2016 (9) TMI 506 - HC - Income Tax

Claim of higher deprecation - Whether the Appellate Tribunal is correct passing a cryptic order in sustaining the action of the respondent in restricting the claim of higher deprecation of 15% as against the claim of 60% for the computer machineries, thereby confirming the addition of the differential depreciation in the computation of taxable total income? - Held that - We are of the considered opinion that orders of the authorities and the appellate tribunal, are correct, in holding that the machineries, for which, depreciation to the extent, sought for, do not fall under the definition, computer, including computer software . Fact that the machineries do not fall under the abovesaid category, cannot be termed as perverse and therefore, the order impugned, does not call for interference. We have given our careful consideration, as to how both the appellate authority and the tribunal have considered the facts of the case and rendered findings, on the rival submissions of the parties. Going through the material on record, we are of the considered view that the concurrent findings of fact, rendered by the CIT (Appeals) and the Income Tax Appellate Tribunal, do not call for any interference, as no substantial question of law, is involved.

Issues Involved:
1. Disallowance of excess depreciation on electrical equipment.
2. Disallowance of excess depreciation on computers and computer peripherals.

Detailed Analysis:

1. Disallowance of Excess Depreciation on Electrical Equipment:

The appellant-assessee, engaged in the publication of a daily newspaper, filed its return of income for the assessment year 2011-12. The assessing officer disallowed the excess depreciation claimed on electrical equipment, specifically on the control panel board and transformer, amounting to ?1,80,229/-. The assessing officer's rationale was that these items did not qualify for 80% depreciation as they were not classified under the heading "Electrical equipment" in the depreciation table.

The appellant-assessee contended that the assessing officer erred by restricting the depreciation claim from 80% to 15%, arguing that the control panel board and transformer should fall under "Instrumentation and monitoring systems for monitoring energy flows" or "Automatic Voltage controller, power factor controller for AC Motors," which qualify for 80% depreciation.

The Commissioner of Income-Tax (Appeals)-II, Madurai, upheld the assessing officer's decision, referencing the definition of a transformer from Wikipedia and concluding that a transformer is used to step up or step down voltage and does not qualify as an automatic electrical load monitoring system or automatic voltage controller.

Upon appeal, the Income Tax Appellate Tribunal found merit in the appellant-assessee's contention, holding that control panel boards and transformers could fall under "Instrumentation and monitoring systems" or "Electrical equipment," thereby qualifying for 80% depreciation. The Tribunal directed the assessing officer to grant the 80% depreciation.

2. Disallowance of Excess Depreciation on Computers and Computer Peripherals:

The appellant-assessee claimed higher depreciation at 60% on items such as scanners, computerized counting and stacking machines, and CTP machines, treating them as computers under the Income Tax Rules. The assessing officer disallowed the claim, granting only 15% depreciation on the grounds that these items were computerized machines, not computers.

The appellant-assessee argued that computer accessories and peripherals, such as printers and scanners, are integral parts of the computer system, citing various judicial precedents where higher depreciation was allowed for such items.

The Commissioner of Income-Tax (Appeals)-II, Madurai, upheld the assessing officer's findings, noting that the machines in question, despite containing computer components, were primarily plant and machinery. The appellate authority emphasized that the names of the machines in the invoices should not be modified by the assessee to fit the description of computers.

The Income Tax Appellate Tribunal agreed with the appellate authority, stating that only computer peripherals could be considered as computers for depreciation purposes, while other items fell under the category of plant and machinery, eligible for 15% depreciation.

High Court Judgment:

The High Court, upon reviewing the material on record and the orders of the authorities and the Tribunal, found no manifest error in the concurrent findings. The Court held that the machineries in question did not fall under the definition of "computer, including computer software," and thus, the orders of the authorities and the Tribunal were correct. The Court concluded that no substantial question of law was involved and dismissed the Tax Case Appeal, upholding the decisions of the lower authorities.

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