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ACIT, Circle 12(1), New Delhi. Vs. HT Media Ltd., 18-20, KG Marg, New Delhi.
March, 19th 2015
       IN THE INCOME TAX APPELLATE TRIBUNAL
            DELHI BENCHES : C : NEW DELHI

  BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM

                       ITA Nos.2508, 2507/Del/2013
                   Assessment Years : 2006-07 & 2007-08

                          ITA No.986/Del/2012
                        Assessment Year: 2008-09


ACIT,                               Vs. HT Media Ltd.,
Circle 12(1),                           18-20, KG Marg,
New Delhi.                              New Delhi.
                                        PAN: AABCH3165P

                      ITA Nos.2203 & 2202/Del/2013
                   Assessment Years: 2006-07 & 2007-08

                          ITA No.340/Del/2012
                        Assessment Year : 2008-09

HT Media Ltd.,                      Vs. ACIT,
18-20, KG Marg,                         Circle 12(1),
New Delhi.                              New Delhi.
PAN: AABCH3165P

  (Appellant)                               (Respondent)


                Assessee By     :    Shri V.P. Gupta, Advocate
                Department By   :    Shri RIS Gill, CIT, DR
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.




         Date of Hearing                :   16.03.2015
         Date of Pronouncement          :   18 .03.2015


                                ORDER
Per Bench:
     These six cross appeals ­ three by the assessee and equal number

by the Revenue relate to the assessment years 2006-07, 2007-08 and

2008-09. Since some common issues are raised in these appeals, we are,

therefore, disposing of these appeals by this consolidated order for the

sake of convenience.

Assessment Year : 2006-07

2.   The only issue raised by the Revenue through various grounds is

against the disallowance u/s 14A of the Income-tax Act, 1961

(hereinafter also called `the Act') . The first grievance in this regard

through ground number 1 is against the holding by the ld.CIT(A) that:

`proportionate disallowance out of interest is not to be made by ignoring

the fact that though investments were made in the immediately

preceding assessment year out of interest bearing funds.'
                                    2
                                             ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                         ITA Nos.986 & 340/Del/2012.

3.   Briefly stated, the facts of the case are that the assessee filed return

declaring dividend income of Rs.1,68,07,438/- which was claimed as

exempt. No disallowance was offered u/s 14A. On being called upon to

explain as to why no disallowance was offered under this section, the

assessee submitted that its main source of income was advertisement

revenue, sale of newspapers and periodicals and, hence, no specific

expenses were incurred for earning the exempt dividend income. The

AO rejected the assessee's contention. Applying rule 8D(2)(iii), the AO

made disallowance equal to ½% of the average of the value of

investments. This resulted into an addition of Rs.41,32,830/-. The ld.

CIT(A) came to hold that rule 8D was not applicable to the assessment

year under consideration. Considering the Tribunal order passed for the

immediately preceding year, the ld. CIT(A) upheld the disallowance to

the tune of Rs.8,11,948/- by considering the total expenditure of Rs.2.88

crore incurred in the current year, being the cost of Finance department

and remuneration of CFO and Directors and, thereafter, allocating it in




                                     3
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

the ratio of exempt income to taxable income. The remaining amount of

disallowance was deleted in the first appeal.

4.   We have heard the rival submissions and perused the relevant

material on record. It is observed that the assessment year under

consideration is 2006-07 and, hence, rule 8D cannot be applied for

making disallowance u/s 14A of the Act. Our view is fortified by the

judgment of the Hon'ble jurisdictional High Court in the case of Maxopp

Investment Ltd. Vs. CIT (2012) 347 ITR 272 (Del. It has been laid down

in this judgment that the provisions of rule 8D can apply only from the

AY 2008-09 and in a period anterior to that, the disallowance is to be

made on a reasonable and acceptable method of apportionment.

Adverting to the facts of the instant case, we find that the AO principally

made disallowance under clause (iii) of rule 8D(2) towards

administrative and other expenses incurred in earning the exempt

income, by picking up rate of disallowance at 0.5% of the average of

the value of investments. There is no specific disallowance made by the

AO on account of interest expenditure. It is manifest that the ld. CIT(A)


                                     4
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

has sustained disallowance by apportionment of total of such

expenditure in the ratio of exempt income to taxable income. In view of

the fact, that neither the AO made any disallowance on account of

interest under section 14A nor did the ld. CIT(A) go into this aspect by

making any enhancement etc., ground no.1 raised by the Revenue for

sustenance of disallowance towards interest is held to be not arising

from the impugned order.

5.   As regards Ground nos.dfgh2 and 3, the Revenue is aggrieved

against the apportionment of common expenses of Rs.2.88 crore

between exempt income and taxable income and, further, the failure of

the ld. CIT(A) to consider proportionate amount of depreciation

attributable to furniture, fixture, vehicles, printers and fax machine as a

part of the base amount determined at Rs.2.88 crore.

6.   It is manifest from the impugned order that the allocation of total

expenses has been made in the ratio of exempt income to taxable

income. The Revenue argued before the Tribunal in the preceding year

that the disallowance u/s 14A ought to have been made on the basis of

                                     5
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

exempt income and taxable income and not the exempt income and

gross sales.    The viewpoint of the Revenue canvassed for the

immediately preceding year seems to have been accepted by the ld.

CIT(A) who chose to apportion total expenses in the ratio of exempt

income to `taxable income' instead of gross sales. The ld. DR could not

point out any other more suitable basis for apportioning expenses

towards exempt income. We, therefore, approve the view taken by the

ld. CIT(A) in making apportionment of total expenses in the ratio of

exempt income to taxable income.

7.   As regards the third ground, it is apparent that while taking the

expenditure of Rs.2.88 crore liable to be bifurcated between exempt

income and taxable income, the ld. CIT(A) did not consider the

proportionate amount of depreciation, which is otherwise required to be

considered.    The ld. DR argued that such proportionate amount of

depreciation to be included in the amount of disallowance worked out by

the ld. CIT(A) at Rs.8,11,948/-, should not be less than Rs.50,000/-. The

ld. AR did not raise any objection to this. As such, accepting the view


                                    6
                                             ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                         ITA Nos.986 & 340/Del/2012.

point of the ld. DR, we increase the disallowance u/s 14A to

Rs.8,61,948. Whereas ground no.2 is not allowed, ground no.3 is partly

allowed.

8.   Ground no. 4 is against the addition of disallowance of Rs.8,11,948

in the computation of income u/s 115JB. The ld. AR did not agitate this

issue and fairly conceded that the amount disallowable u/s 14A should

be properly considered while computing income u/s 115JB.                       We,

therefore, direct that the amount of disallowance u/s 14A at

Rs.8,61,948/- should be added while computing book profit u/s 115JB.

It is but natural that only such amount in this regard can be added in the

computation u/s 115JB, which is exempt u/s 14A. Nothing over and

above that calls for further addition on this score.

9.   The only ground taken by the assessee in this appeal about the

sustenance of disallowance of depreciation amounting to Rs.68,000/- on

motor vehicle was not pressed by the ld. AR. The same is, therefore,

dismissed.



                                      7
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

10.   In the result, the appeal filed by the Revenue is partly allowed and

that of the assessee is dismissed.

Assessment Year : 2007-08

11.   The first ground of the assessee's appeal was not pressed. The

same is, therefore, dismissed.

12.   The only other ground which survives in this appeal is against the

confirmation of disallowance of club expenses of Rs.5,37,384/-.

13.   Briefly stated, the facts apropos this ground are that the assessee

claimed deduction for club expenses amounting to Rs.5,37,384/- which

was not allowed by the AO. The ld. CIT(A) sustained the disallowance.

14.   After considering the rival submissions and perusing the record,

we find that this issue is no more res integra in view of the judgment of

the Hon'ble Supreme Court in the case of CIT vs. United Glass

Manufacturing Company Ltd. 2012-TIOL-102-SC-IT, in which it has

been held that the club membership fee for employees incurred by the

assessee is business expenditure allowable u/s 37 of the Act. The facts

                                     8
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

of the instant case are on all fours with the ratio laid down by the

Hon'ble Supreme Court in this case. We, therefore, allow this ground of

appeal.

15.   The first issue raised by the Department in its appeal through some

grounds is against the reduction in the amount of disallowance u/s 14A.

16.   Briefly stated, the facts of the ground are that the assessee made

investment during the year under consideration in the securities yielding

exempt income and earned dividend of Rs.2,37,38,831/-, which was

claimed as exempt. No disallowance was offered u/s 14A. The reasons

advanced during the course of the assessment proceedings for not

offering any disallowance under this section were rejected by the AO

vide para 3.3 of the assessment order. Thereafter, the AO invoked rule

8D for making disallowance u/s 14A. The first disallowance was made

at Rs.1,04,89,137/- towards interest and the second disallowance of

Rs.1,09,34,433/-, being ½% of the average value of investment as per

rule 8D. The total disallowance was made u/s 14A at Rs.2,14,23,570/-.

The ld. CIT(A), following the view taken by him in apportioning the

                                    9
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.




total expenses in the ratio of exempt income to taxable income,

sustained disallowance towards administrative and other expenses at

Rs.8,39,534/-. The other part disallowed by the AO towards interest was

deleted by noting in the last para on page 5 of the impugned order that

no borrowed funds were utilized by the company in investments made

by it and such investments were `made out of own funds of the

company.' Accordingly, no interest was disallowed. The Revenue is

aggrieved against the reduction in the addition.

17.   After considering the rival submissions and perusing the relevant

material on record, we find that the disallowance u/s 14A made by the

AO in this year has two components viz., interest and other expenses. In

so far as interest aspect is concerned, the AO made disallowance of

interest amounting to Rs.1,04,89,137/- by applying rule 8D(2)(ii),

which the ld. CIT(A) deleted by observing that the assessee had its own

capital to finance the investment in securities fetching exempt income.

The finding recorded by the ld. CIT(A) that investment in securities

yielding exempt income was made out of own capital of the assessee and


                                    10
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

no interest bearing funds were utilized, have not been controverted by

the ld. DR with any cogent material or evidence. The question arises, as

to whether any disallowance towards interest can be made u/s 14A in the

absence of any investment having been made in such securities out of

interest bearing funds.

18.   Recently, the Hon'ble Bombay High Court in CIT Vs. HDFC Bank

Ltd. (2014) 366 ITR 505 (Bom) has held that no disallowance of interest

can be made u/s 14A if the assessee's own capital is more than the

investments fetching exempt income. Similar view has been taken by the

Hon'ble Gujarat High Court in CIT Vs. Suzlon Energy Ltd. (2013) 354

ITR 630 (Guj). In view of these precedents, it becomes ostensible that

there can be no question of disallowance of interest u/s 14A in this case

because the amount of share-holders fund is much higher than the

amount of Investments yielding exempt income. As such, we uphold the

view taken by the ld. CIT(A) in deleting disallowance u/s 14A on

account of interest.




                                   11
                                              ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                          ITA Nos.986 & 340/Del/2012.

19.   The second component of            the disallowance is          out of the

administrative and other expenses, made by the AO at ½% of the

average value of investments and reduced by the ld. CIT(A) to

Rs.8,93,534/-. In this regard, we find that the ld. CIT(A) has followed

the same yardstick of apportioning total expenditure in the ratio of

exempt income : taxable income, which has been upheld by us for the

earlier year. We, therefore, approve the apportionment of expenses in

the ratio of exempt income to taxable income. However, as regards the

non-consideration of depreciation on furniture, fixture, vehicle, etc., we

increase the amount of disallowance by Rs.1 lac to Rs.9,39,534/-. This

disposes of ground nos.1 to 3 taken by the Revenue.

20.   As regards, the fifth ground, the ld. AR did not agitate the addition

of Rs.9,39,534/- in the computation of book profit u/s 115JB relatable to

exempt dividend income. This ground is disposed of accordingly.

21.   The fourth ground of the Revenue's appeal is against the direction

of the ld. CIT(A) to exclude the fringe benefit tax of Rs.3.65 crore from

the net profit while computing book profit u/s 115JB of the Act.

                                    12
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

22.   Briefly stated, the facts of this ground are that the assessee

deducted amount of fringe benefit tax amounting to Rs.3.65 crore in the

computation of book profit for the purposes of section 115JB of the Act.

The AO did not approve the action of the assessee. However, the ld.

CIT(A), relying on CBDT Circular 08/2005 dated 29.8.2005, accepted

the assessee's claim.

23.   We have heard the rival submissions and perused the relevant

material on record. It is observed that the decision taken by the ld.

CIT(A) accords with the mandate of Circular issued by the CBDT. The

ld. DR was fair enough to concede this position.            This ground is,

therefore, not allowed.

24.   Ground no. 6 is against the deletion of disallowance of training

expenses amounting to Rs.2,08,90,762/-.             The AO made the

disallowance of training expenses amounting to Rs.2.08 crore incurred

by the assessee, by treating it as a capital expenditure. The ld. CIT(A),

however, directed to consider it as revenue expenditure.



                                   13
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

25.   After considering the rival submissions and perusing the relevant

material on record, we find that the view taken by the ld. CIT(A) accords

with the judgment dated 27.4.2010 of the Hon'ble jurisdictional High

Court in the case of CIT vs. Solus Pharmaceuticals Ltd., in which it has

been held that the training expenses are to be allowed as revenue

expenses. We, therefore, uphold the view taken by the ld. CIT(A). This

ground fails.

26.   The only other ground which survives for our consideration is

against the allowing of depreciation on computer peripherals at 60%.

27.   We have heard the rival submissions and perused the relevant

material on record. It is observed that the assessee claimed depreciation

on computer peripherals @ 60% which was restricted by the AO to 15%.

The ld. CIT(A), following the judgment of the Hon'ble jurisdictional

High Court in CIT vs. BSES Yamuna Powers Ltd. 2010-TIOL-636-HC-

DEL-IT, accepted the assessee's claim.

28.   Having heard the rival submissions and perused the relevant

material on record, we find that the ld. CIT(A) has taken an appropriate
                                   14
                                             ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                         ITA Nos.986 & 340/Del/2012.

decision on this issue by drawing strength from the judgment of the

jurisdictional High Court which is binding on all the authorities under its

jurisdiction. The Hon'ble Delhi High Court in the case of BSES Yamuna

Powers Ltd.(supra), has held that depreciation on computer peripherals

should be allowed at 60% instead of 15%. We, therefore, uphold the

view taken by the ld.CIT(A) on this issue.

29.   In the result, the appeals of the assessee and the Revenue are partly

allowed.

Assessment Year 2008-09

30.   Ground No.1 of the Revenue's appeal and ground No.1 of the

assessee's appeal is against disallowance u/s 14A.

31.   Briefly stated, the facts of these grounds are that the assessee

earned     income   from   mutual    fund    investments        amounting         to

Rs.2,94,38,025/- which was claimed as exempt. The assessee offered

disallowance at Rs.3 lac in the return of income on account of expenses

disallowable u/s 14A. The AO, during the course of assessment


                                    15
                                             ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                         ITA Nos.986 & 340/Del/2012.

proceedings,     required the assessee to show cause as to why

disallowance be not computed as per rule 8D. In response to that, the

assessee submitted that no expenditure was incurred for earning

dividend income. The AO observed that several expenses were incurred

by the assessee in relation to the exempt income which were not offered

for disallowance. Rejecting the assessee's contention, the AO computed

disallowance as per rule 8D amounting to Rs.8,97,49,579/- consisting of

three amounts, namely, Rs.3 lac, being the amount of expenditure

directly incurred relating to exempt income under clause (i) of Rule 8D

(2); Rs.6,86,27,884/-, being the interest expenditure incurred under

clause (ii) of Rule 8D(2); and Rs.2,08,21,695/-, being the amount equal

to 0.5% of the average value of investments under clause (iii) of Rule

8D(2). When the matter came up before the ld. CIT(A), he held that rule

8D is applicable to the assessment year under consideration. He upheld

the disallowance at 0.5% amounting to Rs.2,08,21,695/- as per clause

(iii) of rule 8D(2). The other additions were deleted. Both the sides are

in appeal on their respective stands.


                                        16
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

32.   We have heard the rival submissions and perused the relevant

material on record. The assessment year under consideration is 2008-09.

As per the judgment of the Hon'ble jurisdictional High Court in the case

of Maxopp Investment (supra), rule 8D is applicable from this

assessment year onwards. As such, the disallowance, if any, u/s 14A is

required to be computed as per rule 8D.

33.   The ld.AR argued that the AO did not record any satisfaction about

the assessee not properly offering expenditure incurred in relation to the

exempt income at Rs.3 lac and, hence, the entire addition be deleted.

We are not convinced with the submission advanced on behalf of the

assessee. It is obvious from para 3.3.1 of the assessment order that the

AO recorded a proper satisfaction about the assessee incurring expenses

in relation to the exempt income and not offering them for disallowance.

At this stage, it would be apposite to reproduce the contents of para 3.3.1

of the assessment order, as under:-

       "3.3.1    It is further observed that the earning of exempt
       income is not in nature of passive activity having no input. In


                                      17
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

        fact in present situation making of investment, maintaining or
        continuing investment and time of exit from investment are
        well informed and well coordinated management decisions
        involving not only inputs from various source but also
        acumen of senior management functionaries. Therefore, cost
        is inbuilt into even so called "passive" investment. There are
        incidental expenditures of collection, telephone, follow up,
        research, etc. Therefore expenses in relation to earning of
        income are embedded in indirect expenses.

       The investment made, being a conscious decision and having

       deployment of funds clearly brings into picture expenditure by way

       of cost of funds "invested." Composite fund having cost needs to

       be spread so as to apportion appropriate cost of funds invested in

       the activity lending to carrying of exempt income."

34.    It can be further noticed that the AO also continued with his

recording of satisfaction in para 3.6, reading as under:-

      "3.6    In view of the facts and circumstances and legal
      position on the issue as discussed above, I am satisfied that
      assessee has incurred expenses to manage its investments
      which may yield exempt income, and assessee grossly failed
                                     18
                                              ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                          ITA Nos.986 & 340/Del/2012.

      to calculate such expenses in a reasonable manner to
      ascertain the true and correct picture of its income and
      expenses.   Therefore, undersigned is left with no option
      except to compute such expenses as per the provisions of
      statute. Accordingly, disallowance is done while applying
      section 14-A r.w. Rule 8D as under:-"

35.    In view of the above categorical satisfaction recorded by the AO,

there can be no scope for accepting the assessee's contention that the

addition so made u/s 14A read with rule 8D be deleted for want of

recording of proper satisfaction by the AO.

36.    The ld. AR argued that the ld. CIT(A) failed in sustaining the

disallowance at 0.5% of the average value of investment towards

administrative and other expenses.       We are not convinced with the

submission advanced by the ld. AR on this score. The obvious reason is

that when rule 8D has come into the picture and has become applicable,

the disallowance is required to be computed with reference to the

mandate given in rule 8D, if the assessee's computation of disallowance

turns out to be incorrect, as has happened in this case. It is only to get


                                    19
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

rid of the rigorous exercise of identifying the amounts incurred in

relation to the exempt income that the delegated legislature has

prescribed the manner of computation of disallowance as per rule 8D.

Since the ld. CIT(A) has sustained disallowance under clause (iii) of rule

8D(2) at 0.5% of the average value of investment, which amount is

obviously much less than the actual expenditure incurred and claimed as

deduction by the assessee, we fail to appreciate the contention for

reducing the amount of such disallowance to a lower level on an ad

hocism. We uphold the disallowance under clause (iii) of rule 8D(2) at

Rs.2,08,21,695/-.

37.   As regards the Revenue's contention about the deletion of

disallowance of interest under clause (ii) of rule 8D(2), we find that the

AO computed disallowance at Rs.6.86 crore, which was deleted by the

ld. CIT(A), impliedly on the premise of the assessee's own capital and

interest bearing funds were more than the investment in the securities

yielding exempt income.




                                    20
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

38.    Recently, the Hon'ble Delhi High Court in CIT vs. Taikisha

Engineering India Ltd. has laid down vide its judgment dated

25.11.2014 that if rule 8D applies then the assessee's claim that interest

is not disallowable on the ground of `own funds', is not acceptable. It

has been laid down by Their Lordships that : ` the decisions relied upon

by the Tribunal in the case of Tin Box Co. 260 ITR 637 (Del), Reliance

Utilities and Power Ltd. 313 ITR 340 (Bom.), Suzlon Energy Ltd. 354

ITR 630 (Guj) and East India Pharmaceutical Works Ltd. 224 ITR 624

(SC) could not be now applicable, if we apply and compute the

disallowance under Rule 8D of the Rules. The said Rule in sub Rule (2)

specifically prescribes the mode and method for computing the

disallowance under Section 14A of the Act. Thus, the interpretation of

clause (ii) to sub Rule (2) to Rule 8D of the Rules by the CIT(A) and the

Tribunal is not sustainable. The said clause expressly states that where

the assessee has incurred expenditure by way of interest in the previous

year and the interest paid is not directly attributable to any particular

income or receipt then the formula prescribed would apply. Under


                                    21
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

clause (ii) to Rule 8D(2) of the Rules, the Assessing Officer is required

to examine whether the assessee has incurred expenditure by way of

interest in the previous year and secondly whether the interest paid was

directly attributable to particular income or receipt. In case the interest

paid was directly attributable to any particular income or receipt, then

the interest on loan amount to this extent or in entirety as the case may

be, has to be excluded for making computation as per the formula

prescribed'. In view of this judgment of the Hon'ble Delhi High Court,

which is a binding precedent for the Delhi Benches of the Tribunal, it is

manifest that the disallowance on account of interest under rule 8D

cannot be deleted simply on the ground that the assessee's capital and

interest free funds are more than the funds invested in securities yielding

exempt income. This judgment is relevant in the context of rule 8D,

which is applicable from the AY 2008-09. Thus, the reasoning given by

us for deleting such disallowance u/s 14A on account of interest for the

immediately preceding year, being the own funds and interest free funds

higher than the amount of investments, cannot be applied to the A.Y.


                                    22
                                             ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                         ITA Nos.986 & 340/Del/2012.

2008-09 onwards, when the mandate of rule 8D has come into force.

Ergo, we find no force in the contention of the ld. AR and the resultant

view canvassed by the ld. CIT(A) that since own capital and interest free

funds exceeded the amount of investments in securities yielding exempt

income, hence no disallowance be made. In our considered opinion, the

ends of justice would meet adequately if the impugned order on this

issue is set aside and the matter is restored to the file of AO for deciding

this aspect afresh, in conformity with the law laid down in Taikisha

Engineering (supra), after allowing a reasonable opportunity of being

heard to the assessee.

39.    In so far as the first component of disallowance at Rs.3 lac is

concerned, we find that it is this amount which was offered by the

assessee voluntarily as disallowable u/s 14A. When the assessee offered

this amount for disallowance, the action of the AO in again adding this

amount under clause (i) of rule 8D amounted to double disallowance to

this extent. We, therefore, order for the deletion of addition to this




                                     23
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

extent and direct that this amount should be reduced from the ultimate

amount determined as disallowable u/s14A.

40.   Before parting with this issue, we want to make it clear that the

assessee earned total exempt income at Rs. 2.94 crore and the

disallowance made by the AO stands at Rs.8.97 crore. The Hon'ble

jurisdictional High Court in CIT vs. Holcim India Pvt. Ltd., vide its

judgment dated 17.10.14, reported in (2014) 90 CCH 681 (Delhi High

Court) and in a couple of other judgments has held that the disallowance

u/s 14A cannot exceed the amount of exempt income. The AO is,

therefore, directed to take into consideration the ratio of these judgments

while computing finally disallowable amount u/s 14A.               The ground

taken by the assessee is dismissed and that by the Revenue is allowed for

statistical purposes.




41.   Ground no. 3 of the Revenue's appeal is against the deletion of

addition of Rs.2,26,02,315/- made by the AO on account of

capitalization of training expenses.



                                       24
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

42.   Both the sides are in agreement that the facts and circumstances of

this ground are, mutatis mutandis, similar to those of ground no. 6 of the

Revenue's appeal for assessment year 2007-08. Following the view

taken hereinabove, we uphold the impugned order in deleting this

disallowance. This ground is not allowed.

43.   Ground no. 4 of the Revenue's appeal is against the deletion of

addition of Rs.15,14,019/- made by the AO on account of club expenses.

Here again we find that similar issue has been decided by us in the

assessee's appeal for the AY 2007-08.         Following the view taken

hereinabove, we uphold the action of the ld. CIT(A) in deleting this

disallowance.

44.   The only issue which survives in the Revenue's appeal is against

the deletion of addition of Rs.1,04,38,807/- made by the AO on account

of depreciation on computer peripherals. The assessee in ground no. 2 is

against not allowing 60% depreciation on `Computer to Plate' (CTP).

45. The facts of these grounds are that the assessee claimed depreciation

on computer peripherals, UPS, etc., @ 60%, which the AO reduced to
                                    25
                                            ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                        ITA Nos.986 & 340/Del/2012.

15%. Apart from that, the assessee claimed additional depreciation @

20% on Computer to Plate which was installed in the factory. The AO

rejected the assessee's contention for allowing depreciation on computer

peripherals at 60% and also repelled the assessee's contention for

allowing additional 20% depreciation on CTP. The ld. CIT(A) accepted

the assessee's claim of allowing depreciation @ 60% on computer

peripherals except CTP, on which rate of depreciation was restricted to

15%, but, additional depreciation @ 20% was granted. Both the sides

are in appeal on their respective stands.

46.   We have heard the rival submissions and perused the relevant

material on record. In so far as the question of allowing depreciation @

60% on computer peripherals is concerned, we find that the view taken

by the ld. CIT(A) is in conformity with the view of the Hon'ble

jurisdictional High Court in BSES Yamuna Power Ltd. (supra).

Following the same, we uphold the action of the ld. CIT(A) in allowing

depreciation at 60% on computer peripherals.




                                     26
                                           ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                       ITA Nos.986 & 340/Del/2012.

47.   As regards the assessee's claim for allowing depreciation @ 60%

on CTP, it is noticed that section 32(1)(iia) of the Act provides for

allowing additional depreciation in the case of any new machinery or

plant acquired and installed after 31.3.2005 by an assessee engaged in

the business of manufacture or production of any article or thing, etc.

The AO has recorded a categorical finding in not accepting the

assessee's claim for additional depreciation to the effect that: `computer

and computer software is out of the ambit of plant and machinery.'

When we look at Appendix to Income-tax Rules, it turns out that Item at

Sr. No. III in new Appendix I is: `Machinery and plant.' Item at Sl. no.

(5) covered under Item III of the Appendix is: `Computers including

computer software.' Thus, it is ostensible that the viewpoint of the AO

that the computers are not to be considered as part of the machinery for

the purpose of additional depreciation, is not sustainable.                  The

legislature has not specifically excluded computers used in factory from

the ambit of `new plant and machinery' eligible for additional




                                    27
                                             ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                         ITA Nos.986 & 340/Del/2012.

depreciation @ 20%. We, therefore, approve the view taken by the ld.

CIT(A) in directing to allow additional depreciation on CTP at 20%.

48.   As regards the assessee's grievance about not allowing

depreciation on CTP at 60%, we are unable to find out anything in the

language of the section or the Rules by which an item of Plant and

machinery which calls for depreciation at a higher rate becomes

ineligible for additional depreciation.     Here is a case in which the

assessee used CTP processor and CTP software for converting the data

of printing plates for use in printing press as master pages. In other

words, CTP performs the functions of receiving and processing data

ready for printing process. The CTP is nothing but part of machinery

used by the assessee in its business of printing press in the factory itself.

Since CTP is otherwise an item of plant and machinery, but, falls under

the broader head of `Computers including computer software,' which is

subject matter of item (5) under the broader heading `III of Appendix I,'

we hold that the assessee is entitled to depreciation on CTP at higher




                                     28
                                                ITA Nos.2508, 2203, 2202, 2507/Del/2012,
                                                            ITA Nos.986 & 340/Del/2012.

rate, in line with other computer peripherals. The Revenue's ground is

dismissed and the assessee's appeal is allowed.

49.       In the result, the Revenue's appeal is partly allowed for statistical

purposes and the assessee's appeal is partly allowed.

          The order pronounced in the open court on 18.03.2015.

               Sd/-                                              Sd/-
    [C.M. GARG]                                     [R.S. SYAL]
 JUDICIAL MEMBER                                ACCOUNTANT MEMBER


Dated, 18th March, 2015.
dk
Copy forwarded to:
     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT

                                                    AR, ITAT, NEW DELHI.




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