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2016 (2) TMI 421 - AT - Income Tax


Issues Involved:
1. Depreciation rate on routers and switches.
2. Disallowance of payment towards purchase and freight charges.

Issue-Wise Detailed Analysis:

1. Depreciation Rate on Routers and Switches:
The primary issue pertains to whether routers and switches qualify as part of a computer for the purposes of depreciation under Section 32 of the Income-tax Act. The assessee claimed depreciation at the rate of 60% on routers and switches, arguing that these accessories form an integral part of computers. However, the Assessing Officer allowed depreciation at the rate of 15%, leading to a disallowance of Rs. 26,68,482/-.

The Tribunal examined the definition and common parlance understanding of 'computer.' It noted that the term 'computer' is not defined in the Income-tax Act, and thus, its meaning must be derived from common usage and commercial parlance. The Tribunal referred to various case laws and definitions, including those from the Information Technology Act, 2000, and concluded that a computer includes all input and output devices that support its functioning.

The Tribunal further analyzed the functions of routers and switches, noting that these devices facilitate data flow and connectivity between computers, making them integral to the computer system. The Tribunal held that routers and switches are part of the computer hardware when used exclusively with computers, thus qualifying for a higher depreciation rate of 60%.

2. Disallowance of Payment Towards Purchase and Freight Charges:
The second issue involved the disallowance of Rs. 4,88,052/- towards purchase and freight charges as per the report in Form No. 3CEB under Section 92E of the Act. The Commissioner of Income Tax (Appeals) noted that this ground was not pressed by the assessee despite written submissions being made.

The Tribunal remanded this issue back to the Commissioner of Income Tax (Appeals) for a fresh analysis. It directed that the assessee be given an opportunity to present evidence and be heard, ensuring a fair reassessment of the factual matrix.

Conclusion:
The appeal was partly allowed for statistical purposes. The Tribunal ruled in favor of the assessee on the issue of depreciation, allowing a 60% rate for routers and switches. The issue of disallowance of payment towards purchase and freight charges was remanded back for further examination.

 

 

 

 

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