2010 (8) TMI 58 - HC - Income Tax

Higher rate of depreciation - computers - printers and scanners - Held that - computer accessories and peripherals such as printers scanners and server etc. form an integral part of the computer system. In fact the computer accessories and peripherals cannot be used without the computer. Consequently as they are the part of the computer system they are entitled to depreciation at the higher rate of 60%.

Summary

Issues:
Appeal challenging higher rate of depreciation on computer accessories and peripherals.

Analysis:
The appeal was filed under Section 260A of the Income Tax Act, 1961, contesting the order of the Income Tax Appellate Tribunal allowing depreciation at 60% on computer accessories and peripherals instead of the normal rate of 25%. The Revenue argued that these accessories should not be treated at par with computers and software. However, both the Commissioner of Income Tax (Appeals) and the Tribunal had already allowed the higher rate of depreciation. The Tribunal cited precedents where it was established that peripherals like printers, scanners, and servers are integral parts of the computer system and eligible for the higher depreciation rate. The Tribunal upheld the decision of the CIT(A) in allowing 60% depreciation on computer peripherals and accessories, ultimately dismissing the appeal by the Revenue.

The Court concurred with the Tribunal's view that computer accessories and peripherals, including printers, scanners, and servers, are integral to the computer system and cannot function independently. As these components are essential parts of the computer system, they are deemed eligible for depreciation at the higher rate of 60%. Consequently, the Court dismissed the appeal at the threshold, affirming the decision of the Tribunal.