Routers and switches should be classified as part of computers and be eligible for 60% depreciation

In a recent decision Special Bench (SB) of the Mumbai Income Tax Appellate Tribunal  in the case of Data craft India Ltd. (Taxpayer) [ITA No. 7462 & 754/ Mum/ 2007]on the issue of whether routers and switches can be classified as computer entitled to depreciation at 60% or have to be classified as general plant and machinery entitled to depreciation at 25%, under the provisions of the Indian Tax Laws (ITL) held that the definition of computer should not be restricted to the central processing unit (CPU) of computer, but should also extend to all the input and output devices which support computer in the receipt of input and outflow of output to and from computer. In view of the broader definition given to computers, routers and switches, which form part and parcel of computer, also qualify for depreciation at 60%.

Background and facts

The Taxpayer is engaged in the business of data communication, design, development, purchase and sale of networking products, their maintenance and installation etc.

For tax years 2001- 2002 and 2002- 2003, the Taxpayer claimed depreciation on routers and switches at the rate of 60% by classifying them as ‘computers’.

The Tax Authority rejected Taxpayer’s contention and held that routers and switches, being equipment which are used as networking tools, would fall under the general category of ‘plant and machinery’ and the rate of depreciation applicable would be 25%.

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