2015 (9) TMI 1425 - AT - Income Tax

Depreciation on certain computer peripherals - Held that - Computer peripherals form a integral part of the computer system and hence they were entitled to depreciation at the higher rate of 60%. Therefore, we are unable to find any fault with the decision of the CIT(A) in holding that depreciation at the rate of 60% is allowable on the cost of Printers, Routers, Scanners and Switches. See Birla Soft Ltd. 2011 (12) TMI 608 - DELHI HIGH COURT & CIT Vs. BSES Yamuna Pvt. Ltd case 2010 (8) TMI 58 - DELHI HIGH COURT . Also the network cables have been held entitled to depreciation at the rate of 60%. - Decided in favour of assessee Depreciation on Jodhpur property - Held that - It is an undisputed fact that the asset was never put to use till date and therefore, it is not legally correct that the leased premise was capitalized and added to the block of assets. Therefore, such ineligible asset, which is not fulfilled the conditions of section 32 of the Act should not have been included in the block of assets. - Decided against assessee

Summary

Issues:
1. Disallowance of depreciation on data cables and Jodhpur property.
2. Dispute over the rate of depreciation on computer peripherals.
3. Appeal against the order of the Commissioner of Income Tax.

Issue 1: Disallowance of Depreciation on Data Cables and Jodhpur Property:
The case involved cross-appeals by the assessee and the Revenue against the Commissioner of Income Tax's order regarding the disallowance of depreciation on data cables and Jodhpur property. The Assessing Officer disallowed the depreciation on data cables, classifying them as part of 'plant and machinery' eligible for 15% depreciation instead of the 60% claimed. The CIT(A) upheld this decision. However, the assessee argued that data cables should be considered computer peripherals and entitled to 60% depreciation. The Tribunal referred to a Delhi High Court judgment supporting the assessee's claim, allowing the higher rate of depreciation on data cables. Regarding the Jodhpur property, the Tribunal dismissed the appeal based on a previous decision against the assessee for a similar issue.

Issue 2: Dispute Over Rate of Depreciation on Computer Peripherals:
The dispute revolved around the rate of depreciation applicable to computer peripherals like printers, routers, scanners, and switches. The Assessing Officer disallowed the 60% depreciation claimed by the assessee, treating the items as part of 'plant & machinery' eligible for 15% depreciation. The CIT(A) accepted the assessee's position that these items were integral to computers and allowed the higher rate of depreciation. The Revenue appealed this decision, but the Tribunal upheld the CIT(A)'s ruling, citing precedents and holding that the higher rate of depreciation was applicable to the computer peripherals.

Issue 3: Appeal Against the Order of the Commissioner of Income Tax:
The Tribunal addressed the cross-appeals by the assessee and the Revenue against the Commissioner of Income Tax's order. The assessee, a company engaged in various businesses, had filed a return of income subject to scrutiny assessment. The CIT(A) provided partial relief, leading to appeals by both parties. The Tribunal considered and decided on the grounds of appeal related to depreciation claims and property disallowances, ultimately partly allowing the assessee's appeal and dismissing the Revenue's cross-appeal.

This detailed analysis covers the issues of disallowance of depreciation, rate of depreciation on computer peripherals, and the overall appeal against the Commissioner of Income Tax's order, providing a comprehensive understanding of the judgment delivered by the Appellate Tribunal ITAT Mumbai.