2019 (7) TMI 1389 - AT - Income Tax

Depreciation on LED wall - @15% or @ 60% - disallowance of 60% depreciation as claimed by the assessee on the ground that these are not integral part of computer to qualify for higher rate of depreciation - HELD THAT - CIT(A) upheld the action of the Assessing Officer in not allowing deprecation @ 60% on such LED wall, projectors and accessories etc. No infirmity in the order of the CIT(A) on this issue. The rate of depreciation has been prescribed under the new appendix-1 of Income Tax Rules 1962 where different rates are prescribed for different plant, machinery and other equipment. There are certain instruments/ equipments wherein lesser rate of depreciation has been prescribed which are also operated by computers/ laptops. There are a number of items which attract 40% depreciation although those items cannot be operated without help of computer such as life saving medical equipments, energy saving devise etc. There are also certain plant and machinery on which 30% depreciation has been prescribed which also cannot operate without the help of computers. Therefore, the arguments of the Ld. Counsel for the assessee that since the LED walls, projectors, accessories etc cannot function without the help of computer/ laptop and therefore is entitled for depreciation @ 60% is not correct. Since no separate rate of deprecation has been prescribed for LED wall, projectors / accessories etc, therefore, these will come under the head other plant and machinery and accordingly entitled for deprecation @ 15% only which has been adopted by the Assessing Officer and upheld by the CIT(A). Therefore, do not find any infirmity in the order of the CIT(A) on this issue - Decided against assessee.

Summary

Issues involved:
1. Depreciation claimed on LED wall, projector, and accessories at 60% instead of 15%.
2. Applicability of higher rate of depreciation based on the nature of assets.

Issue 1: Depreciation claimed on LED wall, projector, and accessories at 60% instead of 15%.
The assessee filed appeals against the CIT(A)'s orders for A.Y. 2012-13 and 2013-14 concerning the disallowance of depreciation claimed at 60% on assets like LED wall, projector, and accessories. The Assessing Officer restricted the depreciation to 15%, disallowing a significant amount. The CIT(A) upheld this decision, leading to the appeals before the Tribunal. The assessee argued that these assets are operated through software and laptops, qualifying for higher depreciation. However, the Assessing Officer deemed these assets as independent electronic machines not integral to computers, justifying the lower rate. The Tribunal concurred with the CIT(A) and dismissed the appeals, emphasizing the prescribed rates for different plant and machinery under the Income Tax Rules.

Issue 2: Applicability of higher rate of depreciation based on the nature of assets.
The assessee contended that the LED wall, projectors, and accessories should qualify for depreciation at 60% based on their integration with computers, citing relevant court decisions. However, the Tribunal noted that no separate rate was prescribed for these assets, categorizing them under other plant and machinery eligible for 15% depreciation. The Tribunal differentiated the cited cases, concluding that the assets in question did not meet the criteria for higher depreciation. The Tribunal upheld the CIT(A)'s decision, dismissing the appeals and emphasizing the specific rates defined in the Income Tax Rules for different equipment categories.

In summary, the Tribunal upheld the lower depreciation rate of 15% for LED wall, projector, and accessories, dismissing the appeals based on the assets' classification as other plant and machinery not specifically designated for higher depreciation rates. The decision highlighted the importance of adhering to prescribed rates under the Income Tax Rules and differentiated the assets in question from those qualifying for enhanced depreciation based on their integration with computers.