In a recent decision, the Madras High Court held that depreciation is not allowable to items such as Scanner, Computerised counting machine, CTP machines etc. under the head “computer and computer peripherals” for the reason that the said machines do not fall under the definition of the term computer and its peripherals. The division bench of the Court, while upholding the order impugned, opined that depreciation under this head is allowableonly to computer and its peripherals which expressly excludes other machineries.
The appellant-assessee, in the instant case, is firm engaged in the business of newspaper. While filing return for the relevant assessment year, the assessee claimed excess depreciation in respect of “control panel board and transformer”treating them to be electricalequipments, classified under the head “B”. Secondly, assessee claimed deduction in respect of depreciation computers and computer peripherals by treating certain items such as 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) etc as “computers.” However, the assessing Officer disallowed the above depreciation claims and passed an order.
The order was sustained by both the Commissioner of Income Tax (Appeals) and the Appellate Tribunal on appeal filed by the assessee on ground that the above claims do not covered by the Act.The appellate authorities took a stand that “control panel board and Transformers are more or lessitems either falling in the category of “Instrumentation and monitoring systems” as stated in the depreciation schedule in New Appendix-IIII-(8)(ix)B of Income Tax Rules or “Electrical equipment” as stated in the New Appendix-IIII-( 8)(ix)E under the head Electrical Equipments taking into account of the principles of ejusdem generis”.Further, it was held that “only computer peripherals can be considered as computers for the purpose of claiming depreciation at the rate prescribed in New Appendix-III(5) of the Income Tax Rules”.Being aggrieved, the assessee approached the High Court on further appeal.
The division bench comprising of Justices S Manikumar and D Krishna Kumar upheld the orders of the CIT(A) and ITAT by observing that “the machineries, for which, depreciation to the extent, sought for, do not fall under the definition, “computer, including computer software”. Fact that the machineries do not fall under the abovesaid category, cannot be termed as perverse.”
Read the full text of the Judgment below.