Document Fragment View
Fragment Information
Showing contexts for: Set Top Box in M/S.Kerala Communicators Cable Ltd, ... vs The Acit, Circle-1(1), Thrissur, ... on 30 April, 2019Matching Fragments
"26. The depreciation so claimed requires to be disallowed as no capital expenditure is incurred for the asset and the cost of the set top box is deemed to have been collected along with installation charges since admittedly the cost of STB's is negligible. It is claimed by the assessee's A.R that the charges so collected are installation charges and 100% depreciation is claimed on set top boxes since the assessee is not having control over the same after handing over the possession to the customer. The assessee's A.R admits that physical possession of the set top boxes is handed over to the customer, charges for the STB's are collected from the customers in the name of installation charges, the cost factor of set top box is admittedly negligible, and Set top box has no resale value in the market. Therefore, expenditure is revenue in nature. Hence there is no necessity to claim, capital expenditure and depreciation on the same. When this was pointed out, the assessee's A.R, furnished a revised depreciation statement claiming depreciation on set top boxes @ 80% in place of 100% claimed, which comes to Rs.35,16,93,816/-. The A.R. stated that the assessee has to attend to the repairing work of the set top boxes as and when needed and the deprecation has been claimed as the possession of M/s.Kerala Communicators Cable Ltd.
distribution management systems for power transmission systems".
The Set Top Box is not coming under any of the categories mentioned above. Hence depreciation on the same is applicable at the rate of 15% only. As per TRAI regulations dated 01.04.2015 the depreciation on the price of customer premises equipment (which included Set Top Box and remote control for Set Top Box) shall be calculated using straight line method at the rate not exceeding 1.7% for every completed calendar month or part thereof. Thus the rate of depreciation at the rate of 15% allowed by Assessing Officer treating the same as Plant and Machinery is as per the provisions of the Act and in tune with TRAI regulations. Depreciation claimed by the assessee under Rule 8(ix)(E)(k) is not applicable to Set Top Box, a device connected to a TV and which allows a subscriber to receive in unencrypted and descrambled form subscribed channels through an addressable system.
Assessing Officer. The Ld. AR submitted that expenses incurred on purchase of set top boxes is revenue expenditure and it is to be allowed. The assessee claimed expenses on purchase of set top boxes as revenue expenditure. The assessee had raised this issue before the CIT(A). This issue was discussed by the CIT(A) in para 7.9 as follows:
"Coming to the merits of the case I have perused the Customer Registration Form. As per the Terms and Conditions of the said document the said boxes are the property of KCCL, i.e., the appellant. These boxes are to be used by the customer himself and at the address given in the Registration Form. Further, the customer is not allowed to alter the STB and in case of any loss or damage to STB, customer is liable to make up the loss. Further, on termination of agreement the customer is required to return the STB to the appellant company. These terms clearly indicate that the Set Top Boxes is the property of the appellant company. I also find force in the contention of appellant that if these Set Top Boxes are not treated as assets of the appellant company but the property of the customer then the entire cost of these set top boxes which are sold during the year is allowable as revenue expenditure. Therefore, on overall reading of the agreement between appellant and its customers and in totality of facts, I treat the STBs as the assets of the appellant company."
100% on the set top boxes is not justified. This was disallowed by the Assessing Officer in para 26 of the order as follows:
"26. The depreciation so claimed required to be disallowed as no capital expenditure is incurred for the asset and the cost of the set top box is deemed to have been collected along with installation charges since admittedly the cost of STB is negligible. It is claimed by eh assessee's AR that the charges so collected are installation charges and 100% depreciation is claimed on set top boxes since the assessee is not having control over the same after handing over the possession to the customer. The assessee's AR admits that physical possession of the set top boxes is handed over to the customer, charges for the STB are collected from the customers in the name of installation charges, the cost factor of the set top box is admittedly negligible, and set top box has no resale value in the market. Therefore, expenditure is revenue in nature. Hence there is no necessity to claim capital expenditure and depreciation on the same. When this was pointed out, the assessee's AR furnished a revised depreciation statement claiming depreciation on set top boxes @80% in place of 100% claimed, which comes to Rs.35,16,93,816/-. The AR stated that the assessee has to attend to the repairing work of the set top boxes as and when needed and the depreciation has been claimed as the possession of the instruments are handed over to the customer and the ownership lies with the assessee. It is to be noted that the assessee has been claiming repair charges from the customer as and when any repair is made on the set top boxes. The additions made during the year as per Form 3CD was Rs.54,78,24,795/- in the nomenclature of "building" and the depreciation claimed on the same is Rs.36,13,86,286/- @ 100% based on the date of put to use. Since the as sis not having possession of the set top boxes and charges for installation of the same stands M/s.Kerala Communicators Cable Ltd.