Maheshan Nagaprasanna JUDGMENT
Alok Aradhe, J.
1. This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2003-04. The appeal was admitted by a bench of this Court vide order dated 06.02.2012 on the following substantial questions of law:
(i) Whether the tribunal is correct on facts and in law in holding that the expenditure said to have been incurred by the assessee amounting to Rs. 89,23,817/- on improvement of interiors, electrical works, modeling and networking of computers, work stations and other miscellaneous works in a leased premises is revenue expenditure without appreciating that this one-time expenditure incurred in providing necessary infrastructure resulted in a benefit of enduring nature which will be available to the assessee for many years?
(ii) Whether the tribunal is correct on facts and in law in holding that ATMs and encoders are computers eligible for 60% depreciation even when they dodo not provide processing activity and do not contain all features of computers and such cannot be called as computers?
(iii) Whether the tribunal is justified in accepting the change in the method of accounting adopted by the assessee when such change would not bring out or enable ascertainment of true and correct profits of the ass. for the accounting year in question?
(iv) Whether the tribunal is correct in law to accept the change in the method of accounting adopted by the assessee without taking into account the provisions of sale of goods Act as per which the delivery is the point of time when the sale is complete?
2. Facts giving rise to filing of this appeal briefly stated are that assessee is engaged in the business of manufacture of automated teller machines (ATMs) and distribution of NCR book products and commissions in India. The assessee filed the return of income on 01.12.2003 declaring taxable income of Rs. 4,66,32,670/-. The return was processed under Section 143(1) and was selected for scrutiny and notice under Section 143(2) of the Act was issued. The assessee had taken premises on lease for a period of three years. The assessee claimed expenditure of Rs. 89,23,817/- on account of leasehold improvements as revenue expenditure in the computation of income. The assessing officer by an order dated 31.03.2006 inter alia held that leasehold improvements expenditure is incurred towards purchase of workstations, improvement of interiors and electrical works, fee paid to the architect, cabling work for networking of computers in connection with setting up of office. Thus, the expenditure was incurred to bring into existence an asset or an advantage for enduring benefit of business, his property is computable as capital expenditure. Accordingly, the leasehold improvement for an amount of Rs. 89,23,817/- was disallowed and added back and depreciation towards furniture and fitting at the rate of 15% was allowed. The assessing officer further held that the assessee has changed the revenue recognition method and therefore it is not possible to ascertain true and correct profit of the assessee for the accounting year in question. It was further held that ATMs cannot be termed as computers and therefore are eligible for depreciation to the extent of 25%. Being aggrieved, the assessee preferred an appeal. The order was affirmed in appeal by the assessee
3. The assessee assailed the order passed by the Co........