2014 (10) TMI 821 - AT - Income Tax

Disallowance of depreciation - grievance of the Revenue is that the Commissioner of Income-tax (Appeals) has failed to appreciate that the scanners and printers can be operated even without a computer and hence cannot become part of computer system for being eligible for depreciation at the rate of 60 per cent - Held that - Commissioner of Income-tax (Appeals) has followed the decision of the Special Bench of the Tribunal in the case of Deputy CIT v. Datacraft India Ltd. 2010 (7) TMI 642 - ITAT, MUMBAI wherein it is held that routers and switches are to be classified as computer peripherals and depreciation at the rate of 60 per cent be allowed. The Commissioner of Income-tax (Appeals) has also considered the decision of the hon'ble Delhi High Court in the case of CIT v. Bonanza 2011 (8) TMI 1058 - DELHI HIGH COURT wherein it was held that depreciation at the rate of 60 per cent. is allowable on computer peripherals. We find that the printers, scanners, projectors as well as port- switches are all functionally dependent on computers and therefore, the order of the Commissioner of Income-tax (Appeals) is in consonance with the precedents on the issue and the learned Departmental representative has not been able to place any other decision to the contrary before us. In view of the same, we see no reason to interfere with the order of the Commissioner of Income-tax (Appeals) - Decided against Revenue.

Summary

Issues:
1. Claim of depreciation on printers and scanners at the rate of 60%.
2. Classification of printers, scanners, and other equipment as part of a computer system for depreciation purposes.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) allowing the claim of depreciation on printers and scanners at the rate of 60%. The Revenue contended that these items can operate independently of a computer and thus should not be eligible for depreciation at the higher rate. The Assessing Officer had initially restricted the depreciation to 15% for these items, considering them as office equipment. However, the assessee argued that these items are integral parts of personal computers and cannot function independently. The Commissioner of Income-tax (Appeals) upheld the assessee's claim, leading to the Revenue's appeal.

2. The Tribunal examined the issue in light of the precedents and legal framework. Referring to the decision of a Special Bench in the case of Deputy CIT v. Datacraft India Ltd., where routers and switches were classified as computer peripherals, depreciation at the rate of 60% was allowed. Additionally, the Tribunal considered the judgment of the Delhi High Court in CIT v. Bonanza, which allowed depreciation at 60% on computer peripherals. The Tribunal found that printers, scanners, projectors, and port-switches are functionally dependent on computers, aligning with the precedents cited. The Departmental representative failed to present any conflicting decisions. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the order of the Commissioner of Income-tax (Appeals) and allowing the higher depreciation rate of 60% on the mentioned equipment.

This detailed analysis outlines the key issues raised in the judgment and the Tribunal's rationale for dismissing the Revenue's appeal.