prpri Depreciation on smart phones functioning equivalent to computers Depreciation on smart phones functioning equivalent to computers

Case Law Details

Case Name : Falcon Business Resources Pvt. Ltd. Vs DCIT (ITAT Delhi)
Appeal Number : ITA No. 1136/Del/2018
Date of Judgement/Order : 30/03/2021
Related Assessment Year : 2012-13

Falcon Business Resources Pvt. Ltd. Vs DCIT (ITAT Delhi)

The lower authorities while deciding the issue whether the depreciation is allowable on mobile phones @ 15% or considering the mobile phones computers @ 60%. This issue has been decided by the solitary decision of Hon’ble Kerala High Court in the case of Federal Bank Ltd. Vs. ACIT (supra) wherein it has been held that mobile phones are not computers and, therefore, depreciation on these mobile phones shall be allowed at the general rate of depreciation on plant and machinery @ 15%. This being the solitary decision on the issue and is binding on us, respectfully following that we uphold that depreciation on mobile phones is allowable @ 15% and not @ 60%. However, we may note that there are smart phones which do function equivalent to the computers or much more than a computer, if the functionality of a mobile phone are shown to be more than a communication equipment, perhaps, it may qualify as a computer. However, as no such information is available in the present case, we respectfully follow the decision of the Hon’ble Kerala High Court in the case of Federal Bank Ltd. Vs. ACIT (supra) and dismiss the appeal of the assessee.

FULL TEXT OF THE ITAT JUDGEMENT

01. This appeal is filed by assessee against the order of the CIT (Appeals)–34, New Delhi, dated 29.12.2017 for assessment year 2012-13.

02. The solitary ground in this appeal is whether the ld. CIT (Appeals) was justified in upholding the action of the ld. Assessing Officer in allowing depreciation on mobile phones @ 15% instead of @ 60% claimed by the assessee following the decision of Hon’ble Kerala High Court.

03. The assessee is a company engaged in the business of purchase and sale of air-time for mobile phones. It filed its return of income on 7.12.2012 at Rs.1,83,73,910/-. The assessment under Section 143(3) of the Income Tax Act, 1961 (the Act) was made by the Dy. Commissioner of Income Tax, Circle 9 (1), New Delhi, on 23.12.2014 determining total income of the assessee at Rs.1,99,90,727/-. The only dispute is with respect to the disallowance of excess claim of depreciation of Rs.16,16,817/-. The assessee challenged the same before the ld. CIT (Appeals), who confirmed the above disallowance of depreciation and, therefore, assessee is in appeal.

04. Despite notice to the assessee, none appeared on the date of hearing. Even on the earlier date of hearing on 28.01.2021 nobody appeared and for today’s hearing the Bench issued notice of hearing by RPAD. Even then there is no compliance by the assessee. Therefore, the issue is decided on the merits of the case.

05. The learned DR submitted that issue is squarely covered against the assessee by the solitary decision of the Hon’ble Kerala High Court in the case of Federal Bank Ltd. Vs. ACIT 20 taxmann.com 707 (Ker.) wherein it has been held that depreciation on mobile phones is allowable @ 15% as those are not computers. He, therefore, submitted that this solitary decision has been followed by the CIT (Appeals). So same may be upheld.

06. We have carefully considered the rival contentions and perused the orders of the lower authorities. The lower authorities while deciding the issue whether the depreciation is allowable on mobile phones @ 15% or considering the mobile phones computers @ 60%. This issue has been decided by the solitary decision of Hon’ble Kerala High Court in the case of Federal Bank Ltd. Vs. ACIT (supra) wherein it has been held that mobile phones are not computers and, therefore, depreciation on these mobile phones shall be allowed at the general rate of depreciation on plant and machinery @ 15%. This being the solitary decision on the issue and is binding on us, respectfully following that we uphold that depreciation on mobile phones is allowable @ 15% and not @ 60%. However, we may note that there are smart phones which do function equivalent to the computers or much more than a computer, if the functionality of a mobile phone are shown to be more than a communication equipment, perhaps, it may qualify as a computer. However, as no such information is available in the present case, we respectfully follow the decision of the Hon’ble Kerala High Court in the case of Federal Bank Ltd. Vs. ACIT (supra) and dismiss the appeal of the assessee.

07. In the result appeal of the assessee is dismissed.

Order pronounced in the open court on : 30.03.2021.

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