Ushodaya Enterprises Ltd., Hyderabad V. DCIT, Hyderabad

ITA 676/HYD/2009

• Counselvise Citation: 67622514 RSA 2009
• Duration Of Justice: 5 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 21-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Depreciation; Bad and doubtful debts
• Section: 143(3); 194C

Judgement Text

ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 1 OF 18 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS.676/HYD/2009 & 411/HYD/2010 (ASSESSMENT YEARS: 2005-06 & 2006-07) USHODAYA ENTERPRIS ES LTD HYDERABAD PAN: AAACU 2690 P VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-16(2) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI V. SIVA KUMAR, ADVOCATE DEPARTMENT BY: SHRI D. SUDHAKAR R AO, CIT (DR) DATE OF HEARING: 05/01/2015 DATE OF PRONOUNCEMENT: 07/01/2015 O R D E R PER ASHA VIJAYARAGHAVAN, J.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE DIRECT ED AGAINST THE ORDERS OF THE CIT (A)-IV HYDERABAD DATED 15.01. 2010 AND 13.03.2009 RESPECTIVELY RELATING TO A.YS 2005-06 & 2006-07 RESPECTIVELY. ITA NO.676/HYD/2009 A.Y 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSINESS OF PUBLISHING OF NEWS PAPER S, SATELLITE TELEVISION BROADCASTING, MANUFACTURING AND TRADING OF FOOD PRODUCTS AS WELL AS HIRING OF SHOOTING SETS. FOR A. Y 2005-06, THE ASSESSEE FILED ITS RETURN OF INCOME ON 1.11.2005 DE CLARING A LOSS OF RS.10,17,16,327/- FROM BUSINESS. THE DCIT, HYDER ABAD WHILE ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 2 OF 18 COMPLETING THE ASSESSMENT ON 26.12.2007 U/S 143(3) OF THE ACT DETERMINED THE INCOME AT RS.37,88,64,362/- UNDER TH E NORMAL PROVISIONS OF THE ACT. WHILE DOING SO, THE AO MADE DISALLOWANCE OF DEPRECIATION, DISALLOWANCE OF EXPENDITURE U/S 40 (A)(IA) OF THE ACT AND DISALLOWANCE OF EXPENDITURE ON THE GROUND T HAT THE SAME DOES NOT PERTAINS TO THE YEAR UNDER THE ACCOUNTING AMONG OTHER DISALLOWANCES. AGGRIEVED, THE ASSESSEE PREFERRED AP PEAL BEFORE THE CIT (A) AND WITH RESPECT TO DISALLOWANCE OF RS. 89,98,773/- WHICH IS ON ACCOUNT OF RESTRICTIONS OF DEPRECIATION ON COMPUTERS, SOFTWARE AND PERIPHERALS TO 25% AS AGAINST 60% CLAI MED BY THE ASSESSEE (VIDE ITEM III(5) OF OLD APPENDIX-I UNDER RULE 5 OF I.T. RULES, 1962). THE ASSESSEE SUBMITTED DETAILS OF THE COMPUTER EQUIPMENTS, PERIPHERALS AND SOFTWARE WHICH IS THE S UBJECT MATTER OF DISALLOWANCE. ASSESSEE ALSO SUBMITTED THA T OUT OF THE ADDITIONS OF RS.3,08,80,838/-, AN AMOUNT OF RS.2,25 ,43,236/- WAS INCURRED TOWARDS THE COST OF OPERATIONG SOFTWAR E WHICH IS ELIGIBLE FOR DEPRECIATION AT 60%. ALSO, AN AMOUNT O F RS.83,37,602/- OUT OF THE ADDITIONS OF RS.3,08,80,8 38/- WAS INCURRED TOWARDS COST OF PRINTERS, SCANNERS, MODEMS , SWITCHES/HUBS, CABLES/CARDS, ROUTERS, FACSIMILE SYS TEMS V-SAT TERMINALS, SOFTWARE ETC AND IT WAS SUBMITTED THAT T HEY ARE INTEGRAL PART OF COMPUTER SYSTEMS AND WITHOUT COMPU TERS, THE SAID ASSETS CANNOT FUNCTION IN THE BUSINESS OF SATE LLITE TELEVISION BROADCASTING. THEREFORE, THE ASSESSEE CLAIMED THAT DEPRECIATION IS ALLOWABLE AT 60%. THE ASSESSEE SUBMITTED THAT TH IS ISSUE HAS BEEN CONSIDERED IN DETAIL BY THE ITAT B BENCH, HY DERABAD IN ITS ORDER FOR A.Y 2002-03 AND 2003-04 VIDE CONSOLID ATED ORDER IN ITA NO.1241/HYD/2008 AND ITA NO.591/HYD/2010 DATED 31.10.2013 IN ASSESSEES OWN CASE. IT WAS FURTHER S UBMITTED THAT ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 3 OF 18 THE ITAT ALSO DECIDED THIS ISSUE IN ASSESSEES OWN CASE FOR A.Y 2004-05 VIDE ITS ORDER IN ITA NO.1429/HYD/2014 DATE D 22.10.2014. 3. THE LD CIT (A) AFTER GOING THROUGH THE DETAILS, AT PARA NO.14 OF HIS ORDER HELD AS FOLLOWS: 14. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND THE FACTS OF THE CASE. I HAVE GONE THROUGH THE RELEVANT PROVISIONS OF THE INCOME TAX RULES RELATIN G TO RATE AT WHICH DEPRECIATION IS ALLOWABLE ON COMPUTER AND COMPUTER SOFTWARE. I AGREE WITH THE OBSERVATIONS MA DE BY THE AO THAT ONLY COMPUTER AND COMPUTER SOFTWARE ARE ENTITLED FOR DEPRECIATION @60%. THOUGH VARIOUS ACCESSORIES LIKE PRINTERS, SCANNERS, MODEMS, ROUTER S ETC., REFERRED TO BY THE APPELLANT MAY BE LINKED TO THE COMPUTERS, THE SAME CANNOT BE CONSIDERED AS FORMING INTEGRAL PART OF THE COMPUTER SYSTEM. THOSE ACCESSO RIES BEING DISTINCT AND SEPARATE ITEMS, COME UNDER THE PURVIEW OF PLANT AND MACHINERY FOR ALLOWANCE OF DEPRECIATION AT THE NORMAL RATE OF 25%. IN THIS VIE W OF THE MATTER, THE STAND OF THE AO IN ALLOWING DEPRECIATIO N ON SUCH COMPUTER ACCESSORIES @ 25%, AS AGAINST THE CLA IM MADE BY THE APPELLANT @60% IS JUSTIFIED. THUS, THE DISALLOWNACE OF RS.89,98,773/- MADE BY THE AO TOWAR DS EXCESS CLAIM OF DEPRECIATION ON COMPUTER ACCESSORIE S IS CONFIRMED. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. WE FIND THAT ITAT IN ITA NO.1429/HYD/2014 FOR A.Y 2004-05 IN ASS ESSEES OWN CASE IT HAS BEEN HELD IN PARA NOS.14 TO 17 AS F OLLOWS: 14. THE NEXT ISSUE AS RAISED IN GROUND NO. 4 WITH IT S SUB- GROUNDS IS IN RESPECT OF DISALLOWANCE OF DEPRECIATI ON OF AN AMOUNT OF RS. 1,43,99,145 CLAIMED @ 60% ON PRINTERS , SCANNERS, MODEMS, ETC. AND RESTRICTING THE SAME TO 25% BY TREATING THEM AS PLANT AND MACHINERY. ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 4 OF 18 15. BRIEFLY THE FACTS ARE, DURING THE COURSE OF ASS ESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 11,43,63,771 @ 60% ON THE BLOCK OF COMPUTERS. ON FURTHER VERIFICATION OF THE DETAILS S UBMITTED BY ASSESSEE, AO NOTICED THAT THE BLOCK OF COMPUTERS AL SO INCLUDE PRINTERS, SCANNERS, MODEMS, SWITCHES, PHOTO/EDIT V- SAT EQUIPMENT, UPS, NETWORK CABLES, SOFTWARE, ETC. AO A FTER VERIFYING THESE FACTS WAS OF THE VIEW THAT COMPUTER S CONNECTED TO PHOTO TRANSMISSION EQUIPMENT, EDITING EQUIPMENT, V-SAT AND DATA PROCESSING EQUIPMENT ARE TO BE TREATED AS COMPUTERS. HOWEVER, SCANNERS, PRINTERS, MODEMS, SWITCHES, NETWORKING CABLE, TRANSMISSION EQUIPMENT AND SOFTWARE DO NOT FORM PART OF COMPUTERS. AO OPINED T HAT EVERY PERIPHERAL DEVICE CONNECTED TO THE COMPUTER D OES NOT FORM PART OF THE COMPUTER. HE OBSERVED THAT COMPUTE R RUNS WITHOUT PERIPHERALS LIKE PRINTER, SCANNER ETC. , BU T NOT THE OTHER WAY ROUND. THE AO WAS OF THE OPINION THAT COM PUTERS USED FOR PHOTO TRANSMISSION EQUIPMENT, DECODING EQU IPMENT V-SAT, DATA PROCESSING EQUIPMENT ARE ELIGIBLE FOR D EPRECIATION @ 60% WHEREAS THE OTHER PERIPHERALS LIKE PRINTERS, SCANNERS, MODEMS, SWITCHES, PHOTO/EDIT/EQUIPMENT UPS, NETWORK CABLES AND SOFTWARE FORM PART OF PLANT AND MACHINER Y, ON WHICH, DEPRECIATION IS ALLOWABLE @25% ONLY. ACCORDI NGLY, HE PROPOSED TO RESTRICT DEPRECIATION @ 25% ON THEM. TH OUGH, ASSESSEE OBJECTED TO SUCH ACTION, THE AO, HOWEVER, REJECTING THE SUBMISSIONS OF ASSESSEE, RESTRICTED DEPRECIATIO N @ 25% ON ROUTERS FACSIMILE SYSTEMS, MODEM, V-SAT, ETC AND IN THE PROCESS DISALLOWED AN AMOUNT OF RS. 1,43,99,145. BE ING AGGRIEVED OF SUCH DISALLOWANCE, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) FOLLOWING HIS OWN ORDER F OR THE AY 2002-03 IN CASE OF SAME ASSESSEE, SUSTAINED THE DIS ALLOWANCE MADE BY AO. 16. THE LEARNED AR AT THE OUTSET SUBMITTED BEFORE U S THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT I N ASSESSEE'S OWN CASE FOR AY 2002-03 AD 2003-04 AS WELL AS FOR AY 2005- 06 AND 2006-07. THE LEARNED DR THOUGH AGREED THAT T HE ISSUE IS COVERED BY THE DECISIONS OF THE COORDINATE BENCH , BUT, HE NEVERTHELESS SUPPORTED THE ORDER OF CIT(A). 17. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDE RS OF REVENUE AUTHORITIES. AS CAN BE SEEN, AO HAS RESTRIC TED THE DEPRECIATION TO 25% ON MODEMS, SWITCHES, ROUTERS, P RINTERS, SCANNERS ETC BY TREATING THEM AS PLANT AND MACHINER Y. THE CIT(A) HAS SUSTAINED THE ORDER OF AO BY FOLLOWING H IS OWN ORDER PASSED IN CASE OF ASSESSEE FOR THE AY 2002-03 . HOWEVER, IT IS SEEN FROM RECORD THAT THE ORDER PASS ED BY CIT(A) FOR AY 2002-03 AND 2003-04 ON IDENTICAL ISSUE WAS ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 5 OF 18 CHALLENGED BY ASSESSEE BEFORE THE TRIBUNAL. THE TRI BUNAL WHILE CONSIDERING THE DISPUTE IN APPEAL PREFERRED B Y ASSESSEE IN ITA NOS. 1241/H/08 AND 591/HYD/10 FOR AY 2002-03 AND 2003-04 RESPECTIVELY ALLOWED ASSESSEE'S CLAIM OF DEP RECIATION @ 60% ON THESE ITEMS. WHILE DOING, SO THE TRIBUNAL FOLLOWED ITS EARLIER ORDER IN ASSESSEE'S OWN CASE FOR AY 200 5-06 AND 2006-07. THE FINDING OF THE TRIBUNAL IS EXTRACTED H EREUNDER FOR READY REFERENCE: '11. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES A ND PERUSED THE MATERIAL ON RECORD. AS PER THE LIST SUB MITTED BY THE ASSESSEE IN ANNEXURE-B AND THE DETAILED NOTE SU BMITTED EXPLAINING THEIR FICTION, THE ITEMS ON WHICH THERE IS A DISPUTE REGARDING CLAIM OF DEPRECIATION ARE EDITING EQUIPME NTS, EDIT CONTROL UNIT, CHARTER GENERATOR V. SAT EQUIPMENTS E TC., AND SEVERAL TYPES OF SOFTWARE AND VARIOUS PARTS AND COM PONENTS. IT IS THE CONTENTION OF THE ASSESSEE THAT ALL THESE EQUIPMENTS FORM INTEGRAL PART OF THE COMPUTER SYSTEM AND THEY CANNOT FUNCTION INDEPENDENTLY EXCEPT IN CONJUNCTION WITH A COMPUTER SYSTEM. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, THE PRIMARY BASIS ON WHICH THE ASSESSING OFFICER CO NCLUDED THAT DEPRECIATION CLAIMED BY THE ASSESSEE IS NOT AL LOWABLE AT 60% AS ACCORDING TO HIM COMPUTER MEANS A CPU WHICH IS ALSO CALLED AS MOTHER BOARD ALONG WITH ITS MEMORY. MONITOR KEY BOARD, MOUSE ARE ESSENTIAL TO RUN COMPUTER AS A N INDEPENDENT ENTITY. THE AFORESAID FINDING OF THE AS SESSING OFFICER WAS UPHELD BY THE CIT (A) WHO ALSO HELD THA T EVERY PERIPHERAL DEVICE CONNECTED TO THE COMPUTER DOES NO T FORM PART OF THE COMPUTER. LET US NOW EXAMINE HOW FAR TH E FINDINGS OF THE REVENUE AUTHORITIES ARE ACCEPTABLE IN THE CONTEXT OF THE RATIO LAID DOWN BY THE INCOME-TAX AP PELLATE TRIBUNAL, MUMBAI (SPECIAL BENCH) IN CASE OF DCIT VS . DATACRAFT INDIA LIMITED (40 SOT 295), THE HON'BLE S PECIAL BENCH BEING CONSCIOUS OF THE FACT THE TERM 'COMPUTE R' HAS NOT BEEN DEFINED UNDER THE IT ACT NOR IN THE GENERAL CL AUSES ACT, 1987, THE MEANING OF THE TERM COMPUTER HAS TO BE UN DERSTOOD BY APPLYING THE PRINCIPLES OF STATUTORY INTERPRETAT ION I.E., ONE HAS TO GIVE THE MEANING TO THE EXPRESSION 'COMPUTER ' NOT MERELY BY GOING TO THE DICTIONARY MEANING BUT BY AP PLYING COMMON PARLANCE OR COMMERCIAL PARLANCE TESTS AS WEL L AS BY ANALYZING THE INTENDMENT OF LEGISLATURE IN PROVIDIN G HIGHER RATE OF DEPRECIATION. THE HON'BLE SPECIAL BENCH AFT ER INTERPRETING THE EXPRESSION 'COMPUTER' IN COMMON PA RLANCE AS WELL AS COMMERCIAL PARLANCE IN THE CONTEXT OF AVAIL ABILITY OF DEPRECIATION AT HIGHER RATE OF 60% IN THE CASE OF R OUTER AND SWITCHES WHETHER TO BE TREATED AS 'COMPUTER' HELD A S UNDER:- ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 6 OF 18 25. THUS IN ORDER TO DETERMINE WHETHER A PARTICULAR MACHINE CAN BE CLASSIFIED AS A COMPUTER OR NOT, THE PREDOMI NANT FUNCTION, USAGE AND COMMON PARLANCE UNDERSTANDING, WOULD HAVE TO BE TAKEN INTO ACCOUNT. TO ANALYZE FURTHER, LET US TAKE THE CASE OF A TELEVISION, THE PRINCIPAL TASK OF WHI CH IS TO DELIVER VISUALS ACCOMPANIED WITH AUDIO. THE SIGNALS , ARE RECEIVED THROUGH THE RELEVANT NET WORKS SUCH AS DIS H TV, TATA SKY ETC. BUT TV DOES NOT BECOME COMPUTER FOR T HE REASON THAT ITS PRINCIPAL FUNCTION CANNOT BE DONE O NLY WITH THE AID OF 'COMPUTER FUNCTIONS' NOTWITHSTANDING THE FACT THAT IN THE ENTIRE PROCESS OF NETWORKING OR RECEIVING TH E OUTPUT FROM DIFFERENT CHANNELS AND MAKING IT AVAILABLE TO THE VIEWERS, SOME SORT OF COMPUTER FUNCTIONS ARE NECESS ARILY INVOLVED. SIMILARLY TAKE THE CASE OF MOBILE PHONE. ITS PRINCIPAL TASK IS TO RECEIVE AND SEND CALLS. IT IS NOT A STANDALONE APPARATUS WHICH CAN OPERATE WITHOUT THE RELEVANT NETWORK, SUCH AS AIRTEL, BSNL, RELIANCE. IT, THEREF ORE, FOLLOWS THAT ANY MACHINE OR EQUIPMENT CANNOT BE DES CRIBED AS COMPUTER, IF ITS PRINCIPAL OUTPUT OR FUNCTION IS THE RESULT OF SOME SORT OF 'COMPUTER FUNCTIONS' IN CONJUNCTION WI TH SOME NON-COMPUTER FUNCTIONS. IN ORDER TO BE CALLED AS CO MPUTER, IT IS SINE QUA NON THAT THE PRINCIPAL OUTPUT/ OBJECT/F UNCTION OF SUCH MACHINE SHOULD BE ACHIEVABLE ONLY THROUGH 'COM PUTER FUNCTIONS'. 26. HAVING ANALYZED THE MEANING OF 'COMPUTER' IN CO MMON PARLANCE, LET US PROCEED TO ASCERTAIN THE CONCEPT, MEANING AND FUNCTIONS OF 'ROUTER' AGAIN WE FIND THAT THE TERM ' ROUTER' HAS NOT BEEN DEFINED IN THE INCOME- TAX ACT, 1961. ACCO RDINGLY IT ALSO NEEDS TO BE ASSIGNED THE MEANING AS IT IS UNDE RSTOOD IN COMMON PARLANCE. THE LEARNED DEPARTMENTAL REPRESENT ATIVE HAS PLACED SOME LITERATURE FROM THE INTERNET EXPLAI NING THE MEANING OF 'ROUTER' AS A DEVICE IN COMPUTER NETWORK ING THAT FORWARDS DATA PACKETS TO THEIR DESTINATIONS, BASED ON THEIR ADDRESSES. AS PER THIS LITERATURE THE WORKING OF RO UTER HAS BEEN EXPLAINED BY WHICH DATA PACKETS ARE TRANSMITTE D OVER A NETWORK (SAY THE INTERNET), THEY MOVE FROM MANY ROU TERS (BECAUSE THEY PASS THROUGH MANY NETWORKS) IN THEIR JOURNEY FROM THE SOURCE MACHINE TO BE DESTINATION MACHINE. ROUTERS WORK WITH IP PACKETS, MEANING THAT THEY WORK AT THE LEVEL OF THE IP PROTOCOL. EVERY ROUTER KEEPS INFORMATION ABO UT ITS NEIGHBOURS (OTHER ROUTERS IN THE SAME OR OTHER NETW ORKS). WHEN A PACKET OF DATA ARRIVES AT A ROUTER, ITS HEAD ER INFORMATION IS SCRUTINIZED BY THE ROUTER. BASED ON THE DESTINATION AND SOURCE IP ADDRESSES OF THE PACKET, THE ROUTER DECIDES WHICH NEIGHBOUR IT WILL FORWARD IT TO. ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 7 OF 18 27. THE ASSESSEE VIDE ITS LETTER DATED 21-2-2005, A DDRESSED TO THE ASSESSING OFFICER, SUBMITTED A NOTE ON USE OF R OUTERS! SWITCHES BY EXPLAINING THAT THE ROUTERS ARE CRUCIAL DEVICE THAT LET THE MESSAGES FLOW FROM ONE COMPUTER TO ANOTHER. IT WAS FURTHER EXPLAINED THAT THE ROUTER HAS TWO SEPARATE BUT RELATED JOBS, VIZ., (A) TO ENSURE THAT THE INFORMATION DOES NOT GO WHER E IT IS NOT NEEDED AND (B) IT MAKES SURE THAT THE INFORMATION D OES MAKE IT TO THE INTENDED DESTINATION. 28. A ROUTER IS A NETWORKING DEVICE WHOSE SOFTWARE AND HARDWARE ARE CUSTOMIZED TO THE TASKS OF ROUTING AND FORWARDING INFORMATION. A ROUTER HAS TWO OR MORE NE TWORK INTERFACES, WHICH MAY BE TO DIFFERENT PHYSICAL TYPE S OF NETWORK (SUCH AS COPPER CABLES, FIBRE OR WIRELESS) OR DIFFERENT NETWORK STANDARDS. EACH NETWORK INTERFACE IS A SMAL L COMPUTER SPECIALIZED TO CONVERT ELECTRIC SIGNALS FR OM ONE FORM TO ANOTHER. ROUTERS CONNECT TWO OR MORE LOGICA L SUBNETS, WHICH DO NOT SHARE A COMMON NETWORK ADDRES S. THE SUBNETS IN THE ROUTER DO NOT NECESSARILY MAP ONE- T O-ONE TO THE PHYSICAL INTERFACES OF THE ROUTER. THE TERM 'LA YER 3 SWITCHING' IS USED OFTEN INTERCHANGEABLY WITH THE T ERM 'ROUTING'. THE TERM SWITCHING IS GENERALLY USED TO REFER TO DATA FORWARDING BETWEEN TWO NETWORK DEVICES THAT SH ARE A COMMON NETWORK ADDRESS. 29. IN SIMPLE WORDS, A ROUTER MEANS A DEVICE THAT R OUTES DATA FROM ONE COMPUTER TO ANOTHER OR FROM ONE NETWORK TO ANOTHER. ROUTERS PROVIDE CONNECTIVITY INSIDE ENTERP RISES, BETWEEN ENTERPRISES AND THE INTERNET, AND INSIDE IN TERNET PROVIDERS. FROM THE ABOVE DISCUSSION IT TRANSPIRES THAT THE FUNCTION OF A ROUTER IS TO RECEIVE THE DATA FROM ON E COMPUTER AND MAKE IT AVAILABLE TO ANOTHER COMPUTER FOR VIEWI NG OR FURTHER PROCESSING. APART: FROM FACILITATING THE FL OW OF DATA BETWEEN TWO COMPUTERS, THE ROUTERS ALSO. HELP IN TH E TRANSFER OF DATA FROM NETWORK TO COMPUTER. THUS THE ESSENTIA L FUNCTION OF THE ROUTER IN A COMMERCIAL ORGANIZATION IS TO FACILITATE THE FLOW OF DATA FROM ONE COMPUTER TO AN OTHER FOR ITS PROCESSING OR STORAGE. SWITCHES ARE SHORTER VER SION OF ROUTERS, WHICH PERFORM SIMILAR FUNCTIONS AS THAT OF ROUTERS BUT WITHIN A LIMITED SPHERE. 30. ON FUNCTIONING OF A 'ROUTER' WE FIND THAT THERE IS NO DISPUTE ON THE FACT THAT A 'ROUTER' DOES NOT PERFOR M ANY LOGICAL, ARITHMETIC AND INTERMEDIARY FUNCTIONS ON D ATA NOR IT MANIPULATES OR PROCESSES DATA, THE WAY A COMPUTER W OULD DO. A 'ROUTER' DOES NOT HAVE A 'CPU'. IT ONLY ENABLES ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 8 OF 18 TRANSMISSION OF DATA AND DATA PACKAGES, IN A SOPHIS TICATED MANNER, TO INTENDED PLACES. A DATA CABLE ALSO CARRI ES DATA FROM ONE PLACE TO ANOTHER, BUT IT DOES NOT SELECTIV ELY INTERCHANGE PACKETS OF DATA BETWEEN PLACES. THE DIF FERENCE BETWEEN A 'CABLE' AND A ROUTER' IS THAT IN A 'ROUTE R' DATA IS 'ROUTED' AS PER THE SPECIFICATION. THUS A 'ROUTER' MAY NOT BY ITSELF BE CALLED A COMPUTER. 31. NOW WE HAVE TO CONSIDER WHETHER A 'ROUTER' CAN BE CONSIDERED AS 'COMPUTER HARDWARE' OR A 'COMPUTER COMPONENT'. COMPUTER HARDWARE REFERS TO THE PHYSICA L PARTS OF A COMPUTER AND RELATED DEVICES. INTERNAL HARDWAR E DEVICES INCLUDE MOTHERBOARDS, HARD DRIVES, AND RAM. EXTERNA L HARDWARE DEVICES INCLUDE MONITORS, KEYBOARDS, MOUSE , PRINTERS, AND SCANNERS. THE INTERNAL HARDWARE PARTS OF A COMPUTER ARE OFTEN REFERRED TO AS 'COMPONENTS', WHI LE EXTERNAL HARDWARE DEVICES ARE USUALLY CALLED 'PERIPHERALS'. TOGETHER, THEY ALL FALL UNDER THE CATEGORY OF COMPUTER HARDWA RE. 'SOFTWARE', ON THE OTHER HAND, CONSIST OF THE PROGR AMS AND APPLICATIONS THAT RUN ON COMPUTERS. BECAUSE SOFTWAR E RUNS ON COMPUTER HARDWARE, SOFTWARE PROGRAMS OFTEN HAVE 'SY STEM REQUIREMENTS THAT LIST THE MINIMUM HARDWARE REQUIR ED FOR THE SOFTWARE TO RUN. 31.1 IN SHORT, 'ROUTER' IS A HARDWARE DEVICE THAT R OUTES DATA (HENCE THE NAME) FROM A LOCAL AREA NETWORK (LAN) TO ANOTHER NET WORK CONNECTION. A ROUTER ACTS LIKE A COIN SORT ING MACHINE, ALLOWING ONLY AUTHORIZED MACHINES TO CONNE CT TO OTHER COMPUTER SYSTEMS. MOST ROUTERS ALSO KEEP LOG FILES ABOUT THE LOCAL NETWORK ACTIVITY. NOW THE QUESTION IS WHETHER THIS 'MACHINE' CAN BE USED INDEPENDENT OF COMPUTER. IF YES, THEN IT CANNOT BE CALLED 'COMPUTER HARDWARE' IN ALL CIRCUMSTANCES. 31.2 WHEN 'COMPUTER HARDWARE', IS USED AS A COMPONE NT OF THE COMPUTER, IT BECOMES PART AND PARCEL OF THE COM PUTER, AS IN THE CASE OF OPERATING SOFTWARE IN THE COMPUTER. IN SUCH A SITUATION, HARDWARE IN QUESTION CAN BE CONSIDERED A S A PART OF A COMPUTER AND HENCE A 'COMPUTER'. PER CONTRA, WHEN THE MACHINE IS NOT USED AS A NECESSARY ASSESSOR OR IN C OMBINATION WITH A COMPUTER, IT CANNOT BE CALLED A 'COMPUTER CO MPONENT'. 31.3 COMING TO THE ROUTERS, IT IS SEEN THAT THESE C AN ALSO BE USED WITH A TELEVISION AND IN SUCH USE, E0 COMPUTER IS REQUIRED. THESE ARE ALSO CALLED T.V. ROUTERS. SIMIL ARLY, 'INTERNET SERVICE PROVIDERS', GIVE CONNECTIVITY, BY INSTALLING A ROUTER IN THE PREMISES OF THE PERSONS !INSTITUTIO NS AVAILING THE INTERNET CONNECTION. IN THESE CASES THE ROUTER IS NOT USED ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 9 OF 18 ALONG WITH A COMPUTER. IN SUCH A SITUATION, IT WOUL D BE A 'STAND ALONE' EQUIPMENT. IN SUCH CASES THIS CANNOT BE CONSIDERED A COMPONENT OF A COMPUTER OR COMPUTER HARDWARE. GIVING ANOTHER EXAMPLE, A COMPUTER SOFTWA RE CAN BE USED IN MANY DEVICES INCLUDING WASHING MACHINE, TELEVISIONS, TELEPHONE EQUIPMENT ETC. WHEN SUCH SOF TWARE IS USED IN THOSE DEVICES, IT INTEGRATES WITH THAT PART ICULAR DEVICES. THE PREDOMINANT FUNCTION OF THE DEVICE DET ERMINES ITS CLASSIFICATION. ONLY IF THE COMPUTER SOFTWARE, RE- SIDES IN A COMPUTER, THEN IT BECOME A PART AND PARCEL OF A C OMPUTER AND, AS LONG AS IT IS AS INTEGRAL PART OF A COMPUTE R, IT IS CLASSIFIED AS A 'COMPUTER'. 31.4. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF TH E CONSIDERED VIEW THAT ROUTER AND SWITCHES CAN BE CLA SSIFIED AS A COMPUTER HARDWARE WHEN THEY ARE USED ALONG WITH A COMPUTER AND WHEN THEIR FUNCTIONS ARE INTEGRATED WI TH A 'COMPUTER'. IN OTHER WORDS, WHEN A DEVICE IS USED A S PART OF THE COMPUTER IN ITS FUNCTIONS, THEN IT WOULD BE TER MED AS A COMPUTER.' 12. WHILE COMING TO SUCH CONCLUSION, THE HON'BLE SP ECIAL BENCH APPROVED THE VIEW TAKEN BY THE INCOME-TAX APP ELLATE TRIBUNAL, KOLKATA BENCH IN CASE OF ITO VS. SAMIRAN MAJUMDAR (98 ITD 119) BUT DID NOT AGREE WITH THE VI EW TAKEN BY THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN THE CASE OF ROUTERMANIA TECHNOLOGIES (P) LTD. VS . ITO (16 SOT 384) BY HOLDING THAT THE MEANING OF EXPRESS ION 'COMPUTER' CANNOT BE RESTRICTED ONLY TO THE CPU OF THE COMPUTER BY PULLING OUT THE IMPORT AND OUTPUT DEVIC ES FROM THE AMBIT OF 'COMPUTER'. THE HON'BLE SPECIAL BENCH FURTHER WENT ON TO HOLD THAT THOUGH FUNCTIONS OF THE COMPUT ER AS ONE COMPOSITE UNIT IS FOR PERFORMING LOGICAL, ARITHMETI CAL OR MEMORY FUNCTIONS ETC., BUT IT IS NOT THE ONLY EQUIP MENT WHICH PERFORMS SUCH FUNCTIONS THAT CAN BE CALLED AS 'COMP UTER'. ALL THE INPUT AND OUTPUT DEVICES WHICH IN FACT SUPPORT IN THE RECEIPT OF INPUT AND OUTFLOW OF THE OUTPUT ARE ALSO PART OF THE 'COMPUTER'. THEREFORE, THE RATIO WHICH CAN BE CULLE D OUT FROM THE AFORESAID DECISION OF HON'BLE SPECIAL BENCH (SP ECIFICALLY PARAGRAPH 31.4 OF THE ORDER), IT IS TO BE SEEN THAT THE HON'BLE SPECIAL BENCH HAS CLEARLY HELD THAT WHEN A PARTICUL AR HARDWARE OR SOFTWARE IS USED ALONG WITH A COMPUTER AND WHEN THEIR FUNCTIONS ARE INTEGRATED WITH A COMPUTER OR IN OTHER WORDS WHEN THE DEVICE IS USED AS PART OF THE COMPUTER IN ITS FUNCTIONS, EVEN THOUGH IT MAY BE HAVING USER ON STANDALONE BASIS, BUT STILL THEN SUCH HARDWARE OR S OFTWARE WOULD BE TERMED AS A 'COMPUTER'. IN APPLYING THE AF ORESAID RATIO TO THE FACTS OF THE PRESENT CASE, IT CAN BE S EEN THAT THE ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 10 OF 18 REVENUE AUTHORITIES HAVE NOT DISPUTED THE FACT THAT THE ITEMS ON WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION AT T HE RATE OF 60% BY TREATING THEM AS 'COMPUTER' ARE BEING USED A S INPUT OR OUTPUT DEVICE OF THE COMPUTERS. HOWEVER, THE DEPART MENTAL AUTHORITIES HAVE NEGATIVED THE CLAIM OF THE ASSESSE E SOLELY ON THE REASONING THAT EVERY PERIPHERAL DEVICE CONNECTE D TO THE COMPUTER CANNOT FORM PART OF THE COMPUTER. HOWEVER, SUCH VIEW OF THE REVENUE AUTHORITIES CANNOT BE THE CORRE CT PROPOSITION OF LAW IN VIEW OF THE RATIO LAID DOWN B Y THE HON'BLE SPECIAL BENCH IN CASE OF DCIT VS. DATACRAFT INDIA LIMITED (SUPRA) BY HOLDING THAT ANY DEVICE WHEN THE Y ARE USED ALONG WITH COMPUTER AND WHEN THEIR FUNCTIONS A RE INTEGRATED WITH THE COMPUTER COMES WITHIN THE AMBIT OF THE EXPRESSION 'COMPUTER'. WE MAY FURTHER OBSERVE THAT IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006-07 , INCOME-TAX APPELLATE TRIBUNAL, HYDERABAD BENCH WHIL E DECIDING THE DEPARTMENTAL APPEAL IN ITA NOS.701/HYD /2009 AND 426/HYD/10 DATED 9-7-2012 ALSO UPHELD THE ORDER PASSED BY THE CIT (A) IN ALLOWING DEPRECIATION AT THE RATE OF 60% BY TREATING THE SCREEN, KEY BOARD, MOUSE, UPS, NET WOR KING, ROUTER AS PART OF THE COMPUTER SYSTEM AND THEREBY E LIGIBLE FOR DEPRECIATION AT THE RATE OF 60% AS AVAILABLE TO COM PUTER. IN THE AFORESAID VIEW OF THE MATTER, WE ARE INCLINED T O ACCEPT THE ASSESSEE'S CONTENTION THAT IT IS ENTITLED TO AVAIL DEPRECIATION AT THE RATE OF 60% ON THOSE ITEMS AS IS APPLICABLE TO 'COMPUTER'. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE C IT (A) BY ALLOWING THE GROUNDS RAISED BY THE ASSESSEE.' AS THE DISPUTE IN THE PRESENT APPEAL IS MATERIALLY THE SAME AND THE LEARNED DR HAS NOT BROUGHT ANY CONTRARY DEC ISION TO OUR NOTICE, WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINATE BENCH IN ASSESSEE'S OWN CASE AS REFERRED TO ABOVE AND DIRECT THE AO TO ALLOW DEPRECIATION @ 60% AS CL AIMED BY ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY ASSESSE E IS ALLOWED. 5. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH, WE ALLOW THE ASSESSEES GROUND ON THIS ISSUE. 6. THE NEXT DISALLOWANCE AGITATED BEFORE US WAS WIT H RESPECT TO DISALLOWANCE OF AN EXPENDITURE OF RS.45,16,04,17 5/- U/S 40(A)(IA). THE FACTS ARE THAT THE AO DISALLOWED RS. 45,16,04,175/- STATING THAT THE ASSESSEE DID NOT DEDUCT TAX AT SOU RCE U/S 194C. ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 11 OF 18 THE ASSESSEE ENTERED INTO AGREEMENTS WITH SISTER CO NCERNS AND OTHER PARTIES FOR PRODUCTION OF TV SERIALS/PROGRAMS TO BE TELECAST BY THE ASSESSEE COMPANY. THE ASSESSEE MADE PAYMENTS TO THESE CONCERNS ON REVENUE SHARING BASIS FROM INCOME GENER ATED FROM ADVERTISEMENTS BY WAY OF TELECASTING THE SERIALS AN D PROGRAMMES PRODUCED. THE AO HELD THAT IT IS IMMATERIAL WHETHER THE PAYMENTS ARE MADE ON OUTRIGHT BASIS OR REVENUE SHAR ING BASIS. HE HELD THAT TAX IS LIABLE TO BE DIRECTED U/S 194C AND DISALLOWED A SUM OF RS.45,16,04,175/- ON ACCOUNT OF NON DEDUCT ION OF TAX UNDER THE SAID SECTION. IN APPEAL THE CIT (A) UPHEL D THE ACTION OF THE AO. 7. AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSE SSEE CAME UP IN APPEAL BEFORE US AND SUBMITTED THAT AN IDENTICAL ISSUE CAME UP BEFORE THE ITAT A BENCH, HYDERABAD IN ASSESSEES OWN CASE WHEREIN THE ITAT UPHELD THE DISALLOWANCE. IN THIS R EGARD THE ASSESSEE SUBMITTED THAT THE SISTER CONCERNS AND OTH ER PARTIES ARE THE ABSOLUTE OWNERS OF THE PROGRAMS, FEATURE FILMS, SERIALS ETC., PRODUCED BY THEM AND THE ASSESSEE IS NOT THE OWNER OF THE RIGHTS OVER THESE PROGRAMMES EXCEPT TELECASTING THESE PROG RAMMES ON ITS TV CHANNELS. THE ASSESSEE FURTHER SUBMITTED THA T THE AGREEMENT THAT THE ASSESSEE ENTERED WAS ONLY FOR TE LECASTING THE PROGRAMMES PRODUCED BY ITS SISTER CONCERNS AND OTHE R PARTIES THROUGH THE ASSESSEES TV CHANNELS AND THE UNDERSTA NDING WAS THAT THE REVENUE GENERATED ON ADVERTISEMENTS IN TIM E SLOTS DURING THE TELECASTING OF THE PROGRAMMES WOULD BE S HARED BETWEEN THE ASSESSEE AND THE SISTER CONCERNS. THE A SSESSEE PRAYED THAT THE DISALLOWANCE MAY BE ORDERED TO BE D ELETED. ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 12 OF 18 7.1 WITHOUT PREJUDICE TO THE SUBMISSIONS MADE IN TH E PRECEDING PARAGRAPH, THE ASSESSEE SUBMITTED THAT TH E CIT (A) OUGHT TO HAVE SEEN THAT SINCE A PART OF THE AMOUNT DISALLOWED IS NOT PAYABLE AT THE END OF THE YEAR BECAUSE THE AS SESSEE HAS ALREADY MADE PAYMENTS TO THE CONCERNED PARTIES, THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE AMOU NTS PAID AND HENCE THERE IS NO JUSTIFICATION FOR DISALLOWING RS. 45,16,04,175/- WHILE COMPUTING THE INCOME OF THE ASSESSEE. SUITABL E DIRECTIONS MAY KINDLY BE GIVEN NOT TO DISALLOW THE AMOUNTS ALR EADY PAID. 7.2 THE ASSESSEE ALSO SUBMITTED THAT THE ALLAHABAD HIGH COURT IN ITS JUDGMENT IN THE CASE OF CIT VS. VECTOR SHIPP ING SERVICES (P) LTD (38 TAXMANN.COM 77 (357 ITR 641) UPHELD THE FIN DING OF THE ITAT THAT FOR DISALLOWING EXPENSES FROM BUSINESS AN D PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE A MOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY TH E END OF THE YEAR. A COPY OF THE DECISION OF THE HON'BLE HIGH CO URT WAS ALSO SUBMITTED BY THE ASSESSEE AND THE ITAT FOLLOWED THE RATIO OF THE SPECIAL BENCH DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORT LTD (136 ITD 23(SB). 7.3 THE ASSESSEE FURTHER SUBMITTED THAT THE HON'BLE ANDHRA PRADESH HIGH COURT IN ITS JUDGMENT DATED 24.06.2014 IN THE CASE OF CIT VS. M/S. JANAPRIYA ENGINEERS SYNDICATE (ITA NO.352 OF 2014) HELD UNTIL AND UNLESS THE DECISION OF THE SPE CIAL BENCH IN THE CASE OF M/S MERILYN SHIPPING & TRANSPORT IS UPS ET BY THE HON'BLE JURISDICTIONAL COURT, IT BINDS SMALLER AND COORDINATE ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 13 OF 18 BENCH OF THE TRIBUNAL. THE ASSESSEE PRAY THAT IN TH E LIGHT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT, ITAT MAY DIRECT THE DISALLOWANCE U/S 40(A)(IA) MAY NOT BE MADE IN SO FA R AS THE ASSESSEE HAS ALREADY MADE PAYMENTS BEFORE THE END O F THE RELEVANT ACCOUNTING YEAR, OUT OF THE AMOUNTS DISALL OWED WHICH HAVE BEEN UPHELD BY THE CIT (A). 8. WE HAVE HEARD BOTH THE PARTIES. WE DIRECT THAT T HE AO MAY FOLLOW THE DECISION OF THE SPECIAL BENCH IN THE CAS E OF MERILYN SHIPPING & TRANSPORTS V. ACIT IN ITA NO.477/VIZ/200 8 DATED 29.03.2012 AND THE DISALLOWANCE U/S 40(A)(IA) MAY N OT BE MADE BY THE AO FOR THE AMOUNTS/PAYMENTS WHICH HAVE ALREADY BEEN PAID BEFORE THE END OF THE RELEVANT AC COUNTING YEAR, OUT OF THE AMOUNTS DISALLOWED WHICH HAVE BEEN UPHELD BY THE CIT (A). THIS GROUND IS PARTLY ALLOWED FOR S TATISTICAL PURPOSES. 9. WITH RESPECT TO THE LAST GROUND BEING DISALLOWAN CE OF EXPENDITURE OF RS.1,00,71,880/- ON THE GROUND THAT THE SAME DOES NOT PERTAIN TO THE YEAR UNDER ACCOUNT. AO DISA LLOWED A SUM OF RS.1,00,71,880/- ON THE GROUND THAT THE SAME DOES NOT PERTAIN TO THE EARLIER YEARS. IN APPEAL, THE CI T (A) HAS UPHELD THE DISALLOWANCE. BEFORE US IT WAS SUBMITTED THAT THE CIT (A) FAILED TO APPRECIATE THE FACT OF THE CASE. DURING THE A.YS 2002-03 AND 2004-05 THE ASSESSEE RAISED BILLS TOWAR DS ADVERTISEMENT CHARGES ON CERTAIN PARTIES AT PRIME T IME RATES. SOME OF THE ADVERTISEMENTS WERE TELECAST ON MORE NU MBER OF TIMES THAN AGREED AND UPON THE CLIENTS POINTING OUT SUCH ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 14 OF 18 MISTAKES, CREDIT NOTES WERE GIVEN FOR EXCESS AMOUNT BILLS ON THEM BY DEBITING TO PRIOR PERIOD EXPENSES. THE CONC ERNED AMOUNT WORKED OUT TO RS.1,00,20,532/-. THE ASSESSEE ALSO PAID A SUM OF RS.47,711/- TOWARDS BONUS RELATING TO A.Y 2004-05 AND DEBITED THE SAME TO PRIOR PERIOD EXPENS ES. THE CIT (A) OUGHT TO HAVE DELETED THE DISALLOWANCE. IN THIS CONNECTION IT IS SUBMITTED THAT IDENTICAL ISSUE CAM E UP FOR CONSIDERATION BEFORE THE B BENCH OF THE ITAT HYDERA BAD FOR A.Y 2007-08 AND THE DISALLOWANCE HAS BEEN DIRECTED TO BE DELETED VIDE ITAT IN ITA NO.1535/HYD/2010 AND 1552/HYD/2010 DATED 10.05.2013. THE ISSUE HAS BEEN DISCUSSED AT PARA NOS.9 TO 13 OF THE ORDER OF THE I TAT. ASSESSEE PRAYED THAT FOLLOWING THE SAID ORDER, THE DISALLOWANCE MAY BE DIRECTED TO BE DELETED. 10. WE HAVE HEARD BOTH THE PARTIES. THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.1535/HYD/2010 AND ITA NO.1552/HYD/2010 DATED 10.05.2013, HAS HELD AS FOLL OWS: 9. THE NEXT ISSUE, WHICH IS INVOLVED IN GROUND NO.3 OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF PRIOR PE RIOD EXPENSES OF RS.2,38,85,000. 10. FACTS OF THE CASE IN RELATION TO THIS ISSUE ARE THAT THE ASSESSING OFFICER HAS ADDED AN AMOUNT OF RS.2,38,85 ,000 ON THE GROUND THAT THE EXPENDITURE DOES NOT PERTAIN TO THE YEAR UNDER APPEAL. ON APPEAL BEFORE THE CIT(A), ASSESSEE SUBMITTED THAT THE SAID AMOUNT PERTAINS TO EXCESS AMOUNTS BIL LED TO VARIOUS PARTIES IN THE EARLIER YEARS, WHICH WERE RE CTIFIED, ON BEING POINTED OUT BY THE SAID PARTIES, AND ACCORDIN GLY DEBITED TO THE PROFIT & LOSS ACCOUNT. THE LEARNED AUTHORISE D REPRESENTATIVE OF THE ASSESSEE SUBMITTED AN DETAILS BEFORE THE CIT(A), CLARIFYING THE NATURE OF THE AMOUNTS AND AL LOWABILITY OF DEDUCTION IN RESPECT THEREOF. THE CIT(A), NOT FI NDING MERIT IN THE CONTENTIONS OF THE ASSESSEE, UPHELD THE ACTI ON OF THE ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 15 OF 18 ASSESSING OFFICER IN DISALLOWING THE AMOUNT OF RS.2 ,38,85,000 ON THE GROUND THAT THE EXPENDITURE IN QUESTION DOES NOT PERTAIN TO THE YEAR UNDER APPEAL, AND THE ASSESSEE HAS NOT INCURRED ANY EXP, BUT HAS WRITTEN OFF INCOME OF EAR LIER YEARS. 11. BEFORE US, ON APPEAL, THE LEARNED COUNSEL FOR T HE ASSESSEE, SHRI SIVA KUMAR, SUBMITTED THAT THE CIT(A) HAS NOT APPRECIATED THAT IN THE EARLIER ASSESSMENT YEARS, B ILLS WERE RAISED TO THE EXTENT OF RS.2,38,85,000, TOWARDS ADVERTISEMENTS FOR PRIME TIME SLOTS ON CERTAIN PART IES, BUT AS THE SAID PROGRAMMES WERE NOT TELECAST, DURING THE P RIME TIME OR TELECAST FOR LESSER NUMBER OF TIMES THAN AGREED UPON, AND WHEN THE PARTIES POINTED OUT SUCH MISTAKES/DISCREPA NCIES, THEY WERE GIVEN CREDIT FOR EXCESS AMOUNTS BILLED AG AINST THEM, BY DEBITING TO PRIOR PERIOD EXPENSES. HENCE, THE CI T(A), ACCORDING TO HIM, ERRED IN CONFIRMING THE DISALLOWA NCE ON THE GROUND THAT THE EXPENDITURE IS NOT RELATING TO THIS YEAR, AND THE INCOME IS WRITTEN OFF. ALTERNATIVELY, THE LEARN ED COUNSEL ARGUED THAT SINCE THE EXCESS BILLING OF RS.2,11,34,7 59 OUT OF RS.2,38,85,000 WAS OFFERED TO TAX IN THE EARLIER Y EARS, AND IT IS WRITTEN OFF TO PROFIT & LOSS ACCOUNT IN THE YEAR UNDER APPEAL AS PRIOR PERIOD ADJUSTMENT, THE SAME SHOULD BE ALLO WED AS DEDUCTION AS BAD DEBT, SINCE SUCH AMOUNTS WERE CONS IDERED AS INCOME IN EARLIER YEARS. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, OPPOSING THE ABOVE CONTENTIONS OF THE ASSESSE E ON THIS ISSUE, SUPPORTED THE ORDER OF THE CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE ORDERS OF THE LOWER AUTHORITIES. THOUGH IN PRINCIPL E, WE ARE AGREEMENT WITH THE DISALLOWANCE MADE BY THE REVENUE AUTHORITIES, WE FIND MERIT IN THE ALTERNATIVE CONTE NTION OF THE ASSESSEE. INASMUCH AS IF AN AMOUNT OF RS.2,11,34,759 OUT OF TOTAL AMOUNT OF RS.2,38,85,000 WAS ALREADY OFFERED TO TAX IN THE EARLIER YEARS, THE PRIOR PERIOD ADJUSTMENT MADE IN THAT BEHALF BY THE ASSESSEE, ON ACCOUNT OF THE CONCERNED PARTIES DECLINING TO MAKE THE PAYMENTS DUE TO DISCREPANCIES IN THE BILLING, THE SAME SHOULD BE ALLOWED AS DEDUCTION AS BAD DEBTS. WE THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE C IT(A) AND DIRECT THE ASSESSING OFFICER ACCORDINGLY TO RESTRIC T THE DISALLOWANCE MADE. ASSESSEE'S GROUNDS ON THIS ISSUE ARE PARTLY ALLOWED. 11. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH IN ITA AND 1552/HYD/2010 (SUPRA), WE DELETE THE DIS ALLOWANCE MADE BY THE CIT (A). ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 16 OF 18 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO.676/HYD/2009 IS PARTLY ALLOWED FOR STATISTICAL P URPOSE. ITA NO.411/HYD/2010 A.Y 2006-07: 13. IN THIS APPEAL, TWO GROUNDS ARE RAISED BY THE A SSESSEE VIZ., DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) AND DISAL LOWANCE OF EXPENDITURE, ON THE GROUND THAT THE SAME DOES NOT P ERTAIN TO THE YEAR UNDER ACCOUNT. THE CIT (A) CONFIRMED THE DISAL LOWANCE MADE BY THE AO U/S 40(A)(IA) OF THE I.T. ACT ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT THE TAX AT SOURCE U/S 194C OF THE ACT ON SOFTWARE EXPENSES PAID TO M/S USHAKIRON TELE VISION AND M/S USHAKIRON MOVIES AND M/S ARJOE ENTERTAINMENT IN DIA (P) LTD. BEFORE THE CIT (A) IT WAS SUBMITTED THAT SINC E THE ASSESSEE HAS ALREADY PAID A PART OF THE AMOUNT, OUT OF RS.43 ,16,33,123/- TO VARIOUS PARTIES, SUCH AMOUNTS ARE NOT PAYABLE AT THE END OF THE YEAR AND THEREFORE, THERE IS NO JUSTIFICATION I N DISALLOWING RS.43,16,33,123/- U/S 40(A)(IA), WHILE COMPUTING TH E INCOME OF THE ASSESSEE. THE CIT (A) FOLLOWING THE DECISION OF HIS PREDECESSORS IN ASSESSEES OWN CASE FOR 2005-06 HEL D AT PARA 6.4 AS FOLLOWS: 6.4 SINCE THE FACTS OF THE CASE ARE IDENTICAL IN THE CURRENT YEAR ALSO, I AM IN FULL AGREEMENT WITH THE ORDER OF MY PREDECESSOR THAT THE ABOVE PAYMENTS ARE COVER ED U/S 194C OF THE ACT, FALLING WITHIN THE PURVIEW OF CLAUSE (B) BELOW EXPLANATION (III) OF THE AFOREMENTIONED S ECTION. SINCE THE APPELLANT DID NOT DEDUCT TDS, THE DISALLOWANCE OF RS.43,16,33,123/- MADE BY THE AO IS HELD TO BE JUSTIFIED AND NO INTERFERENCE IS CALLED FOR. THIS GROUND OF APPEAL IS ACCORDINGLY DECIDED IN FAVOUR O F THE REVENUE AND AGAINST THE APPELLANT. ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 17 OF 18 14. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE US. FOR THE A.Y 2005-06, WE HAVE ALREADY DECIDED SIMILAR ISSUE FOR A.Y 2005- 06 FOLLOWING THE DECISION IN ITA NO.676/HYD/2009 WH EREIN WE HAVE CONCLUDED AT PARA 8 AS FOLLOWS: 8. WE HAVE HEARD BOTH THE PARTIES. WE DIRECT THAT THE AO MAY FOLLOW THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ACIT IN ITA NO.477/VIZ/2008 DATED 29.03.2012 AND THE DISALLOWANCE U/S 40(A)(IA) MAY NOT BE MADE BY THE AO FOR THE AMOUNTS/PAYMENTS WHICH HAVE ALREADY BEEN PAID BEFORE THE END OF THE RELEVANT ACCOUNTING YEAR, OUT OF THE AMOUNTS DISALLOWED WHICH HAVE BEEN UPHELD BY THE CIT (A). THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 15. WITH RESPECT TO THE LAST GROUND RAISED BY THE A SSESSEE IN THIS APPEAL BEFORE US THAT THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.19,09,064/- MADE BY THE AO ON TH E GROUND THAT THE SAID EXPENDITURE DOES NOT PERTAIN TO THE Y EAR OF ACCOUNT AND THAT THE ASSESSEE DID NOT INCUR ANY EXPENDITURE BUT WROTE OFF INCOME OF EARLIER YEARS. IT WAS SUBMITTED BY T HE LD COUNSEL THAT THE CIT (A) OUGHT TO HAVE SEEN THAT THE ASSESS EE RAISED BILLS TO THE SAID EXTENT OF RS.1,00,71,880/- IN THE EARLI ER YEARS TOWARDS ADVERTISEMENTS OF CERTAIN PARTIES AND ON BE ING POINTED OUT THAT THOSE ADVERTISEMENTS WERE NOT TELECAST AS CONTRACTED, CREDIT NOTES WERE GIVEN TO THEM BY DEBITING PRIOR P ERIOD EXPENSES. HENCE THE DISALLOWANCE OUGHT NOT TO HAVE BEEN SUSTAINED. THE COORDINATE BENCH OF THE ITAT HAS DE CIDED IN ITA NOS. 1535 AND 1552/HYD/2010 DATED 10.05.2013 ON THI S ISSUE. FOLLOWING THE SAID ORDER, THE DISALLOWANCE WAS DIRE CTED TO BE ITA NOS.676 OF 09 AND 411 OF 2010 USHODAYA ENTERPRI SES LTD HYDERABAD PAGE 18 OF 18 DELETED IN A.Y 2005-06 AFTER EXTRACTING THE ORDER A T PARA NO.10 FOR THE A.Y 2005-06 AT PAGES 14 AND 15. RESPECTFULL Y FOLLOWING THE SAME, WE DELETE THE DISALLOWANCE MADE BY THE CI T (A). 16. IN THE RESULT APPEAL FILED BY THE ASSESSEE IN I TA NO.411/HYD/2010 IS TREATED AS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY, 2015. S D/ - S D/ - (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 7 TH JANUARY, 2015. VNODAN/SPS COPY TO: 1. M/S. USHODAYA ENTERPRISES LTD., 6-3-570 SOMAJIGUDA, HYDERABAD 2. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD 3. THE CIT(A) V HYDERABAD 4. THE CIT IV HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER