ATM machines are eligible for depreciation at 60% as applicable to computer software, the Chennai Bench of the Income Tax Appellate Tribunal (ITAT) directed to compute WDV at the same rate.
The assessee, M/s. Financial Software and Systems Private Limited, engaged in the business of Automated Teller Machine [ATM] management services and filed its return of income for the assessment year 2017-18 on 29.11.2017 admitting total income of ₹.81,42,210/- under normal provisions of the Act and of book profit ₹.3,09,79,643/- under section 115JB of the Income Tax Act, 1961 [“Act”].
On appeal, the CIT(A) confirmed the addition made by the Assessing Officer towards disallowance against depreciation on ATM machines and the addition of cessation of liability under section 41(1) of the Act.
Shri Ashik Shah, the Counsel for the assessee, stated that this issue is squarely covered in favour of the assessee by the decision of the ITAT, Chennai in the assessee’s case for the assessment years 2013-14 onwards, where, the Tribunal has held that the ATMs are eligible for depreciation at 60% as applicable to computer software.
On the other hand, Shri A.S. Sumanth, JCIT,counsel for the respondent fairly agreed that the issue is covered in favour of the assessee by the decision of the ITAT and stated that the Assessing Officer has not made an addition towards disallowance of depreciation even though he had restricted the depreciation on ATM machines at 15% as against 60% depreciation claimed by the assessee.
It was observed that if the Assessing Officer considered 60% of depreciation and worked out WDV then the depreciation worked out by the Assessing Officer will be higher than or equal to the depreciation claimed by the assessee.
The fact was that once the assessee is entitled to 60% of depreciation on ATM machines, then the Assessing Officer has to work out the depreciation right from the beginning at 60% to compute WDV.
A Coram of Shri G. Manjunatha, Accountant Member & Shri SonjoySarma, Judicial Member directed the Assessing Officer to allow 60% of depreciation and work out the opening WDV and compute the correct depreciation to be allowed for the impugned assessment year.
The Tribunal found that the Assessing Officer has made an addition towards cessation of liability under section 41(1) of the Act because the assessee could not justify with the necessary evidence and confirmed the addition made by rejecting the ground taken by the assessee. The appeal filed by the assesseewas partly allowed.
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