RVR DIGITAL INFRASTRUCTURES LIMITED,HYDERABAD vs. ITO, WARD-(1), HYDERABAD

PDF · subscribers
ITA 2414/HYD/2025Status: DisposedITAT Hyderabad15 July 2026AY 2013-1424 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed the AO to allow depreciation at 60% on SAP License and UPS systems. Regarding set-top boxes, it set aside the disallowance of depreciation and directed the AO to verify the assessee's claim of not claiming depreciation on additions made during the year.

What were the facts?

The assessee, RVR Digital Infrastructures Limited, engaged in TV channel network and internet services, filed its return for AY 2013-14 showing a loss. The Assessing Officer (AO) completed the assessment under Section 143(3), making several additions and disallowances, including for unexplained cash credits, depreciation, and expenses under Section 14A.

What were the issues?

The key issues were the addition of security deposits received from customers as unexplained cash credits and the disallowance of depreciation on various assets like SAP License, UPS systems, and set-top boxes.

Which sections of the Income-tax Act were involved?

Section 68,Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad

Pronounced: 15.07.2026

आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “B” Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER आयकरअपीलसं./I.T.A.No.2414/Hyd/2025 (निर्धारण वर्ा/ Assessment Year: 2013-14) RVR Digital The Income Tax Officer, Infrastructures Limited, Ward-1, Hyderabad. Hyderabad. PAN : AADCR8231L (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)

करदाता का प्रतततितित्व/ Assessee : Shri K. Satish Chandra, Represented by C.A. राजस्व का प्रतततितित्व/ Department : Shri K. Prasad, Sr. A.R. Represented by

सुिवाई समाप्त होिे की ततति/ Date of : 17.06.2026 Conclusion of Hearing घोर्णध की तधरीख/Date of Pronouncement : 15.07.2026 O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National

2 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

Faceless Appeal Centre [in short “NFAC”], Delhi, dated 29.10.2025, pertaining to the assessment year 2013-14.

2.

The grounds raised by the assessee read as under :

“1. The order of the Ld. CIT (A) u/s 250 of the Act dt. 29-10-2025 of the Act for the AY 2013-14 is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in upholding the addition of Rs. 1,00,48,292/-u/s 68 of the IT Act, which was received as advance from the customers on account of set top box installation. 3. The Ld. CIT(A) ought to have appreciated that the assessee already produced the required documents like ledger accounts, Proforma invoices etc. 4. The Ld. CIT(A) ought to have appreciated that the AO has not made any independent enquiry to allege that the amount of advance received of Rs. 1,00,48,292/- was not proper, which is bad in law. 5. The Ld. CIT(A) ought to have appreciated that in the advances received are properly shown in the Books of accounts which are backed up by the Ledgers 6. The Ld. CIT(A) erred in upholding the disallowance u/s 14A r.w.s rule 8D of Rs. 13,57,780/-without considering the facts of the case. 7. The Ld. CIT(A) erred in upholding the disallowance made under section 14A of the Act without appreciating the fact that the assessee has duly submitted copies of financials, computation of income etc., as per which the provisions of sec 14A of the Act are not applicable in the appellant's case. 8. The Ld. CIT(A) erred in making addition under section 14A of the Act without appreciating, the fact that the said provision is not applicable in the case of the appellant as the assessee has not earned any exempt income during the year under consideration and no expenditure was incurred to earn exempt income. 9. The Ld. CIT(A) erred in upholding the disallowance of Expenditure of Rs. 35,56,450/-without considering the facts of the case. 10. The Ld. CIT(A) failed to properly appreciate the fact that the assessee had duly produced all the requisite evidences, including detailed expense ledgers, wherein the major expenses were incurred towards bandwidth charges and pay channel fees and these expenses were fully supported by corresponding invoices, which were duly furnished.

3 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

11.

Without prejudice to the above, the Ld. CIT(A) ought to have considered that the case was scrutinized for the AY 2014-15 in which the return of income is accepted. 12. Without prejudice to the above, the Ld. CIT(A) failed to appreciate that the Assessing Officer erred in making further disallowance of expenditure when it is already been determined on an estimated basis 13. The Ld. CIT(A) erred in upholding the disallowance towards the interest expenditure of Rs. 55,06,406/- without considering the facts of the case. 14. The Ld. CIT(A) ought to have appreciated that the assessee already produced the required documents to whom the advances were given. 15. The Ld. CIT(A) erred in upholding the disallowance of Rs. 3,18,500/- towards SAP License, Rs. 2,58,440/- towards UPS System and Rs. 64,67,180/-towards Set up boxes. 16. The Ld. CIT(A) ought to have considered that the assessee has properly deducted the depreciation towards SAP license & UPS System. 17. The Ld. CIT(A) ought to have appreciated that the claim of depreciation of Rs. 64,67,180/-on Set top boxes was the carry forward balance and it is not related the Assessment year 2013-14. 18. The Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

3.

The brief facts of the case are that the assessee “M/s. R V R Infrastructures Limited” is a company engaged in the business of TV Channel Network and Internet Services, operates cable networks through a system of local cable operators and multi- system operators. The assessee filed its return of income for the A.Y. 2013-14 on 31.10.2013, admitting a loss of Rs.15,22,816/-. The case was selected for scrutiny, and the assessment was

4 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

completed under Section 143(3) of the Income-tax Act, 1961 on 12.03.2016, determining the total income at Rs.2,59,90,230/- by making the additions/disallowances viz., (i) addition towards unexplained cash credits of Rs.1,00,48,292/- under Section 68 of the Act; (ii) disallowance of excess depreciation claimed on intangible assets, being SAP License, UPS system and set-top boxes amounting to Rs.70,44,120/-; (iii) disallowance of expenditure relatable to exempt income under Section 14A read with Rule 8D of the Income-tax Rules, 1962 for Rs.13,57,780/-; (iv) ad hoc disallowance of 5% of other expenses for Rs.35,56,450/- for want of supporting bills and vouchers; and (v) addition towards notional interest on loans and advances to sister concerns for Rs.55,06,406/-.

4.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A) and challenged the additions made by the A.O. towards security deposits u/s 68 of the Act, disallowance of excess depreciation, disallowance u/s 14A r.w. Rule 8D, ad hoc disallowance of other expenses and addition towards notional interest on loans and advances to sister concerns. The Ld. CIT(A), for the reasons stated in his order dated 29.10.2025, rejected the

5 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

explanation of the assessee and sustained the additions made by the A.O.

5.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

6.

The first issue that came up for our consideration from Ground Nos. 2 to 5 of the assessee's appeal is the addition of Rs.1,00,48,292/- made under Section 68 of the Act, towards security deposit received from customers on account of set-top boxes.

7.

The learned counsel for the assessee, Shri K. Satish Chandra, C.A. submitted that the assessee is a cable operator providing cable TV services, installed set-top boxes in the premises of approximately 25,000 customers and collected security deposits @ Rs.392/- to Rs.399/- per set-top box. The total security deposit collected from all the customers amounted to Rs.1,00,48,292/- and the same was shown as current liabilities in the books of account. The A.O. made an addition towards the security deposit as unexplained cash credit under Section 68 of the Income-tax Act, 1961 on the ground that the assessee had not furnished

6 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

confirmation letters from the parties, but fact remains that it is practically impossible to obtain confirmations from 25,000 customers, that too for an amount of Rs.392/- to Rs.399/- per customer. The assessee had furnished all the details, including the consolidated ledger accounts of all the customers, and had also filed purchase invoices relating to the set-top boxes, which have been capitalized in the books of account of the assessee company. Further, the assessee company had also filed the relevant regulations of the Telecom Regulatory Authority of India (TRAI), which mandate collection of security deposits from customers for installation of set-top boxes. Although, these evidence were furnished before both the lower authorities, however, both the authorities had rejected the explanation of the assessee and made the addition under Section 68 of the Income- tax Act, 1961. Therefore, he submitted that the addition made by the A.O. should be deleted.

8.

The learned Senior A.R. for the Revenue, Shri K. Prasad, on the other hand, supporting the order of the Ld. CIT(A), submitted that the Ld. CIT(A) has negated all the arguments of the assessee in light of the reasons given by the A.O. for making the addition

7 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

under Section 68 of the Act, and going by the facts of the present case, the assessee has failed to substantiate the security deposits collected from customers with relevant evidence. Since the assessee has failed to prove the identity and creditworthiness of the customers, the A.O. has rightly treated the security deposits as unexplained cash credits under Section 68 of the Act. Therefore, he submitted that the addition made by the A.O. should be upheld.

9.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the reasons given by the A.O. for making an addition of Rs.1,00,48,292/- under Section 68 of the Income-tax Act, 1961. The A.O. made the addition towards security deposits collected from customers for installation of set- top boxes for providing cable services only on the ground that there is no such practice prevailing in the industry and further, the assessee has not proved the credits by filing relevant confirmations from the parties. In other words, except making a claim that the assessee has not confirmed the credits and except making a bald statement that there is no prevailing practice in

8 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

this industry for collecting security deposits for installation of set- top boxes, the A.O. has not made out any case for making the addition. The assessee had filed relevant details, including the TRAI regulations, which mandate collection of security deposits for installation of set-top boxes in the premises of customers. Further, the assessee had also furnished the relevant consolidated ledger account of area-wise security deposit collected approximately from 25,000 customers. On perusal of the relevant ledger accounts, we find that, the assessee had collected security deposits ranging from Rs.392/- to Rs.399/- per set-top box from the customers and going by the voluminous list of customers, it is practically impossible to obtain confirmations from each and every customer. Further, the assessee had also proved the ownership of the set-top boxes by filing purchase invoices of set-top boxes from M/s. Pace Micro Technology Limited, UK amounting to Rs.3,43,75,000/- and also filed proforma receipts of digital box deposit received from individual customers. From the details submitted by the assessee, it is abundantly clear that the assessee had collected security deposits for set-top boxes and the same has been treated as current liabilities in its books of account. The A.O.,

9 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

without considering the relevant facts, simply made addition under Section 68 of the Income-tax Act, 1961. The Ld. CIT(A), without appreciating the relevant facts, sustained the addition made by the A.O. Thus, we set aside the order of the Ld. CIT(A) on this issue and direct the A.O. to delete the addition of Rs.1,00,48,292/- made under Section 68 of the Income-tax Act, 1961.

10.

The next issue that came up for our consideration from Ground Nos. 6 to 8 of the assessee's appeal is the disallowance made under Section 14A r.w.r. 8D of Income-tax Rules, 1962 amounting to Rs.13,57,780/-.

11.

The learned counsel for the assessee, referring to the annual financial statements, submitted that the assessee has not earned any exempt income on its investments and, in the absence of exempt income, the question of disallowance of expenditure relatable to exempt income does not arise. Therefore, he submitted that the A.O. erred in disallowing expenditure relatable to exempt income under Section 14A r.w.r. 8D of the Income-tax Rules, 1962. In this regard, he relied upon the decision of ITAT,

10 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

Hyderabad Bench in the case of ACIT Vs. Penna Cement Industries Ltd. in ITA No.1083/Hyd/2024 dated 21.01.2026.

12.

The learned senior A.R. for the Revenue, on the other hand, referring to the provisions of Section 14A of the Act, submitted that the section clearly explains about expenditure relatable to exempt income and, therefore, the question of actual earning of exempt income does not arise as long as the assessee has made investments in securities which are capable of earning exempt income, the provisions of Section 14A are applicable and the A.O. is required to compute disallowances of expenditure in terms of Rule 8D of the Income-tax Rules, 1962. Therefore, he submitted that the A.O. has rightly disallowed the expenditure relatable to exempt income and, thus, the addition made by the A.O. should be upheld.

13.

We have heard both parties, perused the material available on record and had gone through the orders passed by the authorities below. There is no dispute with regard to the fact that the assessee has not earned any exempt income for the year under consideration. It is a well-settled position of law by the decisions of various Courts, including the decision of the Hon'ble Supreme

11 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

Court in the case of CIT v. Chettinad Logistics (P.) Ltd., reported in (2018) 95 taxmann.com 250 (SC), wherein the Hon'ble Supreme Court clearly held that where there is no exempt income, no disallowance under Section 14A r.w.r. 8D of the Income-tax Rules, 1962 can be made. A similar view has been taken by the Hyderabad Bench of the Tribunal in the case of ACIT Vs. Penna Cement Industries Ltd., (supra) wherein, by following a plethora of judicial precedents, it was held that in the absence of exempt income, the provisions of Section 14A r.w.r. 8D are not applicable and, consequently, disallowance of expenditure relatable to exempt income under Section 14A cannot be upheld. Since the A.O. has made a disallowance of expenditure relatable to exempt income under Section 14A r.w.r. 8D even though the assessee has not earned any exempt income during the year under consideration, in our considered view, the addition made by the A.O. under Section 14A r.w.r. 8D cannot be upheld. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the disallowance of

12 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

Rs.13,57,780/- made under Section 14A r.w.r. 8D of the Income- tax Rules, 1962.

