2017 (8) TMI 1559 - AT - Income Tax

Rate of depreciation on Routers and IT Intelligence devices - @ 60% OR 80% - Power Transmission System - Depreciation u/s 32 on various assets or block of assets on the rates as prescribed in Rule 5 of the Rules - HELD THAT - It is evident from the above sub items (8)(ix)(E)(k) that the asset qualifying for 80% depreciation should be energy-saving device for power transmission system. The assessee is engaged in trading and leasing of Routers bridges etc. We find that the assessee has failed to produce any documentary evidence to support that the Routers and other equipments are part of power transmission system before the lower authorities. Before us also no documentary evidence in support in claim of the requirement of the said asset being part of power transmission system has been produced. In view of the failure on the part of the assessee to produce documentary evidence in support its claim of depreciation at the rate of 80% on Routers bridges etc. no error in the order of the CIT-(A). The contention of the assessee to follow the order of the CIT-(A) in subsequent year in view of the rule of consistency also cannot be accepted as we are required to adjudicate the issue in view of the facts before us and the decision of the CIT-(A) in subsequent year is not binding on us. Accordingly we dismiss the ground No.1 of the appeal.

Summary

Issues:
- Disallowance of 20% Depreciation on Routers and IT Intelligence devices

Analysis:

Issue 1: Disallowance of 20% Depreciation on Routers and IT Intelligence devices
1. The appellant challenged the addition of ?32,20,772 as disallowance of 20% depreciation on Routers and IT Intelligence devices, arguing that the Assessing Officer erred in applying a depreciation rate of 60% instead of the statutory 80% rate specified in Rule 5.
2. The appellant, engaged in trading and leasing of networking devices, claimed depreciation at 80% based on Rule 5 of the Income-tax Rules, 1962. However, the Assessing Officer contended that the assets did not qualify as energy-saving devices for power transmission systems, limiting depreciation to 60%.
3. The CIT-(A) upheld the Assessing Officer's decision, prompting the appellant to appeal to the Tribunal, emphasizing the consistency of depreciation treatment across assessment years.
4. During the hearing, the appellant's counsel presented a paper book referencing CISCO's website to support the claim that Routers are energy-saving devices. The Senior DR supported the CIT-(A)'s order, arguing against the appellant's eligibility for 80% depreciation.
5. The Tribunal analyzed Rule 5, which specifies depreciation rates for different assets, noting the 80% rate for energy-saving devices like Routers and bridges for power transmission systems.
6. Despite the appellant's failure to provide documentary evidence proving the assets' inclusion in power transmission systems, the Tribunal found no error in the CIT-(A)'s decision. The Tribunal rejected the argument for consistency based on a subsequent year's ruling, emphasizing the need to assess each case independently.
7. Consequently, the Tribunal dismissed the appeal's first ground, affirming the disallowance of 20% depreciation on Routers and IT Intelligence devices.
8. The second ground of appeal, being general in nature, was not addressed, leading to the dismissal of the appellant's overall appeal.

In conclusion, the Tribunal upheld the disallowance of 20% depreciation on Routers and IT Intelligence devices, emphasizing the necessity for documentary evidence and independent assessment in determining depreciation rates as per Rule 5 of the Income-tax Rules, 1962.