2012 (3) TMI 30 - AT - Income Tax

Depreciation on UPS under Computer@60 percent or plant & Machinery @25 per cent - Held That - In view of CIT vs BSES Rajdhani Powers Limited (2010 - TMI - 78240 - DELHI HIGH COURT) UPS classified as Computer eligible for depreciation under 60%. Depreciation on Work Station and Server Back - Held That - Definition of these items may be available in public domain but same were not provided to the CIT (A) nor such claim was made before her. Case referred back to decide afresh.

Summary

Issues involved:
Restriction on rate of depreciation for work station, UPS, and server rack.

Analysis:
1. The appeal was filed by the assessee against the order of CIT (Appeals)-V, New Delhi for the assessment year 2007-08. The only issue raised in the appeal was regarding the restriction on the rate of depreciation for work station, UPS, and server rack.

2. The assessee, a public limited company engaged in manufacturing commercial vehicles, two wheelers, and gears, had the assessment completed under section 143(3) on 21.12.2009.

3. The primary contention in the appeal was the disagreement with the depreciation rates applied to specific assets, namely work station, UPS, and server rack.

4. The assessee had purchased various items during the previous year, including work stations, UPS systems, and server racks, which were considered as additions to computers. The claim for higher depreciation rates on these items was contested by the authorities.

5. The CIT (A) disallowed the higher depreciation claim on work station, UPS, and server rack, stating that these items did not qualify for the higher rates applicable to computers. The decision was based on the interpretation of these assets not being integral parts of a computer system.

6. The assessee argued that the assets in question, such as the work station and server rack, were integral parts of a computer system, supported by definitions from the public domain. However, the revenue contended that these definitions were not presented before the CIT (A) for verification.

7. Regarding the rate of depreciation on UPS, it was noted that the issue was settled in favor of the assessee by a decision of the Hon'ble jurisdictional High Court. The Tribunal directed the authorities to allow depreciation on UPS at the rates claimed by the assessee.

8. However, concerning the work station and server rack, the Tribunal found that the definitions provided by the assessee were not verified by the CIT (A). Hence, the issue was remanded back to the CIT (A) for further examination.

9. Consequently, the appeal of the assessee was partly allowed for statistical purposes, with the issue of depreciation rates on work station and server rack being referred back to the CIT (A) for reconsideration.

10. The judgment was pronounced on January 6th, 2012, by the Appellate Tribunal ITAT Delhi, with the detailed analysis and directions provided for each issue raised in the appeal.