Case Law Details
Machines containing Computer & Computer Software not eligible for depreciation @ 60% alike Computer & Computer Software
Appendix I in Income Tax Rules, 1962 in respect of rates at which depreciation is admissible provides depreciation on computers including computer software @ 60%. Recently, in Dinamalar vs. The ITO [T.C.A.No.624 of 2016, Decided on 02.09.2016], the assessee in respect of the claim of depreciation on computers and computer peripherals, claimed depreciation on the items, viz., cannon lide, scanner, computerized counting & stacking machines, transportation charges, CTP machine, scanner, sisco router, modem, computerized counting & stacking (F/C), CTP machine (clearing charges), CTP machine(erection) treating it as Computers as mentioned in New Appendix-I-III-(5) of the Income Tax Rules, which according to him, were eligible for depreciation @ 60%. The Assessing Officer(AO) disallowed the claim of higher depreciation at 60%, on the following remarks:
“The depreciation in respect above machineries was claimed at the rate of 60% under the head computers. Only computers including computer software is eligible for depreciation at 60% as classified in SI. No. 5 under the heading III. Plant and Machinery of Part- A of the depreciation table. The above machineries are computerized machines and are not computers classified in the depreciation table. Hence they are eligible for depreciation @ 15% only. Accordingly the excess depreciation of Rs. 17,13,508/- and Rs.9,01,181 calculated above is disallowed and added to the total income.”
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Seems illogical – machine which has characteristics of computer are not treated as computer, whereas anything which cannot work on standalone basis and can only work when latched to computer, is classified as computer.