Advocate Akhilesh Kumar Sah
DCIT Vs. BSE Ltd. (ITAT Mumbai)
Allowance of depreciation on the basis of consistency: BSE Ltd. case
In DCIT vs. BSE Ltd. & BSE Ltd. vs. ACIT [ITA No. 6224/Mum/2017 & ITA No. 6292/Mum/2017 & ITA No. 693/Mum/2019 (A.Y. 2012-13), decided on 21.08.2019], these two appeals of assessee and one appeal of Revenue arose out of the order of the Commissioner of Income Tax (Appeals)]-3, Mumbai [in short CIT(A)], in appeal No. CIT(A)-3/IT-128/ACIT-2(1)(1)/16- 17 vide dated 07.07.2017. The Assessment was framed by the Asst. Commissioner of Income Tax, Circle 2(1)(1) Mumbai (in short ITO/ AO) for the A.Y. 2012-13 vide order dated 20.03.2015 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
One of the issue/ first in this appeal of assessee in ITA No. 6292/Mum/2017, was against the order of CIT(A) confirming the disallowance of depreciation made by the AO on assets taken on lease from Hewlett Packard Financial Services India Pvt. Ltd. (HPFS). For this assessee had raised the following grounds:
1: – The learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of depreciation of Rs.6,00,00,000/- on assets taken on lease from Hewlett Packard Financial Services Pvt. Ltd. (HPFS).
a) The learned Commissioner of Income-tax (Appeals) [“the CIT(A)”] erred in confirming the action of the Assessing Officer who had disallowed the depreciation of Rs.6,00,00,000/- on the servers purchased in Assessment Year 2011-12 from HPFS under Finance Lease Scheme on protective basis. The learned Commissioner of Income-tax (Appeals) failed to appreciate the fact that the appellant had purchased the assets under Finance Lease Scheme and is therefore the owner of the assets. Your appellant had also paid insurance premium as the owner of the assets and therefore had rightly claimed depreciation of Rs.6,00,00,000/- u/s.32 on the said assets The Assessing Officer therefore be directed to allow the same.
b) Without prejudice to the above, the Commissioner of Income-tax (Appeals) failed to consider the alternate ground of allowing the installment paid during the year to HPFS of Rs.9,65,01 084/- as lease rent as a revenue expenditure on which the appellant had also deducted tax at source. The Assessing Officer therefore be directed to allow the same.”
Briefly stated facts were that the assessee company being a corporate entity came into existence with effect from 19.08.2009 and was registered under the Companies Act, 1956 and was governed along with securities Contract Regulation Act, 1956. The nature of business of the assessee was as under: –
“a) To safeguard the interest of investing public having dealing on the exchange and the trading members.
b) to establish and promote honorable and just practices in securities transactions.
c) To promote, develop and maintain a well regulated market for dealing in securities.
d) To promote industrial development in the country through efficient resource mobilization by way of investigation in corporate securities.”
The assessee had taken server on finance lease from HPFS during the FY 2010-11 relevant to AY 2011-12 for a period of 36 days. As per Accounting Standard 19 (AS-19), the assessee has capitalized the asset and interest on lease payment has been debited to the profit and loss account and claimed depreciation as under: –
