Case Law Details
DCIT Vs M/s. Lotwin Online Lottery Pvt. Ltd (ITAT Mumbai)
The short question for adjudication in the instant case is whether the batteries which are used along with UPS and which form system for power back up in case of power failure qualify for depreciation at 60 per cent, or not.
Held-
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 per cent.
The issue was claim of depreciation on UPS by the assessee at 60 per cent, whereas the assessing officer had allowed it at 25 per cent. The Hon’ble High Court followed the judgment in BSES Yamuna Powers Ltd. (supra) and allowed depreciation at 60 per cent, on such items.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal filed by the Revenue. The relevant assessment year 2010-11. The appeal is directed against the order of the Commissioner (Appeals)-17, Mumbai and arises out of the order under section 143(3) of the Income Tax Act, 1961 (the “Act”).
2. The sole ground raised by the Revenue in this appeal is that the learned Commissioner (Appeals) erred in upholding the claim of the assessee of depreciation at 60 per cent, on inverter batteries ignoring the fact that inverter batteries are not separable part of the computer and can be utilised for other functions as back up batteries and hence not eligible for depreciation at 60 per cent.
3. In a nutshell, the facts are that during the course of survey, it was gathered that M/s. Jalaram Online Lottery Agency had already closed its lottery business 4-5 years ago. The business was subsequently taken over by the present assessee. This business was again taken over from them by M/s. B. S. Enterprise (a unit of Goldwin Healthcare (P) Ltd.). It was informed that the Jalaram group had used thousand of computer terminals for effecting the sale of online lotteries all over Maharashtra. They had installed batteries for power back up attached with the computers. They were charging depreciation against the batteries at 60 per cent, as applicable to the computers. In response to a query raised by the assessing officer, the assessee filed a written submission which has been extracted at page 3 of the assessment order. The assessing officer was not convinced with the same and came to a finding that the batteries have independent existence and therefore restricted the depreciation to 10 per cent, as in the case of “furniture and fittings including electrical fittings” and thereby disallowed the claim of excess depreciation of Rs. 1,02,52,464.
4. The assessee preferred an appeal against the order of the assessing officer before the learned Commissioner (Appeals). Relying on the judgment of the Hon’ble Delhi High Court in the case of CIT v. BSES Yamuna Powers Ltd. (2013) 358 ITR 47 (Delhi) and CIT v. Orient Ceramics and Industries Ltd. (2013) 358 ITR 49 (Delhi), the learned Commissioner (Appeals) held that depreciation at 60 per cent, was allowable and thus allowed the appeal filed by the assessee.
5. The learned Departmental Representative supported the order passed by the assessing officer.
6. We have perused the relevant material on record. The short question for adjudication in the instant case is whether the batteries which are used along with UPS and which form system for power back up in case of power failure qualify for depreciation at 60 per cent, or not. We find that a similar issue arose before the Hon’ble Delhi High Court in the case of CIT v. BSES Yamuna Powers Ltd. (supra). The issue was whether the Tribunal erred in law in allowing depreciation to the assessee at 60 per cent, on computers accessories and peripherals instead of normal rate of 25 per cent. The Hon’ble High Court held as under (pages 48-49 in 358 ITR) :–
“5. However, upon a perusal of the file, we find that the higher rate of depreciation was allowed both by the Commissioner (Appeals) (‘the CIT(A)’) and the Tribunal. In fact, the Tribunal in its impugned order has observed as under :–
The issue involved in this appeal is covered by the decision of coordinate Bench of the Tribunal as discussed below :–
In the case of ITO v. Samiran Majumdar (2006) 98 ITD 119 (LTAT-Kol), Income Tax Appellate Tribunal Kolkatta Bench ‘B’, has taken a view that the printer and scanner are integral part of the computer system and are to be treated as computer for the purpose of allowing higher rate of depreciation, i.e., 60 per cent.
3.2 The Income Tax Appellate Tribunal, Delhi ‘F Bench in the case of Expeditors International (India) (P.) Ltd. v. Addl CIT (2010) 2 ITR (Trib) 153 (Delhi); (2008) 118 TTJ 652 (LTAT-Delhi) has held that peripherals such as printer, scanners, NT Server, etc., form integral part of the computer and the same, therefore, are eligible for depreciation at the rate of 60 per cent, as applicable to a computer.
4. Respectfully following the aforesaid decisions of the co-ordinate Bench, we uphold the order of the learned Commissioner (Appeals) in allowing the depreciation at 60 per cent, on computer peripherals and accessories, and, thus, the ground raised by the Revenue is rejected.
5. In the result, the appeal filed by the Revenue is dismissed.
6. We are in agreement with the view of the Tribunal 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 per cent.”
6.1 Also similar issue has been dealt in CIT v. Orient Ceramics and Industries Ltd. (supra). The issue was claim of depreciation on UPS by the assessee at 60 per cent, whereas the assessing officer had allowed it at 25 per cent. The Hon’ble High Court followed the judgment in BSES Yamuna Powers Ltd. (supra) and allowed depreciation at 60 per cent, on such items.
7. Respectfully following the judgment of the Hon’ble Delhi High Court in the cases mentioned at para 6 and 6.1 hereinabove, we sustain the order passed by the learned Commissioner (Appeals).
8. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 03/01/2017.
https://taxguru.in/income-tax/rate-depreciation-computer-accessories-peripherals.html
IN ABOVE LINK DEPRECIATION ON COMPUTER IS 40%. BUT AS PER THIS ORDER IT IS 60%.
WHAT IS THE CORRECT FIGURE?
“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 per cent. The issue was claim of depreciation on UPS by the assessee at 60 per cent, whereas the assessing officer had allowed it at 25 per cent. The Hon’ble High Court followed the judgment in BSES Yamuna Powers Ltd. (supra) and allowed depreciation at 60 per cent, on such items”