Hewlett Packard Financial Services (India) Pvt. Ltd. Vs ACIT (ITAT Mumbai)
ITAT Mumbai grants 60% depreciation on HP Indigo Digital Press Printer, deletes 41(1) addition & allows carry-forward of old unabsorbed depreciation
Assessee engaged in leasing & financial asset management solutions, appealed against the order of CIT(A), which had sustained multiple disallowances for AY 2011-12.
1. Depreciation on HP Indigo Digital Press Printer @ 60%
AO restricted depreciation to 15%, holding that the digital press was an independent machine, not a “computer.” Both AO & CIT(A) treated it as a high-end printing press.
Tribunal, relying on CIT v. Cactus Imaging India Pvt. Ltd. (93 taxmann.com 396 Mad.) & CIT v. Saraswat Infotech Ltd. (Bom HC), held that the HP Indigo Printer cannot function without a computer interface & proprietary software, making it an integral part of the computer system. Accordingly, depreciation @ 60% was allowed.
2. Addition u/s 41(1) for cessation of liability
AO added ₹ 11.77 crore treating the amount written off by HP India Sales Pvt. Ltd. as cessation of trading liability.
Tribunal found that the liability was never recorded in HPFS’s books since the corresponding assets were capital items not yet accepted by end-customers. Hence, there was no “trading liability” nor any prior deduction to trigger s. 41(1). Following CIT v. Vardhman Overseas Ltd. (Delhi HC), the Bench directed deletion of the addition, holding that mere write-off by a creditor does not create taxable remission.
