UPS is Integral Part of Computer: Delhi HC Upholds 60% Higher Depreciation Under Income Tax Act in Tata Power Case [Read Order]
The Delhi High Court held that a UPS is an integral part of a computer system and is eligible for higher depreciation at the rate applicable to computers
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The Delhi High Court has held that a UPS (Uninterrupted Power Supply) forms an integral part of a computer system and is eligible for higher depreciation at the rate applicable to computers, while dismissing the Revenue’s appeal in the case of Tata Power Delhi Distribution Limited. The case arises from an appeal filed by the Income Tax Department challenging the order of the Income...
The Delhi High Court has held that a UPS (Uninterrupted Power Supply) forms an integral part of a computer system and is eligible for higher depreciation at the rate applicable to computers, while dismissing the Revenue’s appeal in the case of Tata Power Delhi Distribution Limited.
The case arises from an appeal filed by the Income Tax Department challenging the order of the Income Tax Appellate Tribunal, which had allowed the assessee’s claim of higher depreciation on UPS by treating it as part of a computer system.
The Assessing Officer had restricted the depreciation on UPS by treating it as plant and machinery, allowing a lower rate of depreciation instead of the higher rate applicable to computers.
Before the High Court, the Revenue’s counsel argued that UPS should not be treated as a computer and that the higher depreciation rate applicable to computers should not be extended to it.
The assessee’s counsel argued that UPS is an essential component of a computer system as it ensures uninterrupted power supply, without which the functioning of computers would be affected.
The Division Bench of Justice Dinesh Mehta and Justice Vinod Kumar observed that uninterrupted power supply is necessary for the proper functioning of computers and that UPS cannot be treated merely as an accessory. The Court observed that UPS is an integral part of the computer system.
The court explained that if uninterrupted power supply is not ensured, it would directly impact the functioning and operations of the computer systems used by the assessee. It pointed out that the Assessing Officer had erred in allowing depreciation at a lower rate.
The court upheld the Tribunal’s view that UPS is eligible for depreciation at the higher rate applicable to computers. The court dismissed the Revenue’s appeal and affirmed the allowability of higher depreciation on UPS.
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