Case Law Details
Fastway Transmission (P) Ltd. Vs ACIT (ITAT Chandigarh)
Conclusion: Set top boxes was the property of CISCO which was taken by assessee on lease from CISCO against payment of lease charges thus assessee was not entitled to claim the principal component of alleged lease rent paid as ‘revenue expenditure’ u/s 37(1) however, entitled to claim depreciation @60% on the said assets acquired on Finance Lease.
Held: Assessee was engaged in the business of Multi System Operators and Digital Cable Services (DCS). DCS services were rendered to the customers through set top boxes. During the course of assessment proceedings, AO noticed that assessee had entered into a financial lease agreement with M/s CISCO Capital System India Pvt. Ltd. for supply of Set Top Boxes (STB) and Head Ends. AO further noted that CISCO was a Non-Banking Finance Company (NBFC) registered with Reserve Bank of India and was in the business of providing different types of loans on assets/equipments to its customers.
AO found that assessee had entered into the said agreement with CISCO through Master Lease Finance Agreement wherein the lease term was 48 months for the supply of STBs and Head ends. Assessee had pleaded that the assets / equipment in question was the property of CISCO which was taken by assessee on lease from CISCO against payment of lease charges; Whereas, the sum and substance of AO had been that the transaction in fact, was a finance lease as defined by the ICAI in its AS-19.
Accordingly, AO disallowed the claim of deduction of the Principal component of the lease rentals made by the assessee and allowed depreciation @ 15% on the leased assets, thus resulting in an addition. He rejected the alternate contention of the assessee that the STB would fall within the definition and scope of computers, hence, depreciation on the same should be granted @ 60% as provided under I.T. Rules, 1962.
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