14.

The next issue that came up for our consideration from Ground Nos. 9 to 12 of the assessee's appeal is the ad hoc disallowance of 5% of other expenses.

15.

The A.O. made an addition on account of ad hoc disallowance of 5% of other expenses amounting to Rs.7,11,29,020/- and consequently made an addition of Rs.35,56,450/- on the ground that the assessee had not produced the relevant supporting vouchers for verification. It was the argument of the learned counsel for the assessee that the addition made by the A.O. is without any statutory basis and that, in the absence of any observation with regard to the books of account, an ad hoc disallowance of expenditure cannot be made. On the other hand, the learned Senior A.R. for the Revenue, supporting the order of the Ld. CIT(A), submitted that despite being provided with sufficient opportunity, the assessee failed to furnish supporting bills and vouchers in respect of the expenditure claimed under the head "Other Expenses". Therefore, the A.O. was justified in

13 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

making an ad hoc disallowance of 5% of such expenses and the addition made by the A.O. should be upheld.

16.

We have heard both parties and considered the relevant reasons given by the A.O. for making 5% ad hoc disallowance of other expenses. We find that, the A.O. made addition of ad hoc disallowance of expenses only on the ground that no supporting bills or vouchers were furnished by the assessee and, except this, there is no observation with regard to any incorrectness in the books of account filed by the assessee or evidence furnished in support of expenditure. In the absence of any observation with regard to the incorrectness of the claim of the assessee, an ad hoc disallowance cannot be made merely for the reason of non- submission of supporting evidences. This legal principle is supported by the decision of Hon'ble Supreme Court in the case of PCIT Vs. R.G. Buildwell Engineers Ltd., reported in (2018) 259 taxmann.com 370 (SC). Although the legal principle is very clear in respect of ad hoc disallowance of other expenses, but fact remains that, in the present case, the assessee has not furnished any supporting evidence even on a sample basis in respect of huge expenditure claimed under the head "Other Expenses". Since both

14 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

the parties have failed to discharge their duties, including the A.O. and the assessee, in our considered view, to settle the dispute, a reasonable disallowance of expenditure claimed under the head "Other Expenses" should be made. Therefore, considering the volume of business of the assessee and the amount of other expenses, which is less than 2%, in our considered view, instead of 5%, 2% of the expenses claimed under the head "Other Expenses" should be disallowed for want of supporting bills and vouchers. Thus, we direct the A.O. to restrict the ad hoc disallowance of other expenses to 2% of the expenses claimed by the assessee.

17.

The next issue that came up for our consideration from Ground Nos. 13 and 14 of the assessee's appeal is the addition towards notional interest of Rs.55,06,406/- on loans and advances to sister concerns.

18.

The A.O. made 12% interest disallowance on total loans and advances outstanding as on the date of balance sheet for Rs.7,24,53,567/- and observed that the assessee has diverted interest-bearing funds for non-business purpose to its sister concerns and therefore, computed interest receivable of

15 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

Rs.86,94,430/- @ 12% per annum on the loan amount. Since the assessee has incurred interest expenditure of Rs.55,06,406/- on loans borrowed from the bank, the A.O. restricted disallowance of interest expenditure to the extent of Rs.55,06,406/- and made addition to the total income.

19.

The learned counsel for the assessee submitted that advances were made to sister concerns for legitimate business exigencies, including inter-compulsory receivables arising from the cable network operations, but not loans and advances given in the ordinary course of business for non-business purposes. The assessee further submitted that loans given to sister concerns are not out of interest-bearing funds as claimed by the A.O. because the assessee has utilized the loans borrowed from the bank for the purpose of business. Since the advances to the sister concerns were in the course of normal business, the A.O. ought not to have disallowed notional interest @ 12% on the loans outstanding. Therefore, he submitted that the addition made by the A.O. should be deleted. In this regard, he relied upon the decision of the Hon'ble Supreme Court in the case of S.A. Builders Vs. CIT reported in (2007) 288 ITR 1 (SC).

16 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

20.

The learned senior A.R. for the Revenue, on the other hand, supporting the order of the Ld. CIT(A), submitted that the assessee has not proved the nexus between the advances made to sister concerns and business necessity. Since the A.O. has made out a case of diversion of interest-bearing funds for non-business purposes, he has rightly disallowed interest @ 12% on the amount outstanding in the name of the sister concerns. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. Therefore, he submitted that the addition made by the A.O. should be sustained.

21.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. disallowed notional interest on the loans outstanding in the name of sister concerns on the ground that the assessee ought to have charged interest @ 12% on the loans given to the sister concerns, because the assessee had diverted funds borrowed from banks for non-business purposes. The A.O. further noted that since the assessee was incurring interest expenditure on loans borrowed from financial institutions and was diverting interest-bearing funds to sister concerns without charging any

17 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

interest, observed that, the profits of the assessee were decreasing and the assets in the form of loans and advances were increasing. Except for the above observations, there is no finding by the A.O. with regard to diversion of interest-bearing funds for non-business purposes by advancing loans to sister concerns. On the other hand, the assessee has filed various evidences and proved that the advances to sister concerns were made in the ordinary course of carrying out its cable network and internet service business and were not gratuitous payments to group concerns for non-business purposes. It is a well-settled principle of law by the decision of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT (supra) that where the loans and advances are given to subsidiaries or sister concerns in the ordinary course of business for business exigencies, then the question of disallowance of interest expenditure does not arise. In the present case, the A.O. has not made out a case of diversion of interest-bearing funds for non-business purposes, whereas, on the other hand, he simply computed notional interest on the outstanding loan amount, even though, the assessee has made out a case of business exigencies in advancing loans to sister concerns. The Ld. CIT(A), without

18 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition of Rs.55,06,406/- made towards disallowance of notional interest on advances to sister concerns.

22.

The next issue that came up for our consideration from Ground Nos. 15 to 17 of the assessee's appeal is the disallowance of excess depreciation claimed on SAP License, UPS system and set-top boxes.

23.

The A.O. disallowed the excess depreciation claimed on SAP License @ 60% on the ground that the SAP License is an intangible asset eligible for depreciation @ 25%. Similarly, the A.O. disallowed depreciation of Rs.2,58,400/- claimed on the UPS system without assigning any reasons for such disallowance. The A.O. had also disallowed depreciation of Rs.64,67,180/- on set- top boxes on the ground that the set-top boxes are sold in the market and that local enquiries revealed that cable operators sell the set-top boxes to customers, but do not give them on hire.

19 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

24.

The learned counsel for the assessee, referring to various judicial precedents, submitted that the SAP License is part of computer software and is eligible for depreciation @ 60% under Entry III(6) of Part A of Appendix I to the Income-tax Rules, 1962, which provides for depreciation at 60% in respect of computers, including computer software. In this regard, he relied upon the decision of the Hon'ble Madras High Court in the case of CIT Vs. Computer Age Management Services Pvt. Ltd., reported in (2019) 267 Taxmann.com 146 (Mad.). The assessee further submitted that the UPS system is a computer peripheral device and is covered under the "Computers, including Computer Software" as per Entry III(6) of Part A of Appendix I to the Income-tax Rules, 1962 and, therefore, is eligible for depreciation @ 60%. In this regard, he relied upon the decision in the case of PCIT Vs. Cholamandalam MS General Insurance Co. Ltd., reported in (2025) 175 Taxmann.com 452 (Mad.). The learned counsel for the assessee further submitted that, insofar as disallowance of depreciation on set-top boxes, the assessee had claimed depreciation only on the opening WDV of Rs.57,52,445/-, whereas no depreciation was claimed on additions made during

20 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

the year amounting to Rs.3,73,52,083/-. Hence, the action of the A.O. in disallowing depreciation on the total WDV @ 15% is incorrect. Therefore, he submitted that the addition made by the A.O. should be deleted.

25.

The learned senior A.R. for the Revenue, on the other hand, supporting the order of the Ld. CIT(A), submitted that the Ld. CIT(A) has discussed the issue in light of the facts brought on record by the A.O. and rejected the claim of the assessee. Therefore, he submitted that the order of the Ld. CIT(A) should be upheld.

26.

We have heard both parties, perused the material available on record and had gone through the orders passed by the authorities below. Insofar as depreciation on SAP License, we find that, the Hon'ble Madras High Court has considered the issue of depreciation on ERP and computer software in the case of CIT Vs. Computer Age Management Services Pvt. Ltd., (supra) wherein it has held that the software license acquired by the assessee is in the nature of software application and the assessee is eligible for depreciation @ 60%. Therefore, we direct the A.O. to allow depreciation @ 60% on SAP License. Insofar as depreciation on the

21 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

UPS system, we find that the Hon'ble Madras High Court in the case of PCIT Vs. Cholamandalam MS General Insurance Co. Ltd. (supra) has considered the very same issue and held that UPS systems are eligible for 60% depreciation. Therefore, we direct the A.O. to allow depreciation on the UPS system as claimed by the assessee. Insofar as depreciation on set-top boxes, the A.O. disallowed 15% depreciation on the closing WDV of Rs.4,31,14,528/- and made disallowance of Rs.64,67,180/- on the ground that the assessee had not proved the capitalization of set-top boxes in its books of account and further, generally, set- top boxes were sold to customers. The assessee had furnished the relevant financial statements and claimed that, it had claimed depreciation only on the opening WDV of Rs.57,52,445/-. The assessee further contended that, it had not claimed any depreciation on additions made during the year amounting to Rs.3,73,52,083/-. Therefore, the question of disallowance of depreciation does not arise when the assessee itself has not claimed depreciation. The learned counsel for the assessee has referred to Note No. 7 of the financial statements and Schedule-I, which is available at pages 14 and 15 of the paper book filed by

22 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

the assessee, where the assessee had capitalized set-top boxes and other assets amounting to Rs.9,44,26,293/- for the purpose of claiming depreciation as per the Companies Act, 2013 on the straight-line method, whereas, in Schedule-I pertaining to depreciation under the Income-tax Act, 1961, additions during the year in the block of Plant and Machinery were at Rs. 5,70,64,200/-. If we go by the financial statements of the assessee, it appears that the assessee has not claimed any depreciation during the year in respect of additions relating to set- top boxes. Insofar as the observations of the A.O. with regard to the claim of depreciation on set-top boxes, we find that the reasons given by the A.O. that the assessee had sold the set-top boxes and had not capitalized them are contrary to the facts available on record going by the financial statements of the assessee. The assessee has very much capitalized the set-top boxes under the block of Plant and Machinery and also claimed depreciation thereon, year on year which is evident from the depreciation claimed on the set-top boxes for the earlier assessment years. Since the assessee has proved its ownership over the set-top boxes and also capitalized the same in its books

23 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

of accounts, in our considered view, the reasons given by the A.O. for disallowing depreciation on set-top boxes cannot be accepted. Thus, we set aside the order of the Ld. CIT(A) on this aspect and direct the A.O. to allow depreciation on set-top boxes as applicable to Plant and Machinery and also claimed by the assessee, including depreciation on the opening WDV as claimed by the assessee.

27.

Insofar as the claim of the assessee that no depreciation has been claimed on additions made during the year, because the assets were not put to use, although the financial statements show some light on the claim of the assessee, but facts need to be verified by the A.O. In case the assessee has not claimed any depreciation on additions to set-top boxes made during the year, the question of making disallowance of depreciation thereon does not arise. Therefore, we set aside the issue of disallowance of depreciation on set-top boxes to the file of the A.O. and direct the A.O. to verify the claim of the assessee in light of the relevant financial statements. In case, the assessee is able to prove its claim that it has not claimed any depreciation on additions made

24 RVR Digital Infrastructures Limited ITA No. 2414/Hyd/2025

during the year, then the A.O. is directed to delete the disallowance of depreciation on value of additions during the year.

28.

In the result, the appeal filed by the assessee is partly allowed for statical purposes.

Order pronounced in the Open Court on 15th July, 2026.

Sd/- Sd/- श्री ववजय पाल राव (मंजूनाथ जी) (VIJAY PAL RAO) (MANJUNATHA G.) उपाध्यक्ष /VICE PRESIDENT लेखा सदस्य/ACCOUNTANT MEMBER

Hyderabad, dated 15.07.2026. TYNM/sps आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : RVR Digital Infrastructures Limited, 304B, Jain Sadguru Images, Capital Park, Madhapur, Hyderabad – 500081. 2. रधजस्व/ The Revenue : The Income Tax Officer, Ward-1, Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Digitally signed by TIRUPATI TIRUPATI YAMINI YAMINI NAGA MALLESWARI NAGA MALLESWARI Date: 2026.07.17 10:31:38 +05'30' Sr. Private Secretary ITAT, Hyderabad

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →