2022 (8) TMI 1414 - AT - Income Tax

Depreciation on ATMs - to be treated as computers or plant and machineries - @15% or 40% - HELD THAT - We find that an identical issue has been considered by the Tribunal in assessee s own case for the assessment year 2015-16 2016-17 2020 (3) TMI 802 - ITAT CHENNAI wherein, the Tribunal by following earlier decision in assessee s own case held that the assessee is entitled for 60% depreciation on ATM machines. Computation of depreciation - Facts remains that once the assessee is entitled for 60% of depreciation on ATM machines, the AO has to work out the depreciation right from the beginning at 60% to compute WDV. Accordingly, we direct the AO to allow 60% of depreciation and work out the opening WDV and compute the correct depreciation to be allowed for the impugned assessment year. Cessation of liability u. 41(1) - Addition made as assessee could not justify with necessary evidences - Even before the ld. CIT(A), the assessee could file any evidence to justify the existence of the liabilities - HELD THAT - As considering the fact and circumstances of the case and also the plea of the ld. Counsel for the assessee, we confirm the addition made towards the disallowance of cessation of liability u/s 41(1) of the Act and reject the ground taken by the assessee.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of depreciation on Automated Teller Machine (ATM).
3. Addition towards cessation of liability under section 41(1) of the Income Tax Act.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal filed by the assessee was delayed by 31 days due to the outbreak of the COVID-19 pandemic. The Tribunal condoned the delay and admitted the appeal for adjudication.

2. Disallowance of Depreciation on Automated Teller Machine (ATM):
The primary issue was whether ATMs are eligible for depreciation at 60% as applicable to computer software. The assessee argued that this issue was already settled in their favor by previous decisions of the ITAT, Chennai for earlier assessment years (2013-14 onwards). The Tribunal agreed, citing its own previous rulings and similar decisions from other benches and courts.

The Tribunal noted that ATMs perform functions akin to computers, such as decoding information, processing it, and providing outputs. The Tribunal referenced various judicial precedents, including the Special Bench of Mumbai Tribunal in the case of Dy. CIT v. Datacraft India Ltd., which held that equipment performing logical, arithmetical, and memory functions could be classified as computers.

The Tribunal also dismissed the revenue's argument based on the Karnataka High Court's interpretation under the Karnataka Sales Tax Act, emphasizing that the Income Tax Act and Sales Tax Act serve different purposes and are not pari materia legislations. The Tribunal directed the Assessing Officer to allow depreciation at 60% on ATMs and to compute the opening Written Down Value (WDV) accordingly.

3. Addition Towards Cessation of Liability Under Section 41(1) of the Income Tax Act:
The Assessing Officer made an addition towards cessation of liability under section 41(1) of the Act because the assessee could not provide necessary evidence to justify the existence of the liabilities. The assessee chose not to address this ground during the appeal. Consequently, the Tribunal confirmed the addition made by the Assessing Officer and rejected the ground taken by the assessee.

Conclusion:
The appeal was partly allowed. The Tribunal condoned the delay in filing the appeal, directed the Assessing Officer to allow 60% depreciation on ATMs, and confirmed the addition towards cessation of liability under section 41(1) of the Act. The order was pronounced on 24th August, 2022, at Chennai.