2018 (2) TMI 592 - AT - Income Tax

Claim of Depreciation on the Film Projector - to be depreciated @ 15% instead of 60% - Held that - Section 32 of the Act which granted depreciation allowance does not define the word computer . However the ITAT Special Bench in the case of Datacraft India Ltd. (2010 (7) TMI 642 - ITAT MUMBAI) had the occasion to consider the meaning of word computer . In the present case the concerned machine is a film projector. This is an optical instrument for projecting an image upon a surface. It is a device that projects a beam of light on to a screen for viewing a picture already programmed fed and input. Though some elements of computer function are necessarily involved the projector cannot be said to be a machine whose principal output/object/function is achieved only through computer function. Hence that the film projector in this case cannot be said to be computer entitled for higher rate of depreciation of 60% applicable for computation. The decisions referred by the assessee were with respect to printer scanner and router which are altogether different items. In fact the exposition from Special bench Mumbai decision in the case of Datacraft India Ltd. (supra) had defined the term computer which has clinched the issue in favour of the Revenue. Accordingly I do not find any infirmity in the order of the authorities below. Hence I affirm the same. - Decided against assessee.

Summary

Issues:
Claim of Depreciation on Film Projector

Detailed Analysis:

Issue: Claim of Depreciation on Film Projector
The appeal was directed against the order by the Commissioner of Income Tax (Appeals) regarding the disallowance of the claim of Depreciation amounting to Rs. 91,87,713 on the Film Projector. The Assessing Officer disallowed the claim of depreciation on the film projector, stating that it should be depreciated at 15% instead of 60%. The Assessing Officer argued that the projector is not a computer but is classified as "Plant & Machinery." The appellant contended that the projector is part of a computer system and should be eligible for depreciation at the higher rate applicable to computers. However, the Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, stating that the film projector cannot be equated with a computer as its principal function is projecting images, not solely reliant on computer functions. The ITAT, after considering the Special Bench decision in the case of Datacraft India Ltd., concluded that the film projector does not qualify as a computer entitled to higher depreciation. The ITAT dismissed the appeal, affirming the decision of the authorities below.

This case highlights the importance of correctly classifying assets for depreciation purposes and the significance of the principal function of a machine in determining its eligibility for higher depreciation rates. The decision emphasizes that even if some computer functions are involved, a machine cannot be classified as a computer unless its principal function is achieved solely through computer functions. The judgment provides clarity on the distinction between different types of assets and their eligibility for specific depreciation rates under the Income Tax Rules.

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