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2021 (5) TMI 97 - AT - Income TaxDepreciation on bio metric devices - AO restricted the depreciation to 15% as against 60% claimed by the assessee - DR submitted that biometric devices can independently function and are not integral part of computers, therefore, argued that higher depreciation is not allowable - AR submitted that unless the bio metric devices are attached to the computer, the same cannot function independently and the output cannot be taken - HELD THAT - Hon ble Madras High Court in the case of CIT Vs. Cactus Imaging India (P) Ltd. 2018 (5) TMI 636 - MADRAS HIGH COURT held that the computer printers being part of computer is eligible for higher rate of depreciation @60%. While dealing with the issue, the Hon ble Madras High Court applying the rule of interpretation observed that entry in Appendix I Clause III(5) states computers including computer software and the notes under the Appendix defines the computer software in Clause7 to mean any computer program recorded on disc, tape, perforated media or other information storage device. The computer was not defined in the Act. Therefore, Hon ble High Court viewed that if a particular article falls within the description by the force of words used, it is impermissible to ignore the word description. Thus, the Hon ble High Court held that the printer is integral part of the computer and accordingly held that it is eligible for depreciation @60%. Following the decision of Hon ble Madras High Court, in the instant case, thought the biometric kit is capable of capturing the data, it needs the computer for taking output. Hon ble Mumbai Special Bench in the case of Data Craft India Ltd. 2010 (7) TMI 642 - ITAT, MUMBAI considered the issues of computer and the computer systems and held that router is a networking device, whose software and hardware are customized to the task of routing and forwarding information and held that the switches can be classified as computer hardware when they are used along with the computer and when their functions are integrated with the computer. In simple words, when device used as the part of computer in its functions, then it would be termed as computer. If we apply the reasoning given by the Hon ble Madras High Court and the decision of Hon ble Special Bench of Mumbai Tribunal, biometric device is used along with the computer and fits also into the definition of computer. if the biometric system is detached from the computer, the same does not serve the purpose for which it is intended. Even in the biometric system also, wear and tear is very high like computer. As per the interpretation of Hon ble Madras High court in the case supra the functioning of biometric device fits into the computer and eligible for higher rate of depreciation. Therefore, we hold that bio metric system is a computer and the depreciation required to be allowed at higher rate. Accordingly, we set aside the orders of the Ld.CIT(A) and allow the appeal of the assessee.
Issues:
1. Condonation of delay in filing appeal. 2. Depreciation rate on biometric devices. Condonation of Delay: The appellant filed an appeal with a delay of 195 days citing lockdown and pandemic as reasons. The delay was condoned after considering the circumstances, and the appeal was admitted. Consequently, the stay application by the appellant was deemed infructuous and dismissed. Depreciation Rate on Biometric Devices: The primary issue revolved around the depreciation rate applied to biometric devices purchased by the assessee. The Assessing Officer (AO) restricted the depreciation to 15% instead of the claimed 60%, as the AO considered biometric devices capable of functioning independently without attachment to a computer. The AO rejected the contention that biometric devices should be treated as part of a computer, based on ITAT Mumbai's decision in a similar case. The CIT(A) upheld the AO's decision, emphasizing that biometric devices could operate independently without computers. However, the appellant argued that biometric devices needed to be connected to a computer for functionality and output. The Tribunal analyzed the detailed usage of biometric devices for Aadhar enrollment and other schemes, highlighting the necessity of computer attachment for output. Referring to precedents, the Tribunal noted the Madras High Court's decision on computer printers and the Mumbai Special Bench's ruling on computer systems. Applying these precedents, the Tribunal concluded that biometric devices, when used with a computer and integral to its functions, could be considered as part of a computer. Ultimately, the Tribunal ruled in favor of the appellant, determining that biometric systems qualified as computers and thus should be eligible for higher depreciation rates. Consequently, the orders of the CIT(A) were set aside, and the appeal of the assessee was allowed. In conclusion, the Tribunal dismissed the stay application and allowed the appeal of the assessee, pronouncing the order on 6th January 2021.
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