM ENT OF THE ASSESSEE WITH CONSUMERS IN SUBSTANCE IS A HIRE PURC HASE AGREEMENT FOR A TERM OF 3 YEARS. THE EQUIPMENT REMA INS ON HIRE FOR 3 YEARS WITH THE CONSUMER BUT IS DEEMED TO BE S OLD AT THE END OF 3 YEARS. HERE, THE INTERESTING POINT IS THAT WH EN AT THE END OF 3 YEARS, THE EQUIPMENT IS SOLD AND THE RECEIPT / SA LE PRICE ALONG WITH THE HIRE CHARGES RECEIVED FROM THE CONSUMER DU RING THE PERIOD ALREADY OFFERED TO THE INCOME TAX, HOW CAN T HE DEDUCTION OF CORRESPONDING INVESTMENT / EXPENDITURE INCURRED FOR THE PURCHASE OF SUCH EQUIPMENT CAN BE POSTPONED BEYOND SUCH DATE OF SALE OF EQUIPMENT? THE INCOME UNDER THE INCOME T AX ACT IS THE RESULTANT PROFIT AFTER DEDUCTION OF THE INVESTM ENT / EXPENDITURE INCURRED FROM THE TOTAL SALE PRICE RECE IVED / RECEIVABLE. THEREFORE, WHEN THE TOTAL RECEIPT RELAT ING TO THE EQUIPMENT EITHER IN THE SHAPE OF HIRE CHARGES OR SA LE PRICE IN THE SHAPE OF SECURITY DEPOSIT APPROPRIATED AT THE END O F 3 YEARS, IS ACCOUNTED FOR AS RECEIPT/INCOME, THEN THE DEDUCTION OF THE CORRESPONDING EXPENDITURE EITHER IN THE SHAPE OF DE PRECIATION OR IN THE SHAPE OF REVENUE EXPENDITURE, UNDER NO CIRCU MSTANCES, 85 CAN BE DELAYED OR POSTPONED BEYOND THE DATE OF SAL E OF EQUIPMENT. THE EXPENDITURE INCURRED FOR THE PURCHA SE OF SUCH EQUIPMENT IS REQUIRED TO BE SET OFF FROM THE FINAL RECEIPT / SALE PRICE BY WHATEVER MANNER EITHER AS A DEDUCTION ON A CCOUNT OF DEPRECIATION OR AS REVENUE EXPENDITURE. WHEN THE A SSESSEE NO MORE REMAINS THE OWNER OF THE EQUIPMENT, HOW CAN I T CLAIM DEPRECIATION ON THE SAME, WHICH IS SINE QUA NON FOR CLAIM OF DEPRECIATION. THE ENTIRE COST INCURRED BY THE ASSE SSEE ON THE EQUIPMENT IS REQUIRED TO BE SQUARED OFF AT THE TIME OF SALE OF EQUIPMENT. HENCE, UNDER THE CIRCUMSTANCES, THE ASSE SSEE 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 POSTPONE D BEYOND THE ACTUAL LIFE / OWNERSHIP OF THE EQUIPMENT AND THE AS SESSEE 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 TH E 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 HAND S OF THE ASSESSSEE IS A CAPITAL ASSET, THEN WE CANNOT UNDERS TAND, HOW CAN THE DEPARTMENT PRESS AN ARGUMENT FOR THE GRANT OF D EPRECIATION AT A LOWER RATE WHICH MAY BE EXTENDED BEYOND THE LI FE OF THE ASSET. UNDER THESE CIRCUMSTANCES ALSO, THE ASSESSE E, IN OUR VIEW, IS ENTITLED TO THE HIGHER RATE OF DEPRECIATIO N WHICH IS COMMENSURATE WITH THE LIFE OF THE ASSET. 86 IN VIEW OF OUR FINDINGS GIVEN ABOVE, IT IS HELD THA T THE ASSESSEE IS ENTITLED TO DEPRECATION @ 60% AS APPLICABLE TO THE COMPUTERS FOR THE YEAR UNDER CONSIDERATION. THIS GROUND IS ACCORD INGLY STANDS ALLOWED. 44. GROUND NO. 6: . VIDE GROUND NO.6 THE ASSESSEE HAS CONTESTED THE CONFIRMATION OF DISALLOWANCE OF THE D EDUCTION CLAIMED U/S 35D OF THE ACT OF 1/5 TH OF THE PRELIMINARY EXPENSES AMOUNTING TO RS.2.40 CRORES. 45. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD ACQUIRED 100% SHARES IN A COMPANY CABLE NETWORK LIMITED (C BSL) FROM ITS PARENT COMPANY WHICH HAD OWNED 100% SHARES IN IT NAMELY DIGI WESTERN NETWORK PVT. LTD. (DWNPL) IN FI NANCIAL YEAR 2010-11 FOR RS.1 CRORES. ON 1.8.2010 IT HAD EN TERED INTO AN IRU AGREEMENT WITH CBSL AND AS PER THE SAID AGRE EMENT IT WAS GIVEN FIBRE LINKS ON LEASE ON A ROUTE OF 2000 K MS FOR A PERIOD OF FIVE YEARS COMMENCING FROM 1.4.2010. A PAYMENT OF RS.12 CRORES WAS MADE FOR THE SAME. THIS PAYMENT WA S TREATED AS PRELIMINARY EXPENSES BY THE ASSESSEE AND 1/5 TH OF THE SAME WAS CLAIMED AS DEDUCTION U/S 35D OF THE ACT. THE A. O. DENIED THE SAME TO THE ASSESSEE FOR THE FOLLOWING REASONS: 1) CBSL HAD ACQUIRED THE USER RIGHTS OF THESE FIBRE LINKS FROM A COMPANY HFCL INFOTEL LTD.(HITL) AND AS 87 PER THE TERMS OF AGREEMENT ENTERED INTO BY CBSL WITH HITL ONLY USER RIGHTS OF THE FIBRE LINKS COULD BE GIVEN BY CBSL TO ANY OTHER CONCERN. AS PER THE A.O. THE LEASING OUT AGREEMENT WAS, THEREFORE, VOID AB INITIO AND HENCE ANY TRANSACTION ENTERED INTO IN PURSUANCE TO THE SAME WAS NOT A BUSINESS TRANSACTION AND THE ASSESSEE, THEREFORE, COULD NOT BE CLAIM ANY BENEFIT OUT OF THIS TRANSACTION. 2) THAT THIS WAS NOT EVEN NORMAL LEASE AGREEMENT SINCE NO SERVICE TAX HAD BEEN PAID BY THE ASSESSEE WHICH IT WAS BOUND TO PAY IF IT WAS A LEASE AGREEMENT. 3) THAT IT WAS ONLY A PAY OUT TO CBSL AS PART OF CONSIDERATION OF TAKEOVER IN THE GUISE OF IRU AGREEMENT. 4) THAT EVEN OTHERWISE THE PAYMENT WAS NOT FOR EXPANSION OF THE BUSINESS OF THE ASSESSEE BUT WAS ONLY FOR CARRYING OUT THE CURRENT BUSINESS SINCE IT COULD BE USED ONLY OWN EXISTING CABLE TV LICENCE. 5) IN THE BOOKS OF CBSL THE SAID TRANSACTION HAD BEEN SHOWN AS A LOAN AND, THEREFORE, THE CLAIM OF T HE ASSESSEE WAS OF PRELIMINARY EXPENSES, WAS ONLY AN AFTERTHOUGHT. 6) LASTLY, THAT EVEN OTHERWISE IT DID NOT QUALIFY A S A PRELIMINARY EXPENSE AS PROVIDED FOR IN SECTION 35 D OF THE ACT. 46. THE CIT(A) CONFIRMED THE DISALLOWANCE SO MADE B Y THE A.O. 88 47. BEFORE US, THE LD. COUNSEL FOR ASSESSEE CONTEND ED THAT MAY BE THE EXPENSES INCURRED FOR ACQUIRING LEASE RI GHTS OF FIBRE LINKS DID NOT FALL WITHIN THE DEFINITION AND SCOPE OF PRELIMINARY EXPENSES UNDER THE PROVISIONS OF SECTIO N 35D, HOWEVER THE SAME WERE ALLOWABLE EITHER AS BUSINESS EXPENSES OR AS DEPRECIATION ON THE LEASED ASSET ACQUIRED BY VIRTUE OF THIS IRU AGREEMENT. THIS CONTENTION HAS BEEN RAISED BEFORE US FOR THE FIRST TIME. EVEN THE CIT(A) HAS NOT GONE IN TO THIS ASPECT HAVING DENIED THE CLAIM OF DEDUCTION U/S 35D OF THE ACT ONLY. WE, THEREFORE, RESTORE THIS ISSUE TO THE CIT(A) TO EXAMINE ALL THE FACTS OF THE CASE ON THIS ISSUE AND THEREAFTER DECIDE THE CLAIM IN ACCORDANCE WITH LAW. 48. GROUND NO. 7. THE LD. COUNSEL FOR THE ASSESSEE HAS STATED AT BAR THAT GROUND NO. 7 IS NOT PRESSED, HEN CE, THE SAME IS DISMISSED AS NOT PRESSED. 49. GROUND NOS.8: VIDE GROUND NO. 8, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF INTEREST EXPENDITURE U/S 36(1)(III) OF THE ACT. 50. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURI NG THE COURSE OF SURVEY AT THE BUSINESS PREMISES OF THE ASSESSEE, A DOCUMENT MENTIONING TRANSACTIONS BETWEEN M/S G.S. MAJESTIC A ND 89 MUNICIPAL CORPORATION LUDHIANA WAS SEIZED. ON BEING CONFRONTED WITH THE SAME DURING ASSESSMENT PROCEEDI NGS, IT WAS SUBMITTED BY THE ASSESSEE, THAT IT WAS WORKING IN THE RENTAL OFFICE OWNED BY M/S G.S MAJESTIC DEVELOPERS PVT. LTD. AND AN AMOUNT OF RS.3.20 CRORES WAS GIVEN AS AN ADV ANCE TO THE COMPANY FOR BOOKING OF CORPORATE OFFICE. THE A. O. DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AS RS.2 CRORE S WAS RECEIVED BACK BY THE ASSESSEE COMPANY AS PER LEDGER ACCOUNT OUT OF THE ADVANCE STATED TO BE GIVEN FOR BOOKING O F CORPORATE OFFICE. AS THE ASSESSEE FAILED TO PROVE THE BUSINES S EXIGENCY OF THIS PAYMENT MADE, DISALLOWANCE OF INTEREST @ 14% A MOUNTING RS.28,68,096/- WAS MADE U/S 36(L)(III) OF THE ACT. 51. THE CIT(A) CONFIRMED THE DISALLOWANCE SO MADE B Y THE ASSESSING OFFICER. 52. BEFORE US, THE LD. COUNSEL FOR ASSESSEE HAS CON TENDED THAT IT WAS POSSESSED OF SUFFICIENT OWN FUNDS FOR T HE PURPOSE OF MAKING THE IMPUGNED ADVANCE AND, THEREFORE, NO DISALLOWANCE U/S 36(1)(III) OF THE ACT WAS WARRANTE D. IT WAS POINTED OUT THAT THE ASSESSEE COMPANY HAD RESERVES AND SURPLUS OF RS.107.36 CRORES AND SHARE CAPITAL OF RS .105 CRORES, WHILE ADVANCE GIVEN TO M/S G.S. MAJESTIC WA S RS.3.20 CRORES ONLY OUT OF WHICH A SUM OF RS.2 CRORES HAD B EEN 90 RECEIVED BACK. THE LD. COUNSEL FOR ASSESSEE HAS CON TENDED THAT IN THE LIGHT OF THE ABOVE FACTS, NO DISALLOWAN CE U/S 36(1)(III) OF THE ACT WAS WARRANTED. HE IN THIS RES PECT HAS RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF M/S BRIGHT ENTERPRISES PVT. LTD., RE PORTED IN 381 ITR 160. 53. THE LD. DR, ON THE OTHER HAND, HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 54. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND ME RIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. THE LD. COUNSEL HAS DEMONSTRATED THAT THERE WERE SUFFICIENT OWN FUN DS AVAILABLE WITH THE ASSESSEE COMPANY IN THE FORM OF SHARE CAPITAL AND RESERVES TO THE TUNE OF RS.105 CRORES A ND RS.107 CRORES RESPECTIVELY TO MEET THE ADVANCE GIVEN OF RS .3.20 CRORES. THE ISSUE IS NOW SQUARELY COVERED BY THE VA RIOUS DECISIONS OF THE HIGH COURTS AS WELL AS OF THE APEX COURT OF THE COUNTRY INCLUDING THAT OF THE HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD VS. CIT, JALANDHAR (SUPRA), CIT VS. KAPSONS ASSOCIATES (2 016) 381 ITR 204 (P&H) AND THE LATEST DECISION OF THE COORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JANAK GLOB AL RESOURCES PVT LTD ITA NO. 470/CHD/2018 ORDER DATED 91 16.10.2018, HOLDING THAT THAT IF THE ASSESSEE IS P OSSESSED OF SUFFICIENT OWN INTEREST FREE FUNDS TO MEET THE INVE STMENTS / INTEREST FREE ADVANCES, THEN, UNDER THE CIRCUMSTAN CES, PRESUMPTION WILL BE THAT INTEREST FREE ADVANCES / I NVESTMENTS HAVE BEEN MADE BY THE ASSESSEE OUT OF OWN FUNDS / I NTEREST FREE FUNDS. RELIANCE IN THIS RESPECT CAN ALSO BE PL ACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F HERO CYCLES (P) LTD VS. CIT 379 ITR 347 (SC) AND ALSO ON THE LATEST DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES LTD. [2019] 41 0 ITR 466 (SC). THUS, AS PER THE SETTLED LAW NO DISALLOWANCE U/S 36(1)(III) OF THE ACT IS WARRANTED ON THIS ISSUE. THIS GROUND IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. 55. GROUND NO. 9:- GROUND NO. 9 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. THIS APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ITA NO. 139/CHD/2019 (A.Y. 2012-13) 56. THE ASSESSEE IN ITA NO.139/CHD/2019 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE ORDER DATED 29.12.2018 PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE 'ACT') BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-3, GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT 92 JUSTIFIED TO UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN RESTRICTING THE CLAIM OF DEPRECIATION ON SET TOP BOXES AT THE RATE OF 15% AS AGAINST THE CLAIMED BY THE APPELLANT AT THE RATE OF 60% THEREBY RESTRICTING THE CLAIM OF DEPRECIATION BY RS. 18,49,30,878/-. 2. THAT THE ORDER DATED 29.12.2018 PASSED U/S 250(6) OF THE ACT BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -3, GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS FURTHER NOT JUSTIFIED TO DISALLOW/RESTRICT DEPRECIATION AMOUNTING TO RS. 91,28,670/- IN RESPECT OF CERTAIN ASSETS WHICH WERE ALLEGEDLY NOT PUT TO USE DURING THE RELEVANT PERIOD OR WERE ALLEGEDLY PUT TO USE AFTER SEPTEMBER, 2011. 3. THAT THE ORDER DATED 29.12.2018 PASSED U/S 250(6) OF THE ACT BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -3, GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO DECIDE THE APPEAL ON THE BASIS OF PRINCIPLES OF NATURAL JUSTICE. 4. THAT THE ORDER DATED 29.12.2018 PASSED U/S 250(6) OF THE ACT BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) -3, GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE HAS GRAVELY ERRED IN ADJUDICATING THE GROUNDS OF APPEAL RELATING TO THE APPEAL. 5. THAT THE APPELLANT COMPANY RESERVES ITS RIGHTS TO RAISE ANY ADDITIONAL GADS OF APPEAL. 57. GROUND NO.1 : A PERUSAL OF ABOVE REPRODUCED GROUND NO.1 REVEALS THAT THE ISSUE TAKEN IN THIS GROUND IS IDENTICAL TO THAT HAS BEEN ADJUDICATED VIDE GROUND NOS.2 TO 5 OF ITA NO.547/CHD/2017 AS ABOVE. THE ONLY DIFFERENTIATING FACT 93 POINTED OUT BY BOTH THE LEARNED REPRESENTATIVES OF THE PARTIES IS THAT IN THIS CASE THE CLAIM OF DEDUCTION OF DEPR ECIATION @ 60% AS AGAINST 15% ALLOWED BY THE A.O. WAS TAKEN BY THE ASSESSEE DURING THE REASSESSMENT PROCEEDINGS CARRIE D OUT U/S 147 OF THE ACT CARRIED OUT BY THE ASSESSING OFFICER . THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD CLA IMED DEPRECIATION ON STBS @ 35% I.E. @15% AND ALSO FURTH ER ADDITIONAL DEPRECIATION @ 20%. THE ASSESSING OFFICE R AFTER RECORDING REASONS SHOW CAUSED THE ASSESSEE AS TO WH Y THE DEPRECIATION ON STBS BE NOT RESTRICTED TO 15% AS TH E ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF MANUFACTURING OR PRODUCTION. THE ASSESSEE HOWEVER IN THE RETURN OF I NCOME FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT CLAIMED DE PRECIATION @ 60% AS ALLOWABLE ON COMPUTERS. THE ASSESSING OFFICE R DID NOT ALLOW THE ABOVE CLAIM PUT BY THE ASSESSEE INTER ALI A ON THE GROUND THAT THE ABOVE CLAIM OF HIGHER DEPRECIATION CANNOT BE ALLOWED TO BE TAKEN FOR THE FIRST TIME IN THE REASS ESSMENT PROCEEDINGS. 58. THE LD. CIT(A) ALSO UPHELD THE ABOVE FINDINGS O F THE A.O. 59. BOTH THE LOWER AUTHORITIES I.E. THE LD. ASSESSI NG OFFICER AS WELL AS THE LD. CIT(A) HAVE IN THIS RESPECT RELI ED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. SUN ENGINEERING WORKS PVT. LTD. (1992) 198 ITR 297 (SC) TO 94 HOLD THAT THE PROCEEDINGS U/S 147 OF THE ACT ARE FO R THE BENEFIT OF THE REVENUE AND NOT FOR THE BENEFIT OF T HE ASSESSEE. THE LD. CIT(A) IN THIS RESPECT HAS OBSERVED THAT ME RE FACT OF THE ISSUE U/S 148 OF THE ACT CALLING FOR FILING OF RETURN OF INCOME AND DEEMING SUCH RETURN AS A RETURN FILED U/ S 139 OF THE ACT DID NOT ENTITLE THE ASSESSEE FOR AN EXTENDE D PERIOD OF LIMITATION U/S 139(5) OF THE ACT. HE OBSERVED THAT THE BENEFIT OF SECTION 139(5) IS NOT AVAILABLE TO AN ASSESSEE IN RELATION TO A RETURN FILED PURSUANT TO NOTICE U/S 148 OF THE AC T. 60. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND ALSO GONE THROUGH THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD.(S UPRA) AND FIND THAT THAT THE HONBLE SUPREME COURT IN THE SAI D CASE HAS HELD THAT THE PROCEEDINGS UNDER SECTION 147 ARE FOR BENEFIT OF REVENUE AND ARE AIMED AT GATHERING 'ESCAPED INCOME' OF AN ASSESSEE, AND THAT THE SAME CANNOT BE ALLOWED TO BE CONVERTED AS 'REVISIONAL' OR 'REVIEW' OF ASSESSMENT PROCEEDIN GS. THAT IN A REASSESSMENT PROCEEDING UNDER SECTION 147, ASSESSEE CANNOT SEEK A REVIEW OF CONCLUDED ITEM, UNCONNECTED WITH E SCAPEMENT OF INCOME FOR PURPOSE OF COMPUTATION OF ESCAPED INCOME . HOWEVER, WE NOTE THAT IN THIS CASE, THE CLAIM OF THE ASSESSE E IS DIRECTLY RELATED AND CONNECTED WITH THE ISSUE ON WHICH THE A .O. HAS REOPENED THE ASSESSMENT. THE CASE OF THE A.O. HAS B EEN THAT THE 95 ASSESSEE HAS CLAIMED DEPRECIATION AT A HIGHER RATE I.E. @ 35% AS AGAINST ITS ENTITLEMENT OF 15% WHEREAS THE ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT HAS CLAIMED THE DEPRECIATION @ 60%. THE VERY ISSUE OF RATE OF DEPR ECIATION WAS THE SUBJECT MATTER OF THE PROCEEDINGS AND UNDER THE CIRCUMSTANCES, IN OUR VIEW, THE ASSESSEE HAD GOT RI GHT TO PUT HIS STANCE OF APPLICATION OF HIGHER RATE ON THE SAID IS SUE AS AGAINST OF LOWER RATE PROPOSED BY THE AO. HOWEVER, WE ARE O F THE FURTHER VIEW THAT EVEN THE ABOVE PROPOSITION LAID DOWN BY T HE HONBLE SUPREME COURT OTHERWISE WILL NOT BE APPLICABLE AS S UCH IN THIS CASE BECAUSE OF THE DIRECT STATUTORY PROVISIONS ON THE ISSUE INVOLVED OF ALLOWABILITY OF DEPRECIATION. EXPLANATI ON 5 TO SECTION 32(1) INSERTED BY THE FINANCE ACT, 2001, W.E.F. 1-4-2002 READS AS UNDER: EXPLANATION 5.FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SH ALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTI ON IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCO ME; AS PER SECTION 32 (1) OF THE INCOME TAX ACT, 1961 ( AS REPRODUCED IN THE EARLIER PARA OF THIS ORDER) AN ASSESSEE IS E NTITLED TO CLAIM OF DEDUCTION ON ACCOUNT OF DEPRECIATION ON TANGIBLE AS WELL AS INTANGIBLE ASSETS OWNED OR PARTLY OWNED BY THE ASSE SSEE AND USED FOR BUSINESS PURPOSES AT THE RATE AS MAY BE PR ESCRIBED. HENCE, IN VIEW OF EXPLANATION 5 TO SECTION 32(1), T HE ASSESSING OFFICER IS DUTY BOUND TO ALLOW DEPRECIATION AT THE PRESCRIBED 96 RATES AS ADMISSIBLE TO AN ASSESSEE ON THE ASSETS IR RESPECTIVE OF THE FACT THAT THE ASSESSEE HAS CLAIMED IT OR NOT I N THE RETURN OF INCOME OR OTHERWISE. THE ASSESSING OFFICER, THUS, I S MANDATORILY REQUIRED TO ALLOW THE DEPRECIATION AS PER PRESCRIBE D RATES AND AS LEGALLY ADMISSIBLE TO THE ASSESSEE ESPECIALLY WHEN THE VERY ISSUE OF RATE OF DEPRECIATION IS THE SUBJECT MATTER OF TH E PROCEEDINGS IRRESPECTIVE OF THE FACT THAT WHETHER THE ASSESSEE HAS MADE A CLAIM IN THAT RESPECT OR NOT. HENCE THE PLEA THAT T HE ASSESSEE CAN NOT MAKE A CLAIM OF HIGHER ADMISSIBLE RATE OF DEPRE CIATION IS NOT AVAILABLE TO THE REVENUE IN VIEW OF THE EXPRESS STA TUTORY PROVISIONS OF EXPLANATION 5 TO SECTION 32(1) OF THE ACT. THE ASSESSING OFFICER IS DUTY BOUND TO APPLY AND ALLOW CORRECT RATE OF DEPRECIATION IRRESPECTIVE OF THE FACT THAT AFTER AL LOWING SUCH DEPRECIATION, THE ASSESSED INCOME OF THE ASSESSEE M AY GET REDUCED FROM THE RETURNED INCOME. EXPLANATION 5 TO SECTION 32(1) HAS BEEN HELD TO BE MANDATORY AND PROSPECTIVELY APP LICABLE W.E.F. 01.04.2002 THROUGH VARIOUS JUDICIAL PRONOUNC EMENTS. RELIANCE IN THIS RESPECT CAN BE PLACED ON THE DECIS IONS OF KERALA HIGH COURT IN THE CASE OF CIT V. KERALA ELECTRIC L AMP WORKS LTD. [2003] 261 ITR 721; MADRAS HIGH COURT IN THE CASE OF CIT V. SREE SENHAVALLI TEXTILES (P.) LTD.[2003] 259 IT R 77; PUNJAB AND HARYANA HIGH COURT IN THE CASE OF RAM NATH JIN DAL AND JAGJIWAN RAM V. CIT [2001] 252 ITR 590; KOLKATA BE NCH OF ITAT IN BHAGWATI SPONGE (P.) LTD. V. DCIT [ 2016] 72 TAXMANN.COM 40 ; DILIP KUMAR ROY V. DCIT [2011] 11 TAXMANN. COM 107 97 (KOLKATA); SURAT TEXTILE MILLS LTD. V. INCOME-TAX OFFICER [20 14] 46 TAXMANN.COM 419 (GUJARAT); SAKUN POLYMERS LTD. V. JOINT COMMISSIONER OF INCOME-TAX [2015] 57 TAXMANN.COM 65 (GUJARAT) AND IN THE CASE OF DR. MRS. SUDHA S. TRIVEDI VS ITO 318 ITR 356 (MUMBAI- TRIBUNAL). 61. IN THE CASE OF BHAGWATI SPONGE (P.) LTD. (SUPRA), THE CO- ORDINATE KOLKATA BENCH OF THE TRIBUNAL HAS OBSERVED , WITH REGARD TO THE CLAIMS MADE IN THE REVISED RETURN, WE FIND THAT THE LEARNED CITA HAD NOT CONSIDERED THE SAME IN VIEW OF THE FACT THAT THE REVISED RETURN WAS FILED BY THE ASSESSEE BEYOND THE PRESCRIBED PERIOD U/S 139(5) OF THE ACT. THE LEARNED CITA HAD APPLIED THE DECISION OF GOETZE INDIA LTD. SUPRA AND ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE. BUT WE FIND FROM THE LAST PARAGRAPH OF THE DECISION OF GOETZE INDIA LTD,SUPRA, WHEREIN THE HON'BLE APEX COURT OBSERVED THAT REVISED RETURN THOUGH FILED BELATEDLY COULD BE CONSIDERED BY THE APPELLATE AUTHORITY AND HENCE WE HOLD THAT THE ASSESSEE IS ENTITLED TO MAKE ITS CLAI M BY WAY OF REVISED RETURN. IT HAS BEEN FURTHER OBSERVED, WHEN THERE IS A MANDATE TO GRANT DEPRECIATION TO THE ASSESSEE WHETHER OR NOT SUCH CLAIM IS MADE BY THE ASSESSEE IN THE RETURN IN TERMS OF EXPLANATION 5, IT WOULD BE JUST AND FAIR THAT THE SAME MANDATE WOULD GET AUTOMATICALLY EXTENDED TO THE CLAIM OF ADDITIONAL DEPRECIATION ALSO. 62. THE ITAT CHENNAI BENCH IN THE CASE OF ITO V. S RI BALAJI SAGO & STARCH PRODUCTS [2012] 19 TAXMANN.COM 313/53 SOT 98 15 W HERE IN THE ASSESSEE WAS ENGAGED IN POWER GENERATIO N AND CLAIMED DEPRECIATION ON A NEWLY INSTALLED WINDMILL ON THE BASIS OF WDV METHOD AT THE RATE OF 15% AND SUBSEQUENTLY, WHEN ASSESSEE REALISED ITS MISTAKE NOTING THAT THE CORRE CT RATE OF DEPRECIATION TO WHICH IT WAS ENTITLED TO WAS @ 80%, HENCE, IT FILED A LETTER BEFORE ASSESSING OFFICER TO RECTIFY CLAIM AND TO PROVIDE DEPRECIATION AT THE RATE OF 80%.THE ASSESSING OFFIC ER REJECTED THIS CLAIM PURPORTEDLY FOLLOWING THE DECISION OF TH E SUPREME COURT IN GOETZE (INDIA) LTD.'S CASE ( 2006] 157 TAXMAN 1 (SC)/[2006] 284 ITR 323 (SC)/[2006] 204 CTR 182 (SC ) BY STATING THAT A FRESH CLAIM CANNOT BE MADE BY ASSESSEE OTHER THAN BY FILING A REVISED RETURN. THE CLAIM OF THE ASSESSEE WAS ALLOWED AT THE FIRST APPEAL STAGE AND ON APPEAL BY THE REVENUE THE TRIBUNAL HELD THAT THE ASSESSEE WAS NOT MAKING A FRESH CLAIM BEFORE ASSESSING AUTHORITY; IN FACT, ASSESSEE HAD MADE A C LAIM FOR DEPRECIATION BUT RATE CHOSEN WAS NOT A CORRECT ONE; THUS, JUDGMENT OF SUPREME COURT IN GOETZE (INDIA) LTD.'S CASE ( SUPRA ) WOULD NOT APPLY IN THAT CASE; IT WAS FURTHER HELD T HAT AS PER EXPLANATION 5 TO SECTION 32(1), DEPRECIATION WOULD BE ALLOWED WHETHER OR NOT ASSESSEE HAS CLAIMED DEPRECIATION IN COMPUTING TOTAL INCOME; THEREFORE, ASSESSING OFFICER WAS DUTY BOUND TO ALLOW DEPRECIATION COMPUTED AT CORRECT RATE PROVIDED UNDE R ACT. THE TRIBUNAL IN THIS RESPECT WHILE RELYING UPON THE DEC ISIONS OF THE HON'BLE PUNJAB & HARYANA HIGH COURT RENDERED IN THE CASE OF CIT V. RAMCO INTERNATIONAL [2011] 332 ITR 306/[2009] 180 99 TAXMAN 584 (PUNJ. & HAR.); OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CHOKSHI METAL REFINERY V. CIT [1977] 107 ITR 63 (GUJ.) AND OF CHENNAI BENCH IN THE CASE OF K.K.S.K. LEATHER PROCESSORS (P) LTD. V ITO [ 2010] 126 ITD 215 HAS HELD AS UNDER: 18. REGARDING THE QUESTION, WHETHER A CLAIM MADE BY TH E ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS BY WAY OF OTHER THAN FILING A REVISED RETURN, WE HAVE TO STATE THAT EXAC TLY SIMILAR ISSUE WAS CONSIDERED BY THE PUNJAB & HARYANA HIGH COURT IN TH E CASE OF RAMCO INTERNATIONAL ( SUPRA ). IN THAT CASE, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SEC.80IB. THOUGH THE ASSESSEE HAD FURNISHED F ORM 10CCB AND OTHER REQUISITE DOCUMENTS, THE ASSESSING OFFICER MA DE THE ASSESSMENT WITHOUT REFERRING TO THOSE DOCUMENTS. IN FIRST APPE AL, THE COMMISSIONER OF INCOME-TAX(APPEALS) ALLOWED THE CLAIM OF THE ASS ESSEE WHICH WAS THE SECOND APPEAL BEFORE THE TRIBUNAL. WHEN THE MATTER WAS AGAIN TAKEN BEFORE THE HON'BLE HIGH COURT, THEIR LORD-SHIPS HEL D THAT AS PER FORM 10CCB FILED BY THE ASSESSEE IN THE ASSESSMENT PROCE EDINGS, THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE WAS ADMISSIBLE. T HE COURT HELD THAT THE ASSESSEE WAS NOT MAKING ANY FRESH CLAIM AND HAD DULY FURNISHED AND SUBMITTED THE FORM FOR CLAIMING DEDUCTION UNDER SEC.80IB AND IN SUCH CIRCUMSTANCES, THERE WAS NO REQUIREMENT OF FIL ING ANY REVISED RETURN. IN THE PRESENT CASE ALSO, THE ASSESSEE HAS MADE A C LAIM FOR DEPRECIATION ON WDV METHOD BUT THE RATE CHOSEN WAS NOT A CORRECT ONE. THE ASSESSEE ASKED FOR ADOPTING THE CORRECT RA TE WHICH IS IN FACT, WAS ONLY A PRAYER TO RECTIFY A MISTAKE APPARE NT ON RECORD. THE ASSESSEE WAS NOT CLAIMING ANY FRESH CLAIM BEFORE TH E ASSESSING AUTHORITY. THEREFORE, THE JUDGMENT OF THE HON'BLE S UPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. ( SUPRA ) DOES NOT APPLY TO THE PRESENT CASE. 19. THE ABOVE POSITION IS FORTIFIED BY THE ORDER OF TH E ITAT, CHENNAI BENCH 'D' RENDERED IN THE CASE OF K.K.S.K. LEATHER PROCESSORS (P.) LTD. ( SUPRA ). THE TRIBUNAL, AFTER EXAMINING THE EXPLANATION 5 TO SUB- SEC. (1) OF SEC.32, HELD THAT THE PROVISIONS OF SUB -SEC.(1) OF SEC.32 WAS APPLIED WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN 100 RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCO ME. THE TRIBUNAL HELD THAT THE ASSESSING OFFICER IS DUTY BOUND AND UNDER OBLIGATIO N TO ALLOW THE DEDUCTION OF DEPRECIATION AS PER THE P ROVISIONS OF SEC.32(1). WHEN SUCH A STATUTORY OBLIGATION IS CAST ON THE ASS ESSING AUTHORITY, IT IS INCUMBENT ON HIM TO APPLY THE CORR ECT RATE OF DEPRECIATION, ESPECIALLY IN THE PRESENT CASE WHERE THE OPTION EXERCISED BY THE ASSESSEE IS MANIFESTLY CLEAR. 20. IN THE PRESENT CASE, THE ASSESSEE HAS NOT MADE ANY FRESH CLAIM, AS FAR AS DEPRECIATION IS CONCERNED. IT HAS ALREADY MA DE A CLAIM FOR STATUTORY ALLOWANCE OF DEPRECIATION, SUBJECT TO THE MISTAKE OCCURRED IN CHOOSING THE CORRECT RATE. THE RATIO OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. ( SUPRA ) NEEDS TO BE CAREFULLY APPLIED IN THE MATTERS OF STATUTORY AL LOWANCES AVAILABLE TO AN ASSESSEE. THERE IS A GENETIC DIFFER ENCE IN THE CONCEPT OF DEDUCTION BY WAY OF STATUTORY ALLOWANCE AND DEDUCTION BY WAY OF OTHER EXPENDITURE. (EMPHASIS SUPPLIED BY US) 63. SIMILARLY THE CO-ORDINATE PUNE BENCH OF THE TR IBUNAL IN THE CASE OF INCOME-TAX OFFICER V. GAJRAJ CONSTRUCTIONS [2015] 62 TAXMANN.COM 18 HAS OBSERVED AS UNDER: SO, HOWEVER, EVEN IF ONE WERE TO IMPORT THE REASO NING RAISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BASED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT, TO THE PRESE NT CASE, YET WE DO NOT FIND THAT IT WOULD DEBAR THE ASSESSEE FRO M CLAIMING DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT ON THE IMPUGNED ADDITIONAL INCOME DECLARED IN THE RETURN FILED IN R ESPONSE TO NOTICE UNDER SECTION 153A(1)(A) OF THE ACT. IN THE PRESENT CASE, THE CLAIM OF DEDUCTION UNDER SECTION 80-IB(10) OF T HE ACT WAS MADE IN THE RETURN OF INCOME ORIGINALLY FILED AND I N THE RETURN FILED IN PURSUANCE TO THE NOTICE UNDER SECTION 153A (1)(A) OF THE ACT, THE CLAIM UNDER SECTION 80-IB(10) OF THE ACT I S ONLY ENHANCED AND THEREFORE, IT IS NOT A FRESH CLAIM. TH EREFORE, IN OUR 101 VIEW, THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD. DOES NOT HELP THE R EVENUE IN THE PRESENT CASE. 64. FURTHER IN THE CASE OF GOETZE INDIA LTD VS CIT (SUPRA) THE ISSUE THAT WAS SETTLED BY THE HONBLE SUPREME COURT WAS LIMITED TO THE BAR ON THE POWER OF THE ASSESSING OFFICER TO ENTERTAIN A CLAIM FOR DEDUCTION OTHERWISE THAN BY FILING A REVI SED RETURN , HOWEVER, THE HONBLE SUPREME COURT MADE IT CLEAR TH AT IT DOES NOT IMPINGE ON THE POWER OF THE INCOME-TAX APPELLAT E TRIBUNAL UNDER SECTION 254 OF THE INCOME-TAX ACT, 1961 AS HE LD BY THE APEX COURT IN THE CASE OF NTPC LTD. (SUPRA). APPL YING THE SAME RATIO, THE BAR, IF ANY, TO ENTERTAIN A COUNTER CLAI M BY THE ASSESSEE AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CA SE OF SUN ENGINEERING (SUPRA) IS ON THE POWERS OF THE ASSESS ING OFFICER, HOWEVER, IN OUR HUMBLE VIEW, THAT DOES NOT IMPINGE OR CURTAIL THE POWERS OF THE TRIBUNAL AND HIGHER AUTHORITIES TO EN TERTAIN AN ADDITIONAL/ FRESH CLAIM BASED ON THE FACTS ON THE F ILE IN THE LIGHT OF PROPOSITION LAID DOWN BY THE HONBLE SUPREME COU RT IN THE CASE OF NTPC LTD. (SUPRA) AND OTHER CASE LAWS ( SUPRA) AS DISCUSSED IN EARLIER PARAS (PARA NO. 31 & 32 ABOVE) OF THIS ORDER. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE A SSESSING OFFICER AS WELL AS THE LD. CIT(A) WERE LEGALLY DUTY BOUND TO CONSIDER AND ENTERTAIN THE ISSUE RAISED BY THE ASSE SSEE OF ADMISSIBILITY OF STATUTORY DEDUCTION OF DEPRECIATIO N AT A HIGHER 102 RATE AS PRESCRIBED AND ADJUDICATE UPON IT. EVEN THE RE IS NO BAR ON THE TRIBUNAL IN THIS RESPECT TO ENTERTAIN AND ADJU DICATE UPON THE ISSUE OF RATE OF DEPRECIATION DESPITE THE FACT THAT THE CLAIM RELATING TO ADMISSIBILITY OF HIGHER RATE OF DEPRECI ATION WAS MADE FOR THE FIRST TIME IN THE RETURN FILED IN RESPONSE TO SECTION 148 OF THE ACT. SO FAR THE ISSUE ON MERITS IS CONCERNED, IN VIEW OF OUR DETAILED DISCUSSION AS ABOVE ON THE ISSUE WHILE ADJUDICATING UPON THE ADDITIONAL GROUND TAKEN IN ASSESSEES APPEAL BEARIN G ITA NO.547/CHD/2017 AND IN VIEW OF OUR DECISION RENDERE D THEREIN AND THE FACTS BEING SIMILAR IN THIS APPEAL, THE ISS UE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE AND I T IS ACCORDINGLY HELD THAT THE ASSESSEE IS ENTITLED TO D EPRECIATION ON THE ASSETS IN QUESTION @ 60%. 65. GROUND NO.2: VIDE GROUND NO.2 OF THIS APPEAL, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN C ONFIRMING THE DISALLOWANCE MADE BY THE A.O. IN RESPECT OF DEPRECA TION CLAIMED ON THE STBS WHICH WERE NOT PUT TO USE DURIN G THE YEAR AND FURTHER IN RESTRICTING THE CLAIM OF DEPRECIATIO N AT THE LOWER RATE IN RESPECT OF THE STBS WHICH WERE NOT PUT TO U SE BEFORE SEPTEMBER, 2011 ON THE GROUND THAT THE SAME WERE US ED FOR A PERIOD LESS THAN 180 DAYS. THE RELEVANT FINDINGS OF THE CIT(A ON THE ISSUE ARE REPRODUCED AS UNDER: 103 THE AO HAS MADE THIS DISALLOWANCE ON FOLLOWING GROUNDS:- (I) WITH REGARD TO BILL OF ENTRY OF REMOTES FOR RS.59,36,553/- AND RS.10,89,452/- THE APPELLANT COULD NOT FILE ANY DOCUMENTARY EVIDENCE TO PROVE THAT THESE WERE PUT TO USE DURING THE YEAR ITSELF AND HENCE DEPRECIATION CLAIMED ON THE SAME WAS DISALLOWED. (II) WITH REGARD TO BILL OF ENTRY FOR PURCHASE OF STBS DATED 23.09.2011 AMOUNTING RS.1,68,56,293/-, THE APPELLANT COULD NOT FILE ANY DOCUMENTARY EVIDENCE TO PROVE THAT THESE ASSETS WERE PUT TO USE BEFORE SEPTEMBER 2011 AND THEREFORE DEPRECIATION WAS ALLOWED FOR A PERIOD LESS THAN 180 DAYS AND NOT FOR THE COMPLETE YEAR AS CLAIMED BY THE APPELLANT. DURING THE APPELLATE PROCEEDINGS, NO SUBMISSION OR ANY EVIDENCE TO REBUT THE FINDINGS OF THE AO HAV E BEEN FILED. THE ADDITION HAD BEEN DONE BY THE AO ON THE FACTS OF THE CASE AS PER PROVISIONS OF THE ACT. IN VIEW OF THE SAME, THIS GROUND OF APPEAL OF THE APPELLANT CANNOT BE ACCEPTED AND HENCE THE ADDITION MADE BY THE AO ON THIS ACCOUNT IS CONFIRMED. 66. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THOUGH THE ASSETS MAY NOT BE PUT TO USE AS ALLEGED ABOVE DURING THE RELEVANT PERIOD, HOWEVER, THE ASSETS WER E READY TO USE. AS PER OUR OBSERVATIONS AS NOTED ABOVE, IT HAS BEEN HELD THAT THE TRANSACTION OF ACQUIRING OF STBS BY THE AS SESSEE WAS A LOAN/FINANCIAL TRANSACTION MEANING THEREBY THE ST BS WERE PURCHASED BY THE ASSESSEE TO PUT TO USE IN ITS BUSI NESS. AS FURTHER OBSERVED AS ABOVE, THE STBS ARE FURTHER GIV EN TO THE CONSUMERS ON HIRE PURCHASE AGREEMENT WHICH ARE DEEM ED TO BE SOLD TO THE CONSUMERS AFTER THREE YEARS FROM THE DATE OF DELIVERY/INSTALLATION. UNDER THE CIRCUMSTANCES, IT CAN BE 104 SAFELY CONCLUDED THAT THE ASSESSEE HAD PUT THE STBS IN ITS BUSINESS FROM THE DATE IT ACQUIRED/PURCHASED THE SA ME. IN VIEW OF THIS, THE ASSESSEE IS ENTITLED TO DEPRECATI ON IRRESPECTIVE OF THE DATE OF INSTALLATION OF STBS IN THE PREMISES OF THE CONSUMERS. THIS ISSUE IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. 67. GROUND NOS.3 TO 5: THE ABOVE GROUNDS ARE GENERAL IN NATURE. IN VIEW OF OUR FINDINGS GIVEN ABOVE, THIS APPEAL OF THE ASSESSEE STANDS ALLOWED. 842/CHD/2018 (A.Y. 2014-15):- 68. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3,GURGAON HAS ERRED IN DECIDING THE CASE WITHOUT AFFORDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEARD. 2. THAT IT HAD BEEN CONTENDED BEFORE THE LD.CIT(A) THAT THE APPEAL FOR EARLIER YEAR OF THE SAME ASSESSEE INVOLVING SAME ISSUE I.E. FOR ASSTT. YEAR 2013-14 WAS BEING HEARD BEFORE THE HON'BLE BENCH OF ITAT, CHANDIGARH BENCH, CHANDIGARH AND, AS SUCH, IT WAS REQUESTED FOR KEEPING THE APPEAL IN ABEYANCE TILL THE DISPOSAL OF EARLIER YEAR'S APPEAL BY THE ITAT, CHANDIGARH BENCH, CHANDIGARH AND WHICH SHOULD HAVE BEEN CONSIDERED. 3. NOTWITHSTANDING, THE ABOVE SAID GROUND OF APPEAL, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE DEDUCTION ON ACCOUNT OF 105 PRINCIPAL COMPONENT OF LEASE RENTAL AMOUNTING TO RS.63,59,83,743/- AS CLAIMED BY THE ASSESSEE IN THE COMPUTATION OF INCOME AND ALLOWING THE DEPRECIATION U/S 32 OF THE ACT, WHICH WAS NEVER CLAIMED ON THE LEASEHOLD ASSETS BY THE APPELLANT. 4. THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE AGREEMENT WITH M/S CISCO LTD. WAS ON 'FINANCIAL LEASE' AND NOT ON 'OPERATIONAL LEASE' AND HAS WRONGLY INTERPRETED THE VARIOUS CLAUSES OF THE AGREEMENT OF LEASE WITH M/S CISCO LTD., TO HOLD THAT IT WAS CASE OF 'FINANCE LEASE' AND NOT AN 'OPERATIONAL LEASE' AS CLAIMED BY US DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5. THAT THE LD.CIT(A) HAS GROSSLY ERRED IN FOLLOWING THE JUDGMENT OF SPECIAL BENCH OF ITAT IN THE CASE OF 'INDUSLND BANK LTD' AND OF THE 'ASEA BROWN BOVERI LTD', WHICH HAS LATER ON BEEN DISTINGUISHED BY NUMBER OF JUDICIAL PRONOUNCEMENTS OF HON'BLE SUPREME COURT AND HON'BLE HIGH COURT AND VARIOUS BENCHES OF THE ITAT, WHEREIN, BOTH THE ABOVE JUDGMENTS AS RELIED UPON BY THE CIT(A) HAVE BEEN DISTINGUISHED AND NOT RELIED UPON. THUS, THE RELIANCE BY THE CIT(A) ON SUCH JUDGMENTS IS NOT PROPER. 6. THAT THE DISALLOWANCE OF LEASE RENTAL HAVE BEEN MADE AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THAT THE LD. CIT(A) HAS ERRED IN DISMISSING THE GROUND OF APPEAL WITH REGARD TO DISALLOWANCE OF INTEREST COMPONENT OF RS. 8,21,25,816/- U/S 40(A)(IA). 8. THAT THE SAID DISALLOWANCE IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,40,000/- ON ACCOUNT OF DISALLOWANCE U/S 35D OF THE ACT IGNORING THE FACT THAT IN THE EARLIER YEARS THE SAID DEDUCTION HAVE BEEN ALLOWED BY THE DEPARTMENT IN THE ORDER PASSED U/S 143(3) FOR THE ASSESSMENT EAR 2012-13. 106 10. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST AMOUNTING TO RS.80,28,714/- AND RS.20,06,322/- U/S 36(1)(III) OVERLOOKING THE FACT THAT THERE WAS HUGE SURPLUS IN THE SHAPE OF SHARE CAPITAL AND RESERVES AND SURPLUS AND AS PER BINDING JUDGMENT OF HONBLE SUPREME COURT AND HONBLE PUNJAB & HARYANA HIGH COURT, NO SUCH DISALLOWANCE IS CALLED FOR. 11. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A AMOUNTING TO RS.63,38,690/- SPECIALLY, WHEN THEE WAS NO EXEMPT INCOME AND, AS SUCH, THE DISALLOWANCE U/S 14A IS WHOLLY UNJUSTIFIED. 12. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 69. APART FROM THE ABOVE GROUNDS OF APPEAL, THE ASS ESSEE HAS TAKEN THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL : WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED IN NOT ALLOWING DEPRECIATION ON SET TOP BOXES AT THE ELIGIBLE RATE OF 60% 70. GROUND NOS.1 TO 6 : THE ISSUE TAKEN VIDE GROUND NOS.1 TO 6 AS TO THE ALLOWABILITY OF LEASE RENTAL AS REVENUE EXPENDITURE HAS ALREADY BEEN ADJUDICATED IN FAVOUR OF REVENUE A S PER OUR FINDINGS GIVEN ABOVE WHILE ADJUDICATING GROUND NOS. 3 TO 5 OF ASSESSEES APPEAL IN ITA NO.547/CHD/2017. OUR FINDI NGS GIVEN ABOVE ON THESE ISSUES WILL MUTATIS MUTANDIS APPLY T O THESE GROUNDS ALSO. 107 71. ADDITIONAL GROUND OF APPEAL: IT WAS COMMON GROUND THAT THE ABOVE GROUND IS SIMI LAR TO ADDITIONAL GROUND TAKEN IN THE APPEAL OF THE ASSESS EE IN ITA NO.547/CHD/2017 AND OUR DECISION RENDERED THEREIN W ILL APPLY MUTATIS MUTANDIS TO THIS ADDITIONAL GROUND ALSO. TH IS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 72. GROUND NOS.7 & 8: GROUND NOS.7 AND 8 RELATE TO DISALLOWANCE OF THE INTEREST COMPONENT OF RS.8,21,2 5,816/- UNDER SECTION 40(A)(IA) OF THE ACT FOR LESS DEDUCTI ON OF TDS. THE ASSESSING OFFICER OBSERVED THAT ON THE INTEREST COM PONENT PAID BY THE ASSESSEE TO THE CISCO ALONG WITH LEASE RENTA L, THE ASSESSEE HAD DEDUCTED TDS @ 1% INSTEAD OF 2% AS WAS REQUIRED UNDER THE PROVISIONS OF SECTION 194A R.W.S. 194-I OF THE ACT . HE THEREFORE MADE THE IMPUGNED DISALLOWANCE U/S 40(A) (IA). THE LD. CIT(A) HAS CONFIRMED THE ADDITIONS SO MADE BY THE AO. 73. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS MADE A SEPARATE ADDI TION OF RS.8,21,25,816/- ON THE INTEREST COMPONENT ON ACCOU NT OF NON- DEDUCTION OF TDS. IT IS SUBMITTED THAT IT HAS BEEN THE SUBMISSION OF THE ASSESSEE BEFORE THE AO THAT THIS INTEREST WA S PART OF LEASE CHARGES CLAIMED U/S 37 OF THE ACT AND THE ASSESSEE HAD DEDUCTED TDS @ 2% ON THE ENTIRE AMOUNT OF LEASE CHARGES AGGR EGATING TO 108 RS. 63,59,83,732/- (COMPRISING OF LEASE CHARGES AND INTEREST). THE ASSESSING OFFICER IN PARA 4.13(IV) AT PAGE 54 O F THE ASSESSMENT ORDER HAS OBSERVED THAT TDS HAS BEEN DED UCTED @ 1% ON PAYMENT MADE TO CISCO WHICH IS FACTUALLY INCO RRECT WHEREAS THE ASSESSEE HAS DEDUCTED TDS @ 2% AS WAS S TIPULATED UNDER THE RELEVANT PROVISIONS OF THE ACT. THIS ISSUE, THEREFORE, REQUIRES TO BE FACTUALLY VER IFIED AT THE END OF THE ASSESSING OFFICER. MOREOVER, THE ISSUE RELATING TO THE ALLEGED LEASE RENTAL PAID BY THE ASSESSEE AND CLAIMED AS REVENUE EXPENDI TURE HAS ALREADY BEEN ADJUDICATED BY US AS ABOVE VIDE GROUND NOS. 3 TO 5 OF ITA NO.547/CHD/2017 AND IT HAS BEEN HELD THAT TH E SAID LEASE RENTALS IN FACT WERE REPAYMENT OF THE LOAN AMOUNT. THE ASSESSEE, THEREFORE, WAS NOT REQUIRED TO DEDUCT THE TDS ON TH E PRINCIPAL COMPONENT OF THE LOAN AMOUNT. THE ASSESSEE, HOWEVER, HAS DEDUCTED TDS ON THE SAID COMPONENT ALSO, WHICH UNDE R THE CIRCUMSTANCES, IS TO BE CONSIDERED AS DEDUCTION OF TDS TOWARDS INTEREST COMPONENT. THE ISSUED IS ACCORDINGLY RESTO RED TO THE FILE OF THE ASSESSING OFFICER FOR DECISION A FRESH AS PE R OUR OBSERVATIONS MADE ABOVE. 74. GROUND NO.9: THE ABOVE GROUND IS RELATING TO THE DISALLOWANCE OF EXPENDITURE CLAIMED U/S 35D OF THE ACT, WHICH IS IDENTICAL TO GROUND NO.6 OF THE ASSESSEES APPEAL; ITA 109 NO.547/CHD/2017 AND OUR FINDINGS AND DIRECTIONS GI VEN THEREUPON WILL APPLY MUTATIS MUTANDIS TO THIS GROUN D ALSO. 75. GROUND NO. 10: THE ABOVE GROUND IS RELATING TO THE DISALLOWANCE OF EXPENDITURE CLAIMED U/S 36(1)(III) OF THE ACT, WHICH IS IDENTICAL TO GROUND NO.8 OF THE ASSESSEES APPEAL; ITA NO.547/CHD/2017 AND THE FACTS BEING IDENTICAL AND THE ASSESSEE BEING POSSESSED OF SUFFICIENT FUNDS TO MEET THE AD VANCE GIVEN, HENCE, OUR FINDINGS AND DIRECTIONS GIVEN ABOVE ON G ROUND NO.8 IN ITA NO.547/CHD/2017 WILL APPLY MUTATIS MUTANDIS TO THIS GROUND ALSO. 76. GROUND NO.11: VIDE GROUND NO.11 THE ASSESSEE HAS AGITATED THE CONFIRMATION OF DISALLOWANCE MADE BY T HE AO U/S 14A OF THE ACT IN RESPECT OF THE EXPENDITURE INCURR ED 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. WE FIND THAT THE ISSUE IS NOW SQUARELY COVERED BY THE VARIOUS DECISIONS OF THE HIGH COURTS IN FAVOUR OF T HE ASSESSEE VIZ. CIT, FARIDABAD VS. LAKHANI MARKETING INC. 226 TAX MAN 45 (P&H ), CIT VS. WINSOME TEXTILES (2009) 319 ITR 2 04 (P&H), 110 CHEMINVEST LTD VS. ITO (2015) 378 ITR 33 (DELHI), CORRTECH ENERGY P. LTD. (2014) 45 TAXMAN.COM 116 (GUJARAT H IGH COURT) CIT VS. M/S SHIVAM MOTORS (P) LTD (2014) 272 CTR (ALL) 277. IN ALL THE ABOVE REFERRED TO CASE LAWS, THE HON'BLE HI GH COURTS HAVE BEEN UNANIMOUS TO HOLD THAT NO DISALLOWANCE IS ATTR ACTED U/S 14A OF THE ACT IN CASE THE ASSESSEE HAS NOT EARNED ANY INCOME NOT FORMING PART OF THE TOTAL INCOME. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES ON THE ABOVE ISSUE IS ORDERED TO BE DELETED. 77. GROUND NO.12: THE ABOVE GROUND IS GENERAL IN NATURE. 78. 140/CHD/2018 (A.Y. 2015-16):- THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GRO UNDS OF APPEAL:- 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED UPHOLD THE ACTION OF THE LEARNED ASSESSING OFFICER IN DISALLOWING THE DEDUCTION ON ACCOUNT OF LEASE RENTAL AMOUNTING TO RS. 80,44,97,240/- AS CLAIMED BY THE APPELLANT IN THE COMPUTATION OF INCOME. 2. THAT THE LEARNED CIT(A) GRAVELY ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN TREATING THE LEASE AGREEMENT BETWEEN THE APPELLANT AND CISCO SYSTEM CAPITAL INDIA LTD. AS A FINANCIAL LEASE INSTEAD THE SAME BEING OPERATING LEASE. 111 3. THAT THE LEARNED CIT(A) FURTHER GRAVELY ERRED I N UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFICER IN DISALLOWING A SUM OF RS. 2,40,00,000/- CLAIMED ON ACCOUNT OF THE DEDUCTION U/S 35D OF THE INCOME TAX ACT, 1961. 4. THAT HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 4,21,870/- AS ALLEGED UNEXPLAINED EXPENDITURE. 5. THAT HE WAS FURTHER NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED ASSESSING OFFICER IN DISALLOWING A SUM OF RS. 61,40,984/- MADE AS A DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961. 79. APART FROM THE ABOVE GROUNDS OF APPEAL, THE ASS ESSEE HAS TAKEN THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL : WITHOUT PREJUDICE, THE ASSESSING OFFICER ERRED IN NOT ALLOWING DEPRECIATION ON SET TOP BOXES AT THE ELIGIBLE RATE OF 60% 80. GROUND NOS. 1,2 AND ADDITIONAL GROUND: GROUND NOS. 1, 2 AND ADDITIONAL GROUND OF THIS APPEAL ARE IDENTICAL TO GROUND NOS.3 TO 5 AND ADDITIONAL G ROUND IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2013-14 IN IT A NO.547/CHD/2017, HENCE OUR FINDINGS GIVEN ABOVE WHI LE ADJUDICATING GROUND NOS.3 TO 5 AND ADDITIONAL GROUN D IN ITA NO.547/CHD/2017 WILL APPLY MUTATIS MUTANDIS TO THES E GROUNDS ALSO. 112 81. GROUND NO.3: THE ABOVE GROUND OF APPEAL IS IDENTICAL TO GROUND NO.6 IN ITA NO.547/CHD/2017, HENCE OUR FINDINGS AND DIRECTIONS GIVEN ABOVE IN ITA NO.547/CHD/2017 WILL APPLY MUTATIS MUT ANDIS TO THIS GROUND ALSO. 82. GROUND NO.4: THE ABOVE GROUND IS NOT PRESSED. 83. GROUND NO.5: THIS GROUND RELATES TO DISALLOWANCE MADE BY THE AO U/S 14A OF THE ACT. THE ASSESSEE ADMITTEDLY DID NOT EAR N ANY TAX EXEMPT INCOME DURING THE YEAR. HENCE, AS PER OUR OBSERVATIONS MADE ABOVE WHILE ADJUDICATING GROUND N O.11 OF ASSESSEES APPEAL FOR A.Y. 2014-15 IN ITA NO.842/CH D/2018, NO DISALLOWANCE U/S 14A OF THE ACT IS WARRANTED. TH IS ISSUE IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THIS APPEAL OF THE ASSESSEE STAND PAR TLY ALLOWED. IN THE RESULT THE CAPTIONED APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. SD/- SD/- ( . . / N.K. SAINI) ( / SANJAY GARG) / VICE PRESIDENT / JUDICIAL MEMBER DATED : 06.05. 2020 113 RATI / .. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH