Case Law Details
ITAT DELHI BENCH ‘B’
Assistant Commissioner of Income-tax, Circle 10(1), New Delhi
versus
Dixon Technologies (I) (P.) Ltd.
IT Appeal Nos. 30, 1256 & 1274 (Delhi) of 2010 and
3489 & 5032 (Delhi) of 2012
[ASSESSMENT YEARS 2004-05 & 2006-07 to 2009-10]
MARCH 8, 2013
ORDER
Rajpal Yadav, Judicial Member
The present five appeals are directed at the instance of revenue against the orders of Learned CIT (Appeals) dated 04.01.2010, 15.10.2010, 23.04.2012 and 02.07.2012 passed for assessment years 2004-05, 2006-07 to 2009-10 respectively. Since common issues are involved in all the appeals, therefore, we heard them together and deem it appropriate to dispose of them by this common order.
2. The first common ground involved in all these appeals relates to allow ability of deduction under sec. 80-IB/80-IC to the assessee in all these years. The facts on all vital points are common, therefore, for the facility of reference, we are referring the facts mainly from assessment years 2004-05 and 2006-07.
3. The brief facts of the case are that assessee filed its return of income in assessment year 2004-05 on 1st of November, 2004 declaring an income of Rs. 238,82,550. The case of the assessee was selected for scrutiny assessment and a notice under sec. 143(2) of the Income-tax Act, 1961 was issued on 04.08.2006. This notice was duly served upon the assessee and in response to the notice Shri Sanjay Jaswani, Assistant Vice-President (Finance) appeared on behalf of the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer that assessee has claimed a deduction of Rs. 34,50,925 under sec. 80-IB of the Income-tax Act, 1961. In assessment year 2006-07 on wards, such deduction has been claimed under section 80-IC of the Act. It is pertinent to note that return in assessment year 2006-07 was filed on 15.11.2006 declaring an income of Rs. 159,53,822. The assessee has claimed a deduction of Rs. 608,33,742 under sec. 80-IC of the Act. The facts relating to the claim of deduction under secs. 80-IB and 80-IC are that assessee has established two units, namely, Unit No. 1 which was set up in December, 2003 is engaged in manufacturing/production of air conditioner and microwave oven. It has established Unit No. 2 in November, 2004 and this unit is engaged in manufacture/production of DVDS. According to the assessee, both the units are independent and separately eligible for deduction under sec. 80-IB/80-IC of the Act.
4. Learned Assessing Officer has denied the deduction to the assessee primarily for two reasons. He has held that assembling of parts for the air-conditioners or microwave oven do not constitute manufacturing activities and, therefore, assessee is not entitled for deduction under sec. 80-IB of the Act. With regard to deduction under sec. 80-IC of the Act, he relied upon his conclusion that assembling of different components does not amount to manufacturing and further observed that one of the units is located in Khasra No. 262MI, Selokni Industrial Area, Vikas Nagar District Dehradun. This number has not been notified as forming part of industrial area, therefore, the unit of the assessee is not situated in an industrial area and assessee is not entitled for deduction under sec. 80-IC of the Act.
5. On appeal, Learned First Appellate Authority has appreciated the facts and circumstances. He observed that assembling of different components for manufacturing an air conditioners is not as simple as construed by the Assessing Officer. Learned First Appellate Authority has reproduced a flow chart indicating the use of raw material and how those raw material have undertaken a change in forming altogether new different products. With regard to the geographical location of the unit objected by the Assessing Officer are concerned, Learned CIT (Appeals) has observed that Assessing Officer has considered only one part of the total revenue estates notified by the CBDT as an industrial estates. Learned Assessing Officer has considered 262 MI Selakni. The first notification is bearing No. 177 dated 28.6.2004. The scope of the industrial area was enhanced in the subsequent notification issued by the CBDT on 26.4.2006 vide Notification No. 115. The CBDT has notified Central Hope Town and Camp Road in the list of areas notified as forming part of the industrial estates. Selakni Industrial Area does fall under the revenue estate of Hope Town, which is a bigger revenue estates. Learned First Appellate Authority has relied upon the report of Patwari i.e. State Revenue Official of Uttrakhand.
6. With the assistance of learned representatives, we have gone through the record carefully. In order to avail deduction under section 80-IC, an assessee has to fulfil the conditions contemplated in the section. Therefore, before considering the respective contentions as well as the relevant material, it is imperative upon us to take note of the relevant statutory provisions. The relevant part of section 80-IC, thus reads as under:
“Special provisions in respect of certain undertakings or enterprises in certain special category States.
80-IC. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3).
(2) This section applies to any undertaking or enterprise,
(a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning
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(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Center or Industrial Growth Center or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or
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(b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning
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(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh of the State of Uttaranchal; or
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(3) The deduction referred to in sub-section (1) shall be
(i) in the case of any undertaking or enterprise referred to in sub-clauses (i) and (iii) of clause (a) or sub-clauses (i) and (iii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for ten assessment years commencing with the initial assessment year;
(ii) in the case of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains”.
7. Sub-section (2) of section 80-IC of the Act provides that provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, applied to the eligible undertaking or enterprises under this section. Thus, we deem it fit to note down sub-section (5) and sub-sections (7) to (12) of section 80-IA also. They read as under:
“Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made.
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(7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.
(8) Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date :
Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit.
Explanation.— For the purposes of this sub-section, “market value”, in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market.
(9) Where any amount of profits and gains of an undertaking or of an enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this Chapter under the heading “C.—Deductions in respect of certain incomes“, and shall in no case exceed the profits and gains of such eligible business of undertaking or enterprise, as the case may be.
(10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom.
(11) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertaking or enterprise with effect from such date as it may specify in the notification.
(12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger—
(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place;
(12A) Nothing contained in sub-section (12) shall apply to any enterprise or undertaking which is transferred in a scheme of amalgamation or demerger on or after the 1st day of April, 2007.
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8. From the bare perusal of the section would reveal that sub-section (1) of section 80-IC provides a deduction in respect of profit and gains derived by an undertaking or enterprises from any business referred to in sub-section (2), while computing the total income of an assessee. Sub-section (2) has further sub-sections and in the case of assessee, the clause applicable is 80-IC2(a)(ii) which provide that assessee has begun or begins to manufacture any article or thing, which are not specified in Thirteenth schedule. It means assessee should not manufacture any article or thing which is specified in thirteenth schedule. Apart from this, the activity of manufacture should commence between the period 7th day of Jan 2003 and ending on 1st April 2012. It should be at the place notified by the Board in accordance with the scheme. The difference between both the clause is that under clause ‘b’, the article should be one, which is provided in fourteenth schedule and area i.e. Industrial Park, Industrial Centre need not be notified. The assessee has not manufactured any article or thing, which provided in thirteenth schedule. It is situated in Industrial Estate, thus it falls in section 80-IC(2)(ii) of the Act. As far as the other deduction, sub-section (4) laid down the conditions that undertaking or enterprises should not be formed by splitting up or the reconstruction, of a business already in existence. However, this condition would not be applicable in respect of an undertaking which is formed as a result of the re-establishment or reconstruction or revival of the business of an assessee as provided in section 33B of the Act. Similarly, it is not formed by the transfer to a new business of machinery or plant previously used for any purposes. Since there is no dispute that these conditions are not attracted in the case of the assessee, therefore, we do not deem it necessary to make elaborate discussion. At the time of hearing, it has been pointed out that there is no violation to any other conditions contained in sub-rules (5) to (12) of section 80-IA of the Act (extracted supra).
9. The primary issue required to be determined, is when assessee came into existence and whether geographically it is located with the notified area contemplated in sub-clause (ii) of sec. 80-IC(2)(a) or (2)(b).
10. From perusal of the record, we find that learned Assessing Officer has not objected about period of starting of manufacture. The assessee has also submitted that Unit 1 was started in December 2003 and Unit No. 2 was started in 2004. The objections of the Assessing Officer are that assembling do not constitute manufacturing and assessee’s units are not located in notified area. Let us examine these two factors.
11. The next step which is essential for examining the case of an assessee about the admissibility of deduction under sec. 80-IC is whether it manufactures or produces any article or things. According to the Assessing Officer, expression “manufacture” has been defined in section 2(29BA) which read as under:
“(29BA) ‘manufacture’, with its grammatical variations, means a change in a non-living physical object or article or thing,-
(a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or
(b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure”.
However, expression “production” has not been defined in the Act. The stand of the revenue authorities is that at the most activity carried out by the assessee is of assembling. The learned counsel for the assessee pointed out that expression “manufacture” as well as production have fallen for their interpretation and construction not only at the level of ITAT but before the Hon’ble Supreme Court also and the Hon’ble Court has explained both these expressions in detail. He made reference to the decision of Hon’ble Supreme Court in the case of ITO v. Arihant Tiles & Marbles (P.) Ltd. [2010 320 ITR 79, India Cine Agencies v. CIT [2009] 308 ITR 98, CIT v. Sesa Goa Ltd. [2009] 271 ITR 331. In his written submissions, he also referred a large number of other decisions rendered by Bombay High Court, Hon’ble Gujarat High Court in the cases of CIT v. Nee Pharma (P.) Ltd. [1982] 137 ITR 879, CIT v. Anglo French Drug Co. (Eastern) Ltd. [1991] 191 ITR 92, CIT v. Prabhudass Kishordas Tobacco Products (P.) Ltd. [2006] 282 ITR 568.
12. As observed earlier, we would be reverting back to the facts of the present case in the later part of the order. First, we would like to bring at home the meaning of expression “manufacture and production” as propounded in the various authoritative pronouncements of the Hon’ble Supreme Court as well as of Hon’ble High Court.
13. In the case of India Cine Agencies (supra), Hon’ble Supreme Court has considered the judgment rendered in the case of Sesa Goa Ltd. (supra) and all other decisions on the point which contemplate the meaning of expression “manufacture” as well as “production”. The relevant discussion made by the Hon’ble Court reads as under:
“2. As noted above, the core issue is whether activity undertaken was manufacture or production.
3. In Black’s Law Dictionary (5th Edition), the word ‘manufacture’ has been defined as, “the process or operation of making goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine”. Thus by process of manufacture something is produced and brought into existence which is different from that, out of which it is made in the sense that the thing produced is by itself a commercial commodity capable of being sold or supplied. The material from which the thing or product is manufactured may necessarily lose its identity or may become transformed into the basic or essential properties. (See Dy. CST (Law), Board of Revenue (Taxes) Coco Fibres [1992] Supp. 1 SCC 290).
4. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour arid manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. (See Collector of Central Excise v. Rajasthan State Chemical Works [1991] 4 SCC 473).
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7. To put it differently, the test to determine whether a particular activity amounts to “manufacture’ or not is: Does a new and different good emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes ‘manufacture’ takes place and liability to duty, is attracted. Etymologically the word ‘manufacture’ properly construed would doubtless cover the transformation. It is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view, is a question depending upon the facts and circumstances of the case. (See Empire Industries Ltd v. Union of India [1985] 3 SCC 314).
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14. In this case, assessee was carrying on business of conversion of Jumbo Rolls of photographic films into small flats and rolls in desired sizes. It claimed deduction under secs. 80-HH and 80-I as well as investment allowance under sec. 32AB. The controversy arose whether conversion of jumbo rolls into small sizes amounts to manufacture or production, eligible for deduction under sec. 32AB or deduction under sections 80-HH and 80-I of the Income-tax Act, 1961/ Hon’ble Supreme Court has held that this activity amounts to manufacture or production. Thus, we think it is not necessary to recapitulate and recite all the decision on the construction expression “manufacture”. But suffice to say that core of all the decisions of the Hon’ble Supreme Court or Hon’ble High Court is to the effect that broadly manufacture is a transformation of an article, which is commercially different from the one which is converted. It is a change of one object to another for the purpose of marketability. It brings something into existence, which is different from that, which originally existed. The new product is a different commodity physically as well as commercially. The Hon’ble Court also explained broader test to determine whether manufacture is there or not, it is propounded that when a change or series of changes are brought out by application of processes which take the commodity to the point where, commercially, it cannot be regarded as the original commodity but is, instead recognized as a distinct and new article that has emerged as a result of the process. Hon’ble Delhi High Court has also considered this issue in the case of CIT v. Jackson Engineers Ltd. [2012] 341 ITR 518. In this case, assessee was manufacturing diesel generating set. Learned Assessing Officer has concluded that assembling of diesel generating set does not constitute manufacturing. Hon’ble Delhi High Court has held that assembling of diesel generating set tantamounts to manufacture/production and is eligible for deduction under sec. 80-IA of the Act. Similarly, Hon’ble Guahati High Court in the case of CIT v. I. Tech. Electronics [2012] 341 ITR 533 has considered a similar issue, wherein it has been held that assembling of colour TV by purchasing and assembling items like cabinet, chassis, ICs, picture tube etc. tantamounts to manufacturing activity. Learned First Appellate Authority has considered a flow chart wherein it was demonstrated that for manufacturing air conditioners inputs required are (a) base (b) motors (c) coil (d) gas (e) condensers etc. Apart from these, a compressor would also be required. Learned First Appellate Authority has observed that AC does not merely involved assembling. The assessee has to carry out various operations/activities on each of the components before the same could be utilized. Thus, the alleged assembling of air conditioner, DVD, microwave would fall within the ambit of expression “manufacture”.
15. The next objection of the Assessing Officer is about the geographical location of the assessee’s unit. We have perused the record carefully and find that learned Assessing Officer failed to construe the revenue record in right perspective. He has compared the khasra number with a restricted approach. It has been demonstrated before us that the Board has extended the scope of industrial estates by the last notification bearing No. 115 dated 26.4.2006 which is applicable from earlier period also. The Board has simplicitor removed the confusion. In the latest notification, larger area has been shown as a industrial estates which includes khasra number 262 MI Selokni. The area according to the new notification includes the areas which were already notified plus Central Hope down. The learned counsel for the assessee has placed on record report of the Patwari, wherein he has submitted that khasra No. 262 MI is part of khasra No. 262. Learned Assessing Officer was considering khasra No. 262 and 262 MI as independent khasra number. The copy of the site plan available in the revenue record, exhibiting the geographical location of each killa number and khasra number was also filed before the Learned GIT(Appeals) along with patwari’s report and this document has been placed before us also. Therefore, we are convinced that there is no confusion about the location of assessee’s units. They are situated within the notified area.
15.A Learned Assessing Officer has not raised any other objection. The basic conditions for allowability of deduction under sec. 80-IB are also similar. Learned Assessing Officer except pointing out these two objections has not pointed out any other objection in assessment year 2004-05 also. Therefore, after taking into consideration the orders of the Learned CIT(Appeals) in all the assessment years, we do not find any error in them on the issue of granting deduction under sec, 80-IB/80-IC of the Income-tax Act, 1961. We reject all these grounds of appeal in all the years.
16. Now, we take the remaining grounds of appeal in each assessment year. Next ground of appeal in assessment year 2004-05 is inter-connected with ground No.3 of the revenue’s appeal in assessment year 2006-07. The grievance of the revenue is that Learned CIT(Appeals) has erred in deleting the disallowance of Rs. 2,38,416 in assessment year 2004-05 and Rs. 9,58,563 in assessment year 2006-07. The brief facts of the case are that in assessment year 2004-05, assessee has claimed a deduction of Rs. 9,53,666. The assessee submitted that these amounts have been written off by it on the ground that it had given advances to various firms/companies for job contracts. The advances were given in the normal course of business. However, these parties have failed to carry out the job work or repay the amount It was a genuine business expenditure and, therefore, assessee has written off these advances. Learned Assessing Officer has disallowed 25% of the expenses and made an addition of Rs. 2,38,416.
17. In assessment year 2006-07, the assessee has claimed a deduction of Rs. 9,58,563. This amount consists of two components. Sum of Rs. 3,84,343 represents bad debts and sum of Rs. 5,77,532 represents the advances given by the assessee to 30 parties for job work/supply of parts. This amount of Rs. 5,77,532 is similar to that of Rs. 9,53,666 claimed in assessment year 2004-05. Learned Assessing Officer has disallowed the claim of bad debts on the ground that assessee failed to prove whether debts have actually gone bad or not? With regard to the expenses of Rs. 5,77,532, Assessing Officer has observed that the assessee failed to certify as to how the conditions laid down in the sec. 36(l)(vii) read with sec. 36(2) of the Income-tax Act, 1961 were satisfied for claiming the deduction. Learned First Appellate Authority has admitted additional evidence and called for a remand report of the Assessing Officer. He observed that sum of Rs. 5,77,532 is an amount receivable from 30 parties. In the details submitted by the assessee, the purpose of payment of advance has been disclosed. According to the Learned CIT(Appeals) on perusal of the details, it is noticed that various items mentioned in the list which is to be supplied by these parties consist of various parts, which the assessee would normally be consuming in its day-to-day business. After satisfying himself with the nature of amounts debited by the assessee, details of parties to whom advances were given and how these advances were directly linked with the business of the assessee, learned CIT(Appeals) has allowed the deduction.
18. Learned DR relied upon the order of the Assessing Officer. On the other hand, learned counsel for the assessee relied upon the order of the Learned CIT(Appeals).
19. On due consideration of the facts and circumstances, we find that learned Assessing Officer neither discussed the nature of amounts claimed by the assessee nor discussed how they are not connected with the business of the assessee. In a finding running into few lines, he simply observed that the assessee failed to explain how conditions of sec. 36(l)(vii) read with sec. 36(2) are fulfilled. On the other hand, Learned CIT(Appeals) has observed that in assessment year 2006-07, the total claim made by the assessee has two components, one of the components is bad debt written off. With regard to this issue, we are of the view that and after 01.04.1989, assessee is not supposed to give demonstrative evidence that debt has gone bad. It is sufficient if the amounts are written off in the books. A reference can be made to the decision of Hon’ble Supreme Court in the case of TRF Ltd. v. CIT [2010] 323 ITR 397. As far as the other amounts are concerned, they are claimed as written off, but in fact they were the business expenditure, which assessee failed to recover. Learned First Appellate Authority has appreciated the issue in right perspective and we do not find any merit in the grounds of appeal raised by the revenue. Thus, ground No.3 in both the assessment years is rejected.
20. No other ground remains in assessment year 2004-05, hence this appeal is dismissed.
21. In Ground No.2 in assessment year 2006-07, the grievance of the revenue is that Learned CIT (Appeals) has erred in deleting the addition of Rs. 2,59,991.
22. The brief facts of the case are that assessee has debited a sum of Rs. 2,59,991 representing prior period expenses. It was pointed out before the learned Assessing Officer that assessee has declared prior period income in the form of liability written back, amounting to Rs. 13,21,064. The said prior period income was adjusted against prior period expenses amounting to Rs. 2,59,991 and the net prior period income of Rs. 10,61,073 has been offered for tax. Learned Assessing Officer has disallowed the prior period expenses but taxed the prior period income offered by the assessee. Learned CIT (Appeals) has deleted the disallowance on the ground that expenses represent lease rent and telephone expenses. Their liability was crystallized in this assessment year and, therefore, assessee has claimed it. Learned CIT(Appeals) further observed that it is not equitable on the part of the Assessing Officer to tax the prior period income which is otherwise not taxable and to disallow the prior period expenses. Learned CIT(Appeals) has further relied upon the decision of Hon’ble Gujarat High Court rendered in the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT [1995] 213 ITR 523, wherein Hon’ble Court has held that if the liability for an expense is determined and crystallized during a particular year then the same cannot be disallowed as prior period expense, merely on the ground that the expense relates to a transaction of an earlier year. On due consideration of the detailed reasoning given by the Learned CIT(Appeals), we do not find any error in it. Hence, this ground of appeal is rejected.
23. In the result, the appeal for assessment year 2006-07 is dismissed.
24. In Ground No.2 in assessment year 2007-08, grievance of the revenue is that Learned CIT(Appeals) has erred in deleting the addition made on account of disallowance of excess depreciation claimed on computers. In brief, the issue is whether the depreciation on the computer peripheral like UPS, data drive etc. was to be allowed @ 35% or 60%. Learned Assessing Officer has granted the depreciation @ 35% including additional depreciation under sec. 32(l)(iia) of the Act.
25. On appeal, Learned CIT(Appeals) has allowed the depreciation @ 60%. The issue in dispute is squarely covered in favour of the assessee by the decision of Hon’ble Delhi High Court rendered in the case of CIT v. BSES Rajdhani Power Ltd. rendered in ITA No. 1266 of 2010. Hon’ble Delhi High Court has further considered this issue in CIT v. CITI City Maruti Finance Ltd., in ITA Nos. 1712 and 1714 of 2010. The ITAT has also considered this aspect in the case of ITO v. Samiran Majumdar [2006] 98 ITD 119 (Kol.). The learned counsel for the assessee in his written submissions has placed on record a larger number of judgments as well as the citation on this issue. Taking into consideration the order of the Learned CIT(Appeals) and the submissions made by the respective representatives, we are of the view that the issue regarding allowance of depreciation @ 60% on computer and peripheral is settled by the Hon’ble Delhi High Court and Learned CIT(Appeals) has rightly followed the decision of the jurisdictional High Court. This ground of appeal is rejected.
26. In ground No.3, grievance of the revenue is that Learned CIT(Appeals) has erred in deleting the disallowance of Rs. 11,75,769 and Rs. 66,636 which are representing employees contribution to employees PF and ESI. In brief, the dispute is, whether employees contribution paid to PF and ESI accounts after the due dates provided under the respective acts can be allowed as a deduction or not? Hon’ble Delhi High Court in the case of CIT v. PM Electronics Ltd. [2009] 313 ITR 161 and CIT v. AIMIL Ltd. [2010] 321 ITR 508 has held that if the employees contribution was paid before the due date of filing of the return then the deduction of these amounts would be allowed to the assessee. In the present case, Learned First Appellate Authority has considered this aspect and held that payments to the EPF and ESI accounts have been made before the due date of filing of the return. Thus, the issue in dispute is squarely covered in favour of the assessee by the decision of the jurisdictional High Court. We do not find any merit in this ground of appeal.
27. Ground Nos. 1 & 5 are general in nature. No arguments were advanced on these grounds. Therefore, they are rejected.
28. In the result, the appeal for assessment year 2007-08 is dismissed.
29. Ground No. 1 in assessment year 2008-09: In this ground of appeal, revenue has pleaded that Learned CIT(Appeals) has erred in deleting the disallowance of Rs. 98,482. With the assistance of learned representatives, we have gone through the record carefully. This ground is inter-connected with ground No.2 taken in assessment year 2007-08. The issue in this ground is, at what rate depreciation upon computers and peripherals would be admissible. Learned Assessing Officer has held that depreciation is admissible @ 35% whereas as assessee has claimed the depreciation @ 60%. Learned Assessing Officer has made the disallowance out of the claim of depreciation by applying the rate of 35%. Learned CIT(Appeals) after following the decision of Hon’ble Delhi High Court in the case of BSES Rajdhani Power Ltd. (supra) has held that depreciation would be admissible @ 60%. The similar disallowance was made by the Assessing Officer in assessment year 2007-08. We have considered this issue in ground No.2 of the revenue’s appeal. After following the order of the ITAT in the case of Samiran Majumdar (supra) and the decision of jurisdictional Hon’ble High Court in the case of BSES Rajdhani Power Ltd. (supra), we have rejected the ground of appeal raised by the revenue. Accordingly, we do not find any merit in this ground of appeal also. It is dismissed.
30. In the next ground of appeal, revenue has objected allowance of deduction under sec. 80-IC of the Act. We have already considered this issue in the foregoing paragraphs of this order. This ground has been rejected by us. Hence the appeal in assessment year 2008-09 is dismissed.
31. In assessment year 2009-10, the only issue involved is grant of deduction under sec. 80-IC of the Income-tax Act, 1961. This issue we have already discussed in the preceding paragraphs and we have already rejected. Hence, the appeal in assessment year 2009-10 is dismissed.
32. In the result, all the appeals filed by the revenue are dismissed.
