2017 (4) TMI 1614 - AT - Income Tax

Depreciation on computers and computer based items - depreciation at the rate of 60% OR of 25% - HELD THAT - We find that the assessee has divided these assets under three different heads in the schedule of assets i.e. the editing equipments computer based editing equipments recorder based and editing equipments others. In respect to editing equipments which are computer based the assessee has claimed depreciation at the rate of 60% whereas in respect to other two categories depreciation has been claimed at the rate of 25%. We find that the relevant assets are either computer or computer software as certified by charter engineer vide his report dated 12-11-2014 certifying these assets as computers. As the issue is covered in assessee s own case for AY 2005-06 2016 (7) TMI 1671 - ITAT MUMBAI also and in the given facts and circumstances of the case we confirm the order of CIT(A) allowing depreciation on computers at the rate of 60%. The appeal of Revenue is dismissed.

Summary

Issues:
- Disallowance of depreciation by AO at 25% on editing equipments claimed as computers
- CIT(A) allowing depreciation at 60% on editing equipments based on computers

Analysis:
1. The appeal by the Revenue challenges the CIT(A)'s decision to allow depreciation at 60% on editing equipments categorized as computers instead of the 25% depreciation rate set by the AO. The primary contention raised by the Revenue questions the classification of editing equipments as computers, emphasizing that these items were previously considered as supporting computers rather than being classified as computers themselves. The dispute revolves around the interpretation of the assets' nature and functionality.

2. The CIT(A) justified the depreciation allowance at 60% by examining the nature and specifications of the assets in question. The CIT(A) considered expert certifications and definitions of a computer from various sources, including the Information Technology Act, Oxford Dictionary, and Webster Dictionary. The CIT(A) highlighted that the assets were either computer servers or computer software/application systems, meeting the criteria of being classified as computers. The CIT(A) also referenced previous Tribunal decisions supporting depreciation at 60% for assets integral to computer systems, such as printers, scanners, and servers.

3. The Tribunal reviewed the case and found that the assets in question were certified as computers by a charter engineer. The Tribunal referenced a previous decision related to the same assessee for AY 2005-06, where depreciation at 60% was allowed on similar assets. The Tribunal upheld the CIT(A)'s decision to allow depreciation at 60% on editing equipments categorized as computers, citing consistency with past decisions and the nature of the assets as computer hardware or software. The Tribunal dismissed the Revenue's appeal, affirming the depreciation rate set by the CIT(A).

4. The Tribunal's decision was based on the classification of the assets as computers or computer-based items, supported by expert certifications and past rulings. The Tribunal emphasized the nature of the assets and their integral role in computer systems, leading to the allowance of depreciation at 60% for editing equipments deemed as computers. The Tribunal's decision aligned with consistency in treatment and the technical specifications of the assets, ultimately dismissing the Revenue's appeal.