2023 (7) TMI 1267 - AT - Income Tax

Depreciation on ATMs - to be treated as computers or plant and machineries - @15% or 40% - HELD THAT - As identical issue has been considered by the tribunal in assessee s own case for assessment year 2017- 18 2022 (8) TMI 1414 - ITAT CHENNAI where the Tribunal by following its earlier order for assessment years 2015-16 2016-17, held that ATM machines are entitled for higher depreciation of 60% as against normal depreciation of 15% allowed by the Assessing Officer. We direct the AO to allow higher depreciation of 40% as claimed by the assessee on ATM machine - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether ATMs qualify for higher depreciation rate applicable to computers.

Summary:

Issue 1: Depreciation Rate on ATMs

The revenue contended that the learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in allowing depreciation on ATMs at the rate of 40% by treating them as computers. The revenue argued that ATMs are electronic devices guided by external computers and do not perform the functions of a computer, thus should be eligible for depreciation applicable to plant and machinery only at 15%. The CIT(A) relied on the decision of the ITAT, Chennai Benches, in the assessee's own case for earlier assessment years, which allowed higher depreciation on ATMs.

The assessee, engaged in providing software and services for banking and financial sectors, claimed depreciation on ATMs at 40%. The Assessing Officer disallowed the excess depreciation claimed and made an addition of Rs. 8,28,55,082/-. The CIT(A) deleted this addition, leading to the revenue's appeal.

The Tribunal noted that an identical issue was considered in the assessee's own case for assessment years 2015-16, 2016-17, and 2017-18, where it was held that ATMs are entitled to higher depreciation of 60%. The Tribunal cited several precedents, including decisions from the Kolkata and Delhi Tribunals and the Bombay High Court, which supported the view that ATMs qualify for higher depreciation as they perform functions akin to computers.

The Tribunal also addressed the revenue's reliance on the Karnataka High Court's decision in M/s. Diebold Systems Pvt. Ltd. vs. Commissioner of Commercial Taxes, clarifying that this decision, rendered under the Karnataka Sales Tax Act, does not apply to the Income Tax Act. The Tribunal emphasized the functional test over the commercial parlance test for determining depreciation rates under the Income Tax Act.

In conclusion, the Tribunal directed the Assessing Officer to allow higher depreciation at 60% on ATMs as claimed by the assessee, consistent with the decisions in the assessee's own case for earlier assessment years. Thus, the appeal filed by the revenue was dismissed.

Order Pronounced: The appeal filed by the revenue is dismissed. Order pronounced in the court on 26th July, 2023, at Chennai.