2014 (11) TMI 933 - HC - Income Tax

Rate of depreciation on computer peripherals - Whether the printing machinery, namely printer and scanner, should be treated as an integral part of computer and eligible for 60% depreciation as against 25% - Held that - The printer and scanner is used as an office equipment in business and that is part and parcel of the computer system as decided by the Tribunal in all the subsequent AYs viz., 2003-04, 2004-05 and 2005-06 - the printer and scanner should be treated as an integral part of the system and cannot be used without a computer and depreciation at 60% should be allowed as such no substantial question of law arises for consideration Decided against revenue.

Summary

Issues:
1. Depreciation eligibility of printers and scanners at 60% rate compared to 25% for plant and machinery.

Analysis:
1. The case involved a dispute regarding the depreciation rate applicable to printers and scanners used by the assessee for the assessment year 2002-03. The Assessing Officer initially accepted the return of income filed by the assessee but later reopened the assessment under Section 147 of the Income Tax Act. The main contention was whether printers and scanners should be considered an integral part of a computer system, making them eligible for 60% depreciation, as opposed to the standard 25% applicable to plant and machinery. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal ruled in favor of the assessee, allowing 60% depreciation, based on the equipment being an essential part of the computer system and not operable independently. The Revenue challenged this decision before the High Court.

2. Upon hearing arguments from the Revenue's counsel and examining the case materials, the High Court considered the crucial question of whether printers and scanners should be treated as integral components of a computer system, justifying the higher depreciation rate of 60%. The court noted that the Tribunal, in previous assessment years, consistently upheld the view that printers and scanners were essential parts of the computer system and could not function independently. Both the Commissioner of Income Tax (Appeals) and the Tribunal had consistently allowed 60% depreciation for these devices in the assessee's case. The court found no reason to deviate from this factual finding, emphasizing that the issue was a question of fact rather than law.

3. The High Court concluded that the treatment of printers and scanners as integral components of a computer system, warranting 60% depreciation, had been consistently upheld by the lower authorities in the assessee's case. As there was no legal question involved in the matter, the court dismissed the Tax Case (Appeal) filed by the Revenue, affirming the decision to allow 60% depreciation on printers and scanners. The court's ruling was based on the factual determination that the equipment in question formed an essential part of the computer system and could not operate independently, justifying the higher depreciation rate